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What changed in Delek US Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Delek US Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+368 added−425 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in Delek US Holdings, Inc.'s 2023 10-K

368 paragraphs added · 425 removed · 283 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

107 edited+19 added−22 removed353 unchanged
Biggest changeIn particular, there remains considerable tension in the Organization of Petroleum Exporting Countries ("OPEC")-Russia relationship, uncertainty in the global oil markets, substantial global supply chain issues, and significant disruptions in the labor market. The impact of the COVID-19 Pandemic may precipitate a prolonged economic slowdown and recession. Global economic growth drives demand for energy from all sources, including fossil fuels.
Biggest changeIn recent years, the outbreak of COVID-19 and its development into a pandemic in early 2020 (the "COVID-19 Pandemic" or the "Pandemic"), the war between Russia and Ukraine ("the Russia-Ukraine War"), Organization of Petroleum Exporting Countries ("OPEC")-Russia relationship, and the conflict between Israel and Hamas have been sources of uncertainty in the global oil markets, substantial global supply chain issues, and significant disruptions in the labor market.
In December 2022, we entered into an Inventory Intermediation Agreement with Citi in which Citi purchases a substantial portion of the crude oil and refined products for three of our refineries' inventory at market prices.
In December 2022, we entered into an Inventory Intermediation Agreement with Citi (the "Inventory Intermediation Agreement") in which Citi purchases a substantial portion of the crude oil and refined products for three of our refineries' inventory at market prices.
Negative publicity, regardless of whether the concerns are valid, concerning food, beverage, fuel or other product quality, food, beverage or other product safety or other health concerns, facilities, employee relations or other matters may materially and adversely affect demand for products offered at our stores and could result in a decrease in customer traffic to our stores.
Negative publicity, regardless of whether the concerns are valid, concerning food, beverage, fuel or other product quality, safety or other health concerns, facilities, employee relations or other matters may materially and adversely affect demand for products offered at our stores and could result in a decrease in customer traffic to our stores.
The market price of our common stock may be influenced by many factors, some of which may be beyond our control, including: 55 | Risk Factors • our quarterly or annual earnings, or those of other companies in our industry; • inaccuracies in, and changes to, our previously published quarterly or annual earnings; • changes in accounting standards, policies, guidance, interpretations or principles; • economic conditions within our industry, as well as general economic and stock market conditions; • the failure of securities analysts to cover our common stock, or the cessation of such coverage; • changes in financial estimates by securities analysts and the frequency and accuracy of such reports; • future issuance or sales of our common stock; • announcements by us or our competitors of significant contracts or acquisitions; • sales of common stock by our senior officers or our affiliates; and • the other factors described in these "Risk Factors." In recent years, the stock market in general, and the market for energy companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
The market price of our common stock may be influenced by many factors, some of which may be beyond our control, including: • our quarterly or annual earnings, or those of other companies in our industry; • inaccuracies in, and changes to, our previously published quarterly or annual earnings; • changes in accounting standards, policies, guidance, interpretations or principles; • economic conditions within our industry, as well as general economic and stock market conditions; • the failure of securities analysts to cover our common stock, or the cessation of such coverage; • changes in financial estimates by securities analysts and the frequency and accuracy of such reports; • future issuance or sales of our common stock; • announcements by us or our competitors of significant contracts or acquisitions; • sales of common stock by our senior officers or our affiliates; and • the other factors described in these "Risk Factors." In recent years, the stock market in general, and the market for energy companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
Our inability to fund such capital expenditures, maintenance or improvements, or decision to cancel, delay or defer such projects, could increase the costs of repairing or replacing such assets (subject to reserved funds to cover certain of these costs), increase the costs or delays associated with turnaround activities in our refining segment and other maintenance, place us at a competitive disadvantage, increase the costs of regulatory compliance, limit our ability to develop, market and sell new products and invest in new technologies, and decrease the amount of funds available for future acquisitions or cash available for distributions, all of which could have a material adverse effect on our business, financial condition and results of operations.
Our inability to fund such capital expenditures, maintenance or improvements, or decision to cancel, delay or defer such projects, could increase the costs of repairing or replacing such assets (subject to reserved funds to cover certain of these costs), increase the costs or delays associated with turnaround activities in our refining segment and other maintenance, place us at a competitive disadvantage, increase the costs of insurance coverage and regulatory compliance, limit our ability to develop, market and sell new products and invest in new technologies, and decrease the amount of funds available for future acquisitions or cash available for distributions, all of which could have a material adverse effect on our business, financial condition and results of operations.
These permits, laws and regulations are enforced by federal agencies including the EPA, DOT, PHMSA, FMCSA, Federal Railroad Administration ("FRA"), OSHA, National Labor Relations Board ("NLRB"), Equal Employment Opportunity Commission ("EEOC"), Federal Trade Commission ("FTC") and the FERC, and numerous other state and federal agencies.
These permits, laws and regulations are enforced by federal agencies including the EPA, DOT, PHMSA, FMCSA, Federal Railroad Administration ("FRA"), OSHA, National Labor Relations Board, Equal Employment Opportunity Commission ("EEOC"), Federal Trade Commission ("FTC") and the FERC, and numerous other state and federal agencies.
While the EPA promulgated a rule in June 2019 aiming to improve transparency in the market for RINs, we cannot predict with certainty our exposure to increased RINs costs in the future, nor can we predict the extent by which costs associated with RFS-2 regulations will impact our future results of operations. 41 | Risk Factors Increased supply of and demand for alternative transportation fuels, increased fuel economy standards and increased use of alternative means of transportation could lead to a decrease in transportation fuel prices and/or a reduction in demand for petroleum-based transportation fuels.
While the EPA promulgated a rule in June 2019 aiming to improve transparency in the market for RINs, we cannot predict with certainty our exposure to increased RINs costs in the future, nor can we predict the extent by which costs associated with RFS-2 regulations will impact our future results of operations. 34 | Risk Factors Increased supply of and demand for alternative transportation fuels, increased fuel economy standards and increased use of alternative means of transportation could lead to a decrease in transportation fuel prices and/or a reduction in demand for petroleum-based transportation fuels.
An adverse change in Citi's business, results of operations, liquidity or financial condition could adversely affect its ability to timely discharge its obligations to us, which could consequently have a material adverse effect on our business, results of operations or liquidity. 58 | Risk Factors From time to time, our cash and credit needs may exceed our internally generated cash flow and available credit, and our business could be materially and adversely affected if we are not able to obtain the necessary cash or credit from financing sources.
An adverse change in Citi's business, results of operations, liquidity or financial condition could adversely affect its ability to timely discharge its obligations to us, which could consequently have a material adverse effect on our business, results of operations or liquidity. 52 | Risk Factors From time to time, our cash and credit needs may exceed our internally generated cash flow and available credit, and our business could be materially and adversely affected if we are not able to obtain the necessary cash or credit from financing sources.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. 57 | Risk Factors Financial Instrument and Credit Profile Risks Changes in our credit profile could affect our relationships with our suppliers, which could have a material adverse effect on our liquidity and our ability to operate our refineries at full capacity.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. 51 | Risk Factors Financial Instrument and Credit Profile Risks Changes in our credit profile could affect our relationships with our suppliers, which could have a material adverse effect on our liquidity and our ability to operate our refineries at full capacity.
Acquisitions involve risks that could cause our actual growth or operating results to differ adversely compared with our expectations. Due to our emphasis on growth through acquisitions, we are particularly susceptible to transactional risks that could cause our actual growth or operating results to differ adversely compared with our expectations.
Due to our emphasis on growth through acquisitions, we are particularly susceptible to transactional risks that could cause our actual growth or operating results to differ adversely compared with our expectations.
As described above, RFS-2 requires replacement of increasing amounts of petroleum-based transportation fuels with biofuels through 2022. RFS-2 and widespread use of E-15 or E-85 could cause decreased crude runs and materially affect our profitability, unless fuel demand rises at a comparable rate or other outlets are found for the displaced petroleum products.
As described above, RFS-2 required replacement of increasing amounts of petroleum-based transportation fuels with biofuels through 2022. RFS-2 and widespread use of E-15 or E-85 could cause decreased crude runs and materially affect our profitability, unless fuel demand rises at a comparable rate or other outlets are found for the displaced petroleum products.
Sales of a large number of shares of our common stock, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. 56 | Risk Factors Our stockholders will suffer dilution if we issue currently unissued shares of our stock or sell our treasury holdings in the future.
Sales of a large number of shares of our common stock, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. 50 | Risk Factors Our stockholders will suffer dilution if we issue currently unissued shares of our stock or sell our treasury holdings in the future.
Any failure to remain in compliance with these government regulations may results in enforcement actions which may have a material adverse effect on our business and operations. If our cost efficiency measures are not successful, we may become less competitive. We continue to focus on minimizing operating expenses through cost improvements and simplification of our corporate structure.
Any failure to remain in compliance with these government regulations may result in enforcement actions which may have a material adverse effect on our business and operations. If our cost efficiency measures are not successful, we may become less competitive. We continue to focus on minimizing operating expenses through cost improvements and simplification of our corporate structure.
Subsequent changes to our tax liabilities as a result of these audits may also subject us to interest and penalties, and could have a material adverse effect on our business, financial condition and results of operations. 52 | Risk Factors For example, the tax treatment of our logistics segment depends on its status as a partnership for federal income tax purposes.
Subsequent changes to our tax liabilities as a result of these audits may also subject us to interest and penalties, and could have a material adverse effect on our business, financial condition and results of operations. 46 | Risk Factors For example, the tax treatment of our logistics segment depends on its status as a partnership for federal income tax purposes.
Instability in the financial markets as a result of terrorism, sabotage or war could also affect our ability to raise capital, including our ability to repay or refinance debt. 43 | Risk Factors Legislative and regulatory measures to address climate change and GHG emissions could increase our operating costs or decrease demand for our refined products.
Instability in the financial markets as a result of terrorism, sabotage or war could also affect our ability to raise capital, including our ability to repay or refinance debt. 36 | Risk Factors Legislative and regulatory measures to address climate change and GHG emissions could increase our operating costs or decrease demand for our refined products.
These non-traditional gasoline and/or convenience merchandise retailers may obtain a significant share of the retail fuels market, may obtain a significant share of the convenience store merchandise market and their market share in each market is expected to grow. 42 | Risk Factors We may seek to diversify and expand our retail fuel and convenience store operations, which may present operational and competitive challenges.
These non-traditional gasoline and/or convenience merchandise retailers may obtain a significant share of the retail fuels market, may obtain a significant share of the convenience store merchandise market and their market share in each market is expected to grow. 35 | Risk Factors We may seek to diversify and expand our retail fuel and convenience store operations, which may present operational and competitive challenges.
In addition, if we are not able to sell our finished products to credit worthy customers, then we may be subject to delays in the collection of our accounts receivable and exposure to additional credit risk. If we cannot obtain sufficient capital, when the need arises, then we may be unable to execute our long-term operating strategy.
In addition, if we are not able to sell our finished products to creditworthy customers, then we may be subject to delays in the collection of our accounts receivable and exposure to additional credit risk. If we cannot obtain sufficient capital, when the need arises, then we may be unable to execute our long-term operating strategy.
Failure to manage risks associated with business interruptions could adversely impact our operations, financial condition, results of operations and cash flows. Our refining and logistics operations are subject to significant hazards and risks inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products.
Failure to manage risks associated with business interruptions and casualty losses could adversely impact our operations, financial condition, results of operations and cash flows. Our refining and logistics operations are subject to significant hazards and risks inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products.
Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations. 59 | Risk Factors Fluctuations in interest rates could materially affect our financial results. Because a significant portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense.
Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations. 53 | Risk Factors Fluctuations in interest rates could materially affect our financial results. Because a significant portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense.
Any outcome of this process would be dependent upon a number of factors that may be beyond our control, including, among other 50 | Risk Factors things, market conditions, industry trends, regulatory approvals, and the availability of financing on reasonable terms..
Any outcome of this process would be dependent upon a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, regulatory approvals, and the availability of financing on reasonable terms..
Health concerns, poor food, beverage, fuel or other product quality or operating issues stemming from one store or a limited number of stores can materially and adversely affect the operating results of some or all of our stores and harm our proprietary brands.
Health concerns, poor food, beverage, fuel or other product quality or operating issues stemming from one store or a limited number of stores could materially and adversely affect the operating results of some or all of our stores and harm our proprietary brands.
The extent of such impact will depend on future developments and factors outside of our control, including new information which may emerge concerning the severity or duration of the COVID-19 Pandemic, the evolving governmental and private sector actions to contain the pandemic or treat its health, economic, and other impacts, and the timing and effectiveness of the ongoing rollout of currently available vaccines.
The extent of such impact will depend on future developments and factors outside of our control, including new information which may emerge concerning the severity or duration of such disease, the evolving governmental and private sector actions to contain the pandemic or treat its health, economic, and other impacts, and the timing and effectiveness of the ongoing rollout of currently available vaccines.
According to the EPA, approximately 95% of the nation's refining capacity has entered into "global" settlements under the EPA National Refinery Initiative. 39 | Risk Factors In 2015, the EPA finalized reductions in the NAAQS for ozone, from 75 ppb to 70 ppb. Our Tyler refinery is located near areas classified as being in non-attainment with the new standard.
According to the EPA, approximately 95% of the nation's refining capacity has entered into "global" settlements under the EPA National Refinery Initiative. In 2015, the EPA finalized reductions in the NAAQS for ozone, from 75 ppb to 70 ppb. Our Tyler refinery is located near areas classified as being in non-attainment with the new standard.
In general, we would be a USRPHC if the fair market value of our "U.S. real property interests," as such term is defined for U.S. federal income tax purposes, equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business.
In general, we would be a USRPHC if the fair market value of our "U.S. real property 48 | Risk Factors interests," as such term is defined for U.S. federal income tax purposes, equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business.
We may experience delays or unanticipated costs in implementing our cost efficiency plans, which could prevent the timely or full achievement of expected cost efficiencies and adversely affect our competitive position. Risks Related to Ownership of Our Common Stock The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.
We may experience delays or unanticipated costs in implementing our cost efficiency plans, which could prevent the timely or full achievement of expected cost efficiencies and adversely affect our competitive position. 49 | Risk Factors Risks Related to Ownership of Our Common Stock The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.
In light of our recent operating results and liquidity needs, we have cancelled, delayed, or deferred certain capital expenditures, maintenance and improvements. Our need to incur costs associated with the commencement of such capital expenditures, maintenance, and improvements may be substantial and could have a material adverse effect on our business, financial condition and results of operations.
At times in light of our operating results and liquidity needs, we have cancelled, delayed, or deferred certain capital expenditures, maintenance and improvements. Our need to incur costs associated with the commencement of such capital expenditures, maintenance, and improvements may be substantial and could have a material adverse effect on our business, financial condition and results of operations.
We are subject to regulation by the DOT and various state agencies in connection with our pipeline, trucking and rail transportation operations. These regulatory authorities exercise broad powers, governing activities such as the authorization to operate hazardous materials pipelines and engage in motor carrier operations.
Risks Related to Transportation Regulations We are subject to regulation by the DOT and various state agencies in connection with our pipeline, trucking and rail transportation operations. These regulatory authorities exercise broad powers, governing activities such as the authorization to operate hazardous materials pipelines and engage in motor carrier operations.
More stringent laws or regulations or adverse changes in the interpretation of existing laws or regulations by government agencies could have an adverse effect on our financial position and the results of our operations and could require substantial expenditures for the installation and operation of systems and equipment. 40 | Risk Factors Health and safety legislation and regulations change frequently.
More stringent laws or regulations or adverse changes in the interpretation of existing laws or regulations by government agencies could have an adverse effect on our financial position and the results of our operations and could require substantial expenditures for the installation and operation of systems and equipment. Health and safety legislation and regulations change frequently.
Finally, depending on the severity and duration of any extreme weather events or climate conditions, our operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations. Our operations are subject to business interruptions and casualty losses.
Finally, depending on the severity and duration of any extreme weather events or climate conditions, our operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations. 38 | Risk Factors Our operations are subject to business interruptions and casualty losses.
It is uncertain what action, if any, Congress may take with respect to enacting or reinstating the blender's tax credit beyond 2022 or when such action might be effective.
It is uncertain what action, if any, Congress may take with respect to enacting or reinstating the blender's tax credit beyond 2024 or when such action might be effective.
These factors include: • changes in global and local economic conditions, e.g., as a result of the outbreak of the COVID-19 Pandemic; • domestic and foreign supply and demand for crude oil and refined products, including changes in the availability and cost of inputs from price inflation and supply chain disruptions; • the level of foreign and domestic production of crude oil and refined petroleum products; • changes in the rate of inflation (including the cost of raw materials, labor, commodities, and supplies) and interest rates; • increased regulation of feedstock production activities, such as hydraulic fracturing; • infrastructure limitations that restrict, or events that disrupt, the distribution of crude oil, other feedstocks and refined petroleum products; • excess or overbuilt infrastructure; • an increase or decrease of infrastructure limitations (or the perception that such an increase or decrease could occur) on the distribution of crude oil, other feedstocks or refined products; • investor speculation in commodities; • worldwide political conditions, particularly in significant oil producing regions such as the Middle East, Africa, the former Soviet Union and South America; • the ability or inability of the members of OPEC to maintain oil price and production controls; • pricing and other actions taken by competitors that impact the market; • the level of crude oil, other feedstocks and refined petroleum products imported into and exported out of the U.
These factors include: • changes in global and local economic conditions; • domestic and foreign supply and demand for crude oil and refined products, including changes in the availability and cost of inputs from price inflation and supply chain disruptions; • the level of foreign and domestic production of crude oil and refined petroleum products; • changes in the rate of inflation (including the cost of raw materials, labor, commodities, and supplies) and interest rates; • increased regulation of feedstock production activities, such as hydraulic fracturing; • infrastructure limitations that restrict, or events that disrupt, the distribution of crude oil, other feedstocks and refined petroleum products; • excess or overbuilt infrastructure; • an increase or decrease of infrastructure limitations (or the perception that such an increase or decrease could occur) on the distribution of crude oil, other feedstocks or refined products; • investor speculation in commodities; • worldwide political conditions, particularly in significant oil producing regions such as the Middle East, Africa, the former Soviet Union and South America; • the ability or inability of the members of OPEC to maintain oil price and production controls; • pricing and other actions taken by competitors that impact the market; • the level of crude oil, other feedstocks and refined petroleum products imported into and exported out of the U.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact 48 | Risk Factors our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we take could result in a decrease in market share.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost inflation is incurred. Additionally, the pricing actions we take could result in a decrease in market share.
As of December 31, 2022, approximately 15% of our employees were represented by unions and/or covered by a collective bargaining agreement. None of our employees in our logistics segment, retail segment or in our corporate office are represented by a union. We consider our relations with our employees to be satisfactory.
As of December 31, 2023, approximately 15.1% of our employees were represented by unions and/or covered by a collective bargaining agreement. None of our employees in our logistics segment, retail segment or in our corporate office are represented by a union. We consider our relations with our employees to be satisfactory.
The physical effects of climate change and severe weather present risks to our operations. The potential physical effects of climate change and severe weather on our operations are highly uncertain and depend upon the unique geographic and environmental factors present.
The potential physical effects of climate change and severe weather on our operations are highly uncertain and depend upon the unique geographic and environmental factors present.
Increasing attention to environmental, social and governance matters may impact our business, financial results or stock price. In recent years, increasing attention has been given to corporate activities related to ESG matters in public discourse and the investment community.
Increasing attention to environmental, social and governance matters may impact our business, financial results, cost of capital, or stock price. In recent years, increasing attention has been given to corporate activities related to ESG matters in public discourse and the investment community.
A reduction in the volume of refined products supplied to our West Texas terminals could adversely affect our sales and earnings. We are subject to risks associated with significant investments in the Permian Basin.
A reduction in the volume of refined products supplied to our West Texas terminals could adversely affect our sales and earnings. 40 | Risk Factors We are subject to risks associated with significant investments in the Permian Basin.
Termination of our Inventory Intermediation Agreement with Citi, which is scheduled to expire in December 2024, would require us to finance the products covered by the agreement at terms that may not be favorable. The availability of capital will depend upon several factors, some of which are beyond our control.
Termination of our Inventory Intermediation Agreement with Citi, which is scheduled to expire in January 2026, would require us to finance the products covered by the agreement at terms that may not be favorable. The availability of capital will depend upon several factors, some of which are beyond our control.
Differences in views among the partners may result in delayed decisions or failures to agree on major matters, such as large expenditures or contractual commitments, the construction of assets or 47 | Risk Factors the borrowing of money, among others.
Differences in views among the partners may result in delayed decisions or failures to agree on major matters, such as large expenditures or contractual commitments, the construction of assets or the borrowing of money, among others.
In late 2015, the EPA finalized additional rules regulating refinery air emissions from a variety of sources (such as cokers, flares, tanks and other process units) through additional NSPS and National Emission Standards for Hazardous Air Pollutants and changing the way emissions from startup, shutdown and malfunction operations are regulated (the "Refinery Risk and Technology Review Rules" or “RTR”).
In late 2015, the EPA finalized additional rules regulating refinery air emissions from a variety of sources (such as cokers, flares, tanks and other process units) through additional New Source Performance Standard and National Emission Standards for Hazardous Air Pollutants and changing the way emissions from startup, shutdown and malfunction operations are regulated (the "Refinery Risk and Technology Review Rules" or “RTR”).
Our operations are subject to various laws and regulations relating to occupational health and safety and process safety administered by OSHA, the EPA and various state equivalent agencies.
Risks Related to Workplace Safety Regulations Our operations are subject to various laws and regulations relating to occupational health and safety and process safety administered by OSHA, the EPA and various state equivalent agencies.
However, the occurrence of any of the following factors could adversely affect our growth strategy: • We may not be able to identify suitable acquisition candidates or acquire additional assets on favorable terms; • We usually compete with others to acquire assets, which competition may increase, and any level of competition could result in decreased availability or increased prices for acquisition candidates; • We may experience difficulty in anticipating the timing and availability of acquisition candidates; • We may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions; and • As a public company, we are subject to reporting obligations, internal controls and other accounting requirements with respect to any business we acquire, which may prevent or negatively affect the valuation of some acquisitions we might otherwise deem favorable or increase our acquisition costs.
However, the occurrence of any of the following factors could adversely affect our growth strategy: • We may not be able to identify suitable acquisition candidates or acquire additional assets on favorable terms; • We usually compete with others to acquire assets, which competition may increase, and any level of competition could result in decreased availability or increased prices for acquisition candidates; • We may experience difficulty in anticipating the timing and availability of acquisition candidates; • We may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our potential acquisitions; and • As a public company, we are subject to reporting obligations, internal controls and other accounting requirements with respect to any business we acquire, which may prevent or negatively affect the valuation of some acquisitions we might otherwise deem favorable or increase our acquisition costs. 44 | Risk Factors Acquisitions involve risks that could cause our actual growth or operating results to differ adversely compared with our expectations.
As a result of the expanded scope, we could face increased operating costs or other impediments that could alter the way we conduct our business, which could in turn have a material adverse effect on our business, financial condition and results of operations.
As a result of this uncertainty, we could face increased or unexpected operating costs or other impediments that could alter the way we conduct our business, which could in turn have a material adverse effect on our business, financial condition and results of operations.
Delek Logistics is subject to its own operating and regulatory risks, including, but not limited to: • its reliance on significant customers, including us; • macroeconomic factors, such as commodity price volatility that could affect its customers' utilization of its assets; • its reliance on us for near-term growth; • sufficiency of cash flow for required distributions; • counterparty risks, such as creditworthiness and force majeure; • competition from third-party pipelines and terminals and other competitors in the transportation and marketing industries; • environmental regulations; • successful integration of acquired businesses; • operational hazards and risks; • pipeline tariff regulations; • limitations on additional borrowings and other restrictions in its debt agreements; and • other financial, operational and legal risks. 46 | Risk Factors The occurrence of any of these factors could directly or indirectly affect Delek Logistics' financial condition, results of operations and cash flows.
Delek Logistics is subject to its own operating and regulatory risks, including, but not limited to: • its reliance on significant customers, including us; • macroeconomic factors, such as commodity price volatility that could affect its customers' utilization of its assets; • its reliance on us for near-term growth; • sufficiency of cash flow for required distributions; • counterparty risks, such as creditworthiness and force majeure; • competition from third-party pipelines and terminals and other competitors in the transportation and marketing industries; • environmental regulations; • successful integration of acquired businesses; • operational hazards and risks; • pipeline tariff regulations; • limitations on additional borrowings and other restrictions in its debt agreements; and • other financial, operational and legal risks.
Our financial condition and operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment. We recorded no goodwill impairment during the years ended December 31, 2022 and 2021 and $126.0 million during the year ended December 31, 2020, respectively.
Our financial condition and operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment. We recorded no goodwill impairment during the years ended December 31, 2022 and 2021 and $14.8 million during the year ended December 31, 2023, respectively.
General economic conditions may adversely affect our business, operating results and financial condition. Economic slowdowns may have serious negative consequences for our business and operating results, because our performance is subject to domestic economic conditions and their impact on levels of consumer spending.
Economic slowdowns may have serious negative consequences for our business and operating results, because our performance is subject to domestic economic conditions and their impact on levels of consumer spending.
Our borrowing availability under our various credit facilities as of December 31, 2022 was $542.1 million. Our level of debt could have important consequences for us.
Our borrowing availability under our various credit facilities as of December 31, 2023 was $1,084.0 million. Our level of debt could have important consequences for us.
In addition, we have identified and self-reported certain other environmental matters subsequent to our purchase of our facilities. Based upon environmental evaluations performed internally and by third parties, we recorded and periodically update environmental liabilities and accrued amounts we believe are sufficient to complete remediation.
In addition, we have identified and self-reported certain other environmental matters subsequent to our purchase of our facilities. Based upon environmental evaluations performed internally and by third parties, we recorded and periodically update environmental liabilities and accrued amounts we believe are sufficient to complete remediation. We expect remediation at some properties to continue for the foreseeable future.
This could, among other things, make it more difficult for us to obtain (or increase our cost of obtaining) capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all.
This could, among other things, make it more difficult for us to obtain (or increase our cost of obtaining) capital and financing and reduce our reliance on the use of RINs financing arrangements and funded letters of credit for our operations. Our access to additional capital may not be available on terms acceptable to us or at all.
For example, on February 27, 2021, our El Dorado refinery experienced a fire in its Penex unit. For additional information, refer to Note 13 - Commitments and Contingencies in the Notes to Consolidated Financial Statements.
For example, in February 2021, our El Dorado refinery experienced a fire in its Penex unit and in November 2022, our Big Spring refinery experienced a fire in its diesel hydrotreater unit. For additional information, refer to Note 13 - Commitments and Contingencies in the Notes to Consolidated Financial Statements.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. As of December 31, 2022, we had total debt of $3,053.7 million, including current maturities of $74.5 million. In addition to our outstanding debt, as of December 31, 2022, our letters of credit issued under our various credit facilities were $287.4 million.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. As of December 31, 2023, we had total debt of $2,657.3 million, including current maturities of $44.5 million. In addition to our outstanding debt, as of December 31, 2023, our letters of credit issued under our various credit facilities were $305.5 million.
If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, and could be liable for property damage to third parties caused by contamination from releases and spills.
When these events occur, in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, we have in the past and could in the future be liable for costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, as well as for property damage to third parties caused by contamination from releases and spills.
We expect remediation at some properties to continue for the 51 | Risk Factors foreseeable future. The need to make future expenditures for these purposes that exceed the amounts for which we estimated and accrued could have a material adverse effect on our business, financial condition and results of operations.
The need to make future expenditures for these purposes that exceed the amounts for which we estimated and accrued could have a material adverse effect on our business, financial condition and results of operations.
The ultimate extent of the impact of the volatile conditions in the oil and gas industry on our business, financial condition, results of operation and liquidity will also depend largely on future developments, including the extent and duration of any price reductions, any additional decisions by OPEC and disputes between the members of other leading oil producing countries (together with OPEC, “OPEC+”).
The ultimate extent of the impact of volatile conditions in the oil and gas industry on our business, financial condition, results of operation and liquidity will depend largely on future developments which are outside of our control, including the extent and duration of any price reductions, any additional decisions by OPEC and disputes between the members of OPEC+.
It is difficult to predict how significant the impact of the COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic, an additional regional or global disease outbreak, and any responses to such events, will be on the U.S. and global economies and our business or for how long disruptions are likely to continue.
Such impairment charges could be material. It is difficult to predict how significant the impact of any regional or global disease outbreak and any responses to such events will be on the U.S. and global economies and our business or for how long disruptions are likely to continue.
In addition, the DOT has issued guidelines with respect to securing regulated facilities such as our bulk terminals against terrorist attack. We have instituted security measures and procedures in accordance with such guidelines to enhance the protection of certain of our facilities. We cannot provide any assurance that these security measures would fully protect our facilities from an attack.
We have instituted security measures and procedures in accordance with such guidelines to enhance the protection of certain of our facilities. We cannot provide any assurance that these security measures would fully protect our facilities from an attack.
We typically arrange for the treatment or disposal of hazardous substances generated by our refining and other operations. Therefore, we may be liable for removal or remediation costs associated with releases of these substances at third party locations, as well as other related costs, including fines, penalties and damages resulting from injuries to persons, property and natural resources.
Therefore, we may be liable for removal or remediation costs associated with releases of these substances at third party 32 | Risk Factors locations, as well as other related costs, including fines, penalties and damages resulting from injuries to persons, property and natural resources.
There can be no assurance that product liability claims against us would not have a material adverse effect on our business or results of operations or our ability to maintain existing customers or retain new customers. Environmental regulations are becoming more stringent, and new environmental and safety laws and regulations are continuously being enacted or proposed.
There can be no assurance that product liability claims against us would not have a material adverse effect on our business or results of operations or our ability to maintain existing customers or retain new customers.
In February 2022, IEP Energy Holding LLC and certain of its affiliates (but not including CVR Energy) proposed three director candidates to be considered at our 2022 Annual Meeting. All three of these proposed director candidates were rejected by our stockholders.
As a result, stockholder campaigns could adversely affect our results of operations, financial condition and cash flows. In February 2022, IEP Energy Holding LLC and certain of its affiliates (but not including CVR Energy) proposed three director candidates to be considered at our 2022 Annual Meeting. All three of these proposed director candidates were rejected by our stockholders.
Depending on the conditions in the credit markets, it may become more difficult to obtain cash or credit from third-party sources.
Depending on the conditions in the credit markets, it may become more difficult to obtain cash or credit from third-party sources including the use of RINs financing arrangements and funded letters of credit.
If we are or become a USRPHC, so long as our common stock is regularly traded on an established securities market such as the NYSE, only a non-U.S. holder who, actually or constructively, holds or held during the lookback period more than five percent of our common stock will be subject to U.S. federal income tax on the disposition of our common stock. 54 | Risk Factors Loss of or reductions to tax incentives for biodiesel production may have a material adverse effect on earnings, profitability and cash flows relating to our renewable fuels facilities.
If we are or become a USRPHC, so long as our common stock is regularly traded on an established securities market such as the NYSE, only a non-U.S. holder who, actually or constructively, holds or held during the lookback period more than five percent of our common stock will be subject to U.S. federal income tax on the disposition of our common stock.
Risks Relating to Our Industries The COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic or an additional regional or global disease outbreak, and certain developments in the global oil markets have had, may continue to have, or may have an adverse impact on our business, our future results of operations and our overall financial performance.
Risks Relating to Our Industries Developments which impact the global oil markets have had, may continue to have, or may have an adverse impact on our business, our future results of operations and our overall financial performance.
Should the U.S. and global economies experience weakness, demand for energy may decline. Should growth in global energy production outstrip demand, excess supplies may arise.
Global economic growth drives demand for energy from all sources, including fossil fuels. Should the U.S. or global economies experience weakness, demand for energy may decline. Should growth in global energy production outstrip demand, excess supplies may arise.
In addition to a civil penalty of $0.5 million that we paid in June 2019, we will be required to expend capital for pollution control equipment that may be significant over the next 6 years.
District Court for the Northern District of Texas in June 2019 resolving alleged historical violations of the CAA at our Big Spring refinery. In addition to a civil penalty of $0.5 million that we paid in June 2019, we will be required to expend capital for pollution control equipment that may be significant over the next 5 years.
Although credits have been readily available, there can be no assurance that such credits will continue to be available for purchase at reasonable prices, or at all, and we could have to implement capital projects in the future to reduce benzene levels. Our operations are also subject to the CWA, the OPA-90 and comparable state and local requirements.
We have purchased credits in the past to comply with these content requirements for two of our refineries. Although credits have been readily available, there can be no assurance that such credits will continue to be available for purchase at reasonable prices, or at all, and we could have to implement capital projects in the future to reduce benzene levels.
In addition to the substantial remediation costs that could be caused by leaks or spills from our pipelines, regulators could prohibit our use of affected portions of the pipeline for extended periods, thereby interrupting the delivery of crude oil to, or the distribution of refined products from, our refineries.
In addition to the substantial remediation costs that could be caused by leaks or spills from our pipelines, regulators could prohibit our use of affected portions of the pipeline for extended periods, thereby interrupting the delivery of crude oil to, or the distribution of refined products from, our refineries. 33 | Risk Factors In addition, the DOT has issued guidelines with respect to securing regulated facilities such as our bulk terminals against terrorist attack.
This risk, and others dependent on geopolitical factors, may be heightened as a result of Russian action against Ukraine and events occurring in response thereto.
This risk, and others dependent on geopolitical factors, may be heightened as a result of ongoing conflicts such as the Russia-Ukraine war and Israel-Hamas war and events occurring in response thereto.
A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community.
A number of advocacy groups, both domestically and internationally, have campaigned for governmental and private action to promote change at public companies related to ESG matters, including through the investment and voting practices of investment advisers, public pension funds, universities and other members of the investing community. 37 | Risk Factors These activities include increasing attention and demands for action related to climate change, promoting the use of substitutes to fossil fuel products, litigation and encouraging the divestment of companies in the fossil fuel industry.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital. 44 | Risk Factors Risks Relating to Our Business We are particularly vulnerable to disruptions to our refining operations because our refining operations are concentrated in four facilities.
Unfavorable ESG ratings may lead to increased negative investor sentiment toward us and our industry and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital.
We rely on information technology in our operations, and any material failure, inadequacy, interruption, cyber-attack or security failure of that technology could harm our business.
A strike or work stoppage could have a material adverse effect on our business, financial condition and results of operations. 47 | Risk Factors We rely on information technology in our operations, and any material failure, inadequacy, interruption, cyber-attack or security failure of that technology could harm our business.
These activities could reduce demand for our products, reduce our profits, increase the potential for investigations and litigation, impair our brand and have negative impacts on our stock price and access to capital markets.
The increasing attention given to ESG activities and a shift by consumers to more fuel-efficient or alternative fuel vehicles could reduce demand for our products, reduce our profits, increase the potential for investigations and litigation, impair our brand and have negative impacts on our stock price and access to capital markets.
Although we monitor our refinery operating margins and seek to optimize results by adjusting throughput volumes, throughput types and product slates, there are inherent limitations on our ability to offset the effects of adverse market conditions. 37 | Risk Factors Many of the factors influencing changes in crack spreads and refining margins are beyond our control.
Refining margins historically have been volatile, and we believe they will continue to be volatile. Although we monitor our refinery operating margins and seek to optimize results by adjusting throughput volumes, throughput types and product slates, there are inherent limitations on our ability to offset the effects of adverse market conditions.
Our operations are subject to certain requirements of the CAA, as well as related state and local laws and regulations governing air emissions. Certain CAA regulatory programs applicable to our refineries, terminals and other operations require capital expenditures for the installation of air pollution control devices, operational procedures to minimize emissions and monitoring and reporting of emissions.
Certain CAA regulatory programs applicable to our refineries, terminals and other operations require capital expenditures for the installation of air pollution control devices, operational procedures to minimize emissions and monitoring and reporting of emissions. A consent decree was entered in the U.S.
Gasoline sales generate customer traffic to our retail fuel and convenience stores, and any decrease in gasoline sales, whether due to shortage or otherwise, could adversely affect our merchandise sales. A serious interruption in the supply of gasoline to our retail fuel and convenience stores could have a material adverse effect on our business, financial condition and results of operations.
Gasoline sales generate customer traffic to our retail fuel and convenience stores, and any decrease in gasoline sales, whether due to shortage or otherwise, could adversely affect our merchandise sales.
To the extent COVID-19 and the developments in the global oil markets adversely affects our business, financial condition, results of operation and liquidity, they may also have the effect of heightening many of the other risks described below.
Furthermore, developments in the global oil markets may also have the effect of heightening many of the other risks described below. A regional or global disease outbreak could have a material adverse effect on our business, financial condition, results of operation and liquidity.
A reduction in cigarette sales volume and/or revenues, merchandise gross profit from tobacco products or overall customer demand for tobacco products could have a material adverse effect on the business, financial condition and results of operations of our retail segment. 49 | Risk Factors In addition, major cigarette manufacturers currently offer substantial rebates to us; however, there can be no assurance that such rebate programs will continue.
A reduction in cigarette sales volume and/or revenues, merchandise gross profit from tobacco products or overall customer demand for tobacco products could have a material adverse effect on the business, financial condition and results of operations of our retail segment.
Any increase in crude oil prices or unfavorable movements in crude oil differentials due to such actions or changing regulatory environment may negatively impact our ability to acquire crude oil at economical prices and could have a material adverse effect on our business, financial condition and results of operations. 38 | Risk Factors We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements could significantly increase our costs of doing business, thereby adversely affecting our profitability.
Any increase in crude oil prices or unfavorable movements in crude oil differentials due to such actions or changing regulatory environment may negatively impact our ability to acquire crude oil at economical prices and could have a material adverse effect on our business, financial condition and results of operations.
In the future, we may incur substantial expenditures for investigation or remediation of contamination that has not been discovered at our current or former locations or locations that we may acquire, or at third party sites where hazardous substances from these locations may have been treated or disposed.
As a result of our purchase of Alon, if we are forced to incur costs or pay liabilities in connection with these indemnification obligations, such costs and payments could be significant. 45 | Risk Factors In the future, we may incur substantial expenditures for investigation or remediation of contamination that has not been discovered at our current or former locations or locations that we may acquire, or at third party sites where hazardous substances from these locations may have been treated or disposed.
In addition, a number of state and local governments in the U.S. have expressed intentions to take, or have taken, action to reduce GHG emissions.
In April 2016, the U.S. became a signatory to the 2015 United Nations Conference on Climate Change, which led to the creation of the Paris Agreement. In addition, a number of state and local governments in the U.S. have expressed intentions to take, or have taken, action to reduce GHG emissions.
Because Delek Logistics is our consolidated subsidiary, the occurrence of any of these risks could also affect our financial condition, results of operations and cash flows. Additionally, if any of these risks affect Delek Logistics' viability, its ability to serve our supply and distribution needs may be jeopardized.
The occurrence of any of these factors could directly or indirectly affect Delek Logistics' financial condition, results of operations and cash flows. Because Delek Logistics is our consolidated subsidiary, the occurrence of any of these risks could also affect our financial condition, results of operations and cash flows.
In addition, because the premium or discount we pay for a portion of the crude oil processed at our refineries is established based upon this differential during the month prior to the month in which the crude oil is processed, rapid decreases in the differential may negatively affect our results of operations and cash flows.
In addition, because the premium or discount we pay for a portion of the crude oil processed at our refineries is established based upon this differential during the month prior to the month in which the crude oil is processed, rapid decreases in the differential may negatively affect our results of operations and cash flows. 31 | Risk Factors Additionally, governmental and regulatory actions, including continued resolutions by OPEC to restrict crude oil production levels and executive actions by the U.S. presidential administration to advance certain energy infrastructure projects may continue to impact crude oil prices and crude oil differentials.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee Note 13 to our consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, which is incorporated by reference in this Item 3, for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeSee Note 13 to our consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, which is incorporated by reference in this Item 3, for additional information. 56 | ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Removed
SEC regulations require disclosure of proceedings arising under federal, state or local provisions regulating the discharge of materials into the environment or protecting the environment, if we reasonably believe that such proceedings may result in monetary sanctions of $0.3 million or more. There is no such pending litigation against us requiring disclosure.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 61 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 61 Item 6. Reserved 62 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 63 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 106
Biggest changeItem 4. Mine Safety Disclosures 57 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 57 Item 6. Reserved 58 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 94

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEach of the three measures of cumulative total return assumes reinvestment of dividends. The 2022 peer group is comprised of CVR Energy, Inc. (NYSE: CVI), HF Sinclair Corporation (NYSE: DINO) (formally HollyFrontier Corporation (NYSE: HFC)), Marathon Petroleum Corporation (NYSE: MPC), PBF Energy, Inc. (NYSE: PBF), Phillips 66 (NYSE: PSX), and Valero Energy Corporation (NYSE: VLO).
Biggest changeEach of the three measures of cumulative total return assumes reinvestment of dividends. The 2023 peer group is comprised of Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT), CVR Energy, Inc. (NYSE: CVI), HF Sinclair Corporation (NYSE: DINO) (formally HollyFrontier Corporation (NYSE: HFC)), Marathon Petroleum Corporation (NYSE: MPC), Par Pacific Holdings, Inc. (NYSE: PARR), PBF Energy, Inc.
The repurchase program does not obligate us to acquire any particular amount of stock and does not expire. 61 | Market for Equity, Stockholder Matters, and Purchase of Equity Securities Performance Graph The Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The repurchase program does not obligate us to acquire any particular amount of stock and does not expire. 57 | Market for Equity, Stockholder Matters, and Purchase of Equity Securities Performance Graph The Performance Graph and related information shall not be deemed "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information with respect to the purchase of shares of our common stock made during the three months ended December 31, 2022 by or on behalf of us or any “affiliated purchaser,” as defined by Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (inclusive of all purchases that have settled as of December 31, 2022).
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information with respect to the purchase of shares of our common stock made during the three months ended December 31, 2023 by or on behalf of us or any “affiliated purchaser,” as defined by Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (inclusive of all purchases that have settled as of December 31, 2023).
On August 1, 2022, the Board of Directors approved an approximately $170.3 million increase in the share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million. As of December 31, 2022, there was $270.4 million of authorization remaining under Delek's aggregate stock repurchase program. This authorization has no expiration.
On August 1, 2022, the Board of Directors approved an approximately $170.3 million increase in the share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million. As of December 31, 2023, there was $185.1 million of authorization remaining under Delek's aggregate stock repurchase program. This authorization has no expiration.
The adjacent graph compares cumulative total returns for our stockholders to the Standard and Poor's 500 Stock Index and a market capitalization weighted peer group selected by management for the five-year period commencing December 31, 2017 and ending December 31, 2022. The graph assumes a $100 investment made on December 31, 2017.
The adjacent graph compares cumulative total returns for our stockholders to the Standard and Poor's 500 Stock Index and a market capitalization weighted peer group selected by management for the five-year period commencing December 31, 2018 and ending December 31, 2023. The graph assumes a $100 investment made on December 31, 2018.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is traded on the New York Stock Exchange under the symbol "DK." As of February 24, 2023, there were approximately 133 common stockholders of record.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is traded on the New York Stock Exchange under the symbol "DK." As of February 21, 2024, there were approximately 129 common stockholders of record.
This number does not include beneficial owners of our common stock whose stock is held in nominee or "street name" accounts through brokers. The transfer agent for our common stock is American Stock Transfer & Trust Company, 6201 15th Ave., Brooklyn, NY 11219. Dividends On August 1, 2022, our Board of Directors voted to reinstate the quarterly cash dividend.
This number does not include beneficial owners of our common stock whose stock is held in nominee or "street name" accounts through brokers. The transfer agent for our common stock is Equiniti Trust Company, LLC, 48 Wall Street, Floor 23, New York, NY 100005. Dividends On August 1, 2022, our Board of Directors voted to reinstate the quarterly cash dividend.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 - October 31, 2022 — $ — — $ 360,000,008 November 1 - November 30, 2022 1,734,727 33.72 1,734,727 301,500,273 December 1 - December 31, 2022 1,090,856 28.47 1,090,856 270,439,480 Total 2,825,583 $ 31.70 2,825,583 N/A (1) On November 6, 2018, our Board of Directors authorized a share repurchase program for up to $500.0 million of Delek common stock.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 - October 31, 2023 769,450 $ 25.99 769,450 $ 185,054,287 November 1 - November 30, 2023 — — — 185,054,287 December 1 - December 31, 2023 — — — 185,054,287 Total 769,450 $ 25.99 769,450 N/A (1) On November 6, 2018, our Board of Directors authorized a share repurchase program for up to $500.0 million of Delek common stock.
The stock performance shown on the graph below is not necessarily indicative of future price performance.
(NYSE: PBF), Phillips 66 (NYSE: PSX), and Valero Energy Corporation (NYSE: VLO). The stock performance shown on the graph below is not necessarily indicative of future price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRevenues 2022 vs. 2021 Revenues for the retail segment increased by $159.5 million, or 20.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following: • an increase in total fuel sales which were $642.2 million for the year ended December 31, 2022 compared to $480.9 million for 2021, primarily attributable to a $0.88 increase in average price charged per gallon sold; and • partially offset by a decrease in merchandise sales to $314.7 million for the year ended December 31, 2022 compared to $316.4 million for the year ended December 31, 2021, primarily driven by the same-store sales decrease of 0.3%. 2021 vs. 2020 Revenues for the retail segment increased by $115.7 million, or 17.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following: • an increase in total fuel sales which were $480.9 million for the year ended December 31, 2021 compared to $357.9 million for 2020, primarily attributable to a $0.86 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold; and • slightly offset by a decrease in merchandise sales to $316.4 million for the year ended December 31, 2021 compared to $323.8 million for 2020, primarily driven by the same-store sales decrease of (1.8)%. 98 | Management's Discussion and Analysis Cost of Materials and Other 2022 vs. 2021 Cost of materials and other for the retail segment increased by $160.7 million, or 25.3%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following: • an increase in average cost per gallon of $0.90 or 35.3% applied to fuel sales volumes that decreased period over period.
Biggest changeThese decreases were partially offset by the following: • an increase in total retail fuel gallons sold of 172,452 thousand gallons during 2023 compared to 170,668 thousand gallons in 2022, primarily attributable to a same-store increase in fuel volumes of 0.7% • an increase in merchandise sales to $316.1 million for the year ended December 31, 2023 compared to $314.7 million for the year ended December 31, 2022, primarily driven by the same-store sales increase of 0.6%.
Our convenience stores typically offer various grades of gasoline and diesel under the DK or Alon 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 DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.
Our convenience stores typically offer various grades of gasoline and diesel under the DK or Alon 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 DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.
While there continues to be risk around the fair value of RINs Obligation that we incur and the RINs cost we recognize in our results of operations, we believe that our risk management activities around RINs are comprehensive.
While there continues to be risk around the fair value of the RINs Obligation that we incur and the RINs cost we recognize in our results of operations, we believe that our risk management activities around RINs are comprehensive.
These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include: • Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income (loss) attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization; • Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales.
These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include: • Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income (loss) attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization; and • Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales.
To the extent that our logistics volumes are not subject to MVCs, our Logistics revenue may be negatively impacted in periods where are customers are experiencing economic pressures or reductions in demand for their products.
To the extent that our logistics volumes are not subject to MVCs, our Logistics revenue may be negatively impacted in periods where our customers are experiencing economic pressures or reductions in demand for their products.
However, there can be no assurances regarding the availability of any future debt or equity financings or whether such financings can be made available on terms that are acceptable to us; any execution of such financing activities will be dependent on the contemporaneous availability of functioning debt or equity markets.
However, there can be no assurances regarding the availability of future debt or equity financings or whether such financings can be made available on terms that are acceptable to us; any execution of such financing activities will be dependent on the contemporaneous availability of functioning debt or equity markets.
The crack spread is often unpredictable and may negatively impact our results of operations in ways that cannot be anticipated and that are beyond management's control. Additionally, rising interest rates (which often occur in under inflationary conditions) may also adversely impact our WACC.
The crack spread is often unpredictable and may negatively impact our results of operations in ways that cannot be anticipated and that are beyond management's control. Additionally, rising interest rates (which often occur under inflationary conditions) may also adversely impact our WACC.
A high-level summary of the refinery activities is presented below: Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery Total Nameplate Capacity (bpd) 75,000 80,000 (1) 73,000 74,000 Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate Relevant Crack Spread Benchmark Gulf Coast 5-3-2 Gulf Coast 5-3-2 (2) Gulf Coast 3-2-1 (3) Gulf Coast 2-1-1 (4) Marketing and Distribution The refining segment's petroleum-based products are marketed primarily in the south central and southwestern regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States.
A high-level summary of the refinery activities is presented below: Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery Total Nameplate Capacity (bpd) 75,000 80,000 73,000 74,000 Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate Relevant Crack Spread Benchmark Gulf Coast 5-3-2 Gulf Coast 5-3-2 (1) Gulf Coast 3-2-1 (2) Gulf Coast 2-1-1 (3) Marketing and Distribution The refining segment's petroleum-based products are marketed primarily in the south central and southwestern regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States.
The energy-related legislation passed with the Inflation Reduction Act (IRA) encompasses clean energy financial incentives that are expected to increase capital investment opportunities that focus on the development of production capacity for liquid fuels with lower GHG emissions. Gulf coast industries should be well positioned for growth, particularly if global trade becomes tied to environmental attributes.
The energy-related legislation passed with the Inflation Reduction Act ("IRA") encompasses clean energy financial incentives that are expected to increase capital investment opportunities that focus on the development of production capacity for liquid fuels with lower GHG. Gulf coast industries should be well positioned for growth, particularly if global trade becomes tied to environmental attributes.
(2) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S. Gulf Coast 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.
(1) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S. Gulf Coast ("Gulf Coast") 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.
We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. 63 | Management's Discussion and Analysis Executive Summary: Management's View of Our Business and Strategic Overview Management's View of Our Business We are an integrated downstream energy business focused on petroleum refining, the transportation, storage and wholesale distribution of crude oil, intermediate and refined products and convenience store retailing.
We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise. 59 | Management's Discussion and Analysis Executive Summary: Management's View of Our Business and Strategic Overview Management's View of Our Business We are an integrated downstream energy business focused on petroleum refining, the transportation, storage and wholesale distribution of crude oil, intermediate and refined products and convenience store retailing.
There continues to be significant uncertainty around coming regulatory requirements, not just from an operational perspective, but also around what reporting requirements may be, as well as the associated cost. 71 | Management's Discussion and Analysis The SEC is currently considering its requirements for ESG reporting in the near term, which may include requirements that independent assurance be obtained and reported for ESG disclosures, similar to financial statement audit reports.
There continues to be significant uncertainty around coming regulatory requirements, not just from an operational perspective, but also around what reporting requirements may be, as well as the associated cost. 65 | Management's Discussion and Analysis The SEC is currently considering its requirements for ESG reporting in the near term, which may include requirements that independent assurance be obtained and reported for ESG disclosures, similar to financial statement audit reports.
Additionally, while our current Net RINs Obligation reflects current RINs market prices as of December 31, 2022, the financial statement impact, including both the income statement and net cash impact of future changes to enacted Renewable Volume Obligation rates, is not determinable because of the complexity of the Net RINs Obligation and related transactions, where such financial statement impact is dependent upon the following: (1) the composition of the specific Net RINs Obligation (in terms of the vintages of RINs we currently own versus the waived RINs Obligation) and the related market prices at the date each volumetric requirement change is enacted; (2) the composition of our RINs forward commitment contracts that may be settled or positions closed as a result of any enacted change and the related gains or losses; (3) the settlement requirements of related RINs product financing arrangements; and (4) the quantity of and dates at which excess RINs can be sold and the sales price (see also Note 11, Note 12 and Note 19 as well as our related accounting policies related to RINs included in Note 2 of our consolidated financial statements included in Item 8.
Additionally, while our current Net RINs Obligation reflects current RINs market prices as of December 31, 2023, the financial statement impact, including both the income statement and net cash impact of future changes to enacted Renewable Volume Obligation rates, is not determinable because of the complexity of the Net RINs Obligation and related transactions, where such financial statement impact is dependent upon the following: (1) the composition of the specific Net RINs Obligation (in terms of the vintages of RINs we currently own versus the waived RINs Obligation) and the related market prices at the date each volumetric requirement change is enacted; (2) the composition of our RINs forward commitment contracts that may be settled or positions closed as a result of any enacted change and the related gains or losses; (3) the settlement requirements of related RINs product financing arrangements; and (4) the quantity of and dates at which excess RINs can be sold and the sales price (see also Note 11, Note 12 and Note 18 as well as our related accounting policies related to RINs included in Note 2 of our consolidated financial statements included in Item 8.
See below for further discussion on how certain key market trends impact our operating results. 72 | Management's Discussion and Analysis Crude Prices WTI crude oil represents the largest component of our crude slate at all of our refineries, and can be sourced through our gathering channels or optimization efforts from Midland, Texas or Cushing, Oklahoma or other locations.
See below for further discussion on how certain key market trends impact our operating results. 66 | Management's Discussion and Analysis Crude Prices WTI crude oil represents the largest component of our crude slate at all of our refineries, and can be sourced through our gathering channels or optimization efforts from Midland, Texas or Cushing, Oklahoma or other locations.
(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of December 31, 2022. (3) We have purchase commitments to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices.
(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of December 31, 2023. (3) We have purchase commitments to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices.
(4) The Krotz Springs refinery has the capability to process substantial volumes of light sweet crude oil to produce a high percentage of refined light products. Our refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi.
(3) The Krotz Springs refinery has the capability to process substantial volumes of light sweet crude oil to produce a high percentage of refined light products. Our refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi.
The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 ULSD and 2-1-1 HSD/LLS crack spreads for each of the quarterly periods over the past three years. . 75 | Management's Discussion and Analysis RIN Volatility Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the price of RINs .
The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 ULSD and 2-1-1 HSD/LLS crack spreads for each of the quarterly periods over the past three years. 69 | Management's Discussion and Analysis RIN Volatility Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the price of RINs .
We evaluate the entity’s need for continuing financial support; the equity holder’s lack of a controlling financial interest; and/or if an equity holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual returns. We evaluate our interests in a VIE to 105 | Management's Discussion and Analysis determine whether we are the primary beneficiary.
We evaluate the entity’s need for continuing financial support; the equity holder’s lack of a controlling financial interest; and/or if an equity holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual returns. We evaluate our interests in a VIE to 93 | Management's Discussion and Analysis determine whether we are the primary beneficiary.
Logistics has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations. The logistics segment owns or leases approximately 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.
Logistics has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations. The logistics segment owns or leases approximately 199 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.
The chart below illustrates the volatility in RINs over the past three years. 76 | Management's Discussion and Analysis Energy Costs Energy costs are a significant element of our Refining EBITDA and can significantly impact our ability to capture crack spreads, with natural gas representing the largest component.
The chart below illustrates the volatility in RINs over the past three years. 70 | Management's Discussion and Analysis Energy Costs Energy costs are a significant element of our Refining EBITDA and can significantly impact our ability to capture crack spreads, with natural gas representing the largest component.
Cash outlays in the first quarter of 2023 are planned to include incentive compensation payments that were earned and accrued in 2022. In line with our Long-term Sustainable strategy, future cash requirements will include initiatives to build on our long-term sustainable business model, ESG initiatives and sum of the parts initiatives.
Cash outlays in the first quarter of 2024 are planned to include incentive compensation payments that were earned and accrued in 2023. In line with our long-term sustainable strategy, future cash requirements will include initiatives to build on our long-term sustainable business model, ESG initiatives and sum of the parts initiatives.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our separate debt and credit facilities. 102 | Management's Discussion and Analysis Additionally, we also utilize other financing arrangements to finance operating assets and/or, from time to time, to monetize other assets that may not be needed in the near term, when internal cost of capital and other criteria are met.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our separate debt and credit facilities. 90 | Management's Discussion and Analysis Additionally, we utilize other financing arrangements to finance operating assets and/or, from time to time, to monetize other assets that may not be needed in the near term, when internal cost of capital and other criteria are met.
Floating interest rate debt is calculated using December 31, 2022 rates. For additional information, see Note 10 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Floating interest rate debt is calculated using December 31, 2023 rates. For additional information, see Note 10 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
For additional information, see Note 9 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Other Cash Requirements Our material short-term cash requirements under contractual obligations are presented above, and we e xpect to fund the majority of those requirements with cash flows from operations.
For additional information, see Note 9 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Other Cash Requirements Our material short-term cash requirements under contractual obligations are presented above, and we expect to fund the majority of those requirements with cash flows from operations.
(3) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the WTI Cushing/WTS price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.
(2) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the WTI Cushing/ West Texas Sour ("WTS") price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.
Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to MVCs.
Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to minimum volume commitments.
It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE: DKL), where we owned a 78.8% interest at December 31, 2022. Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.
It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE: DKL), where we owned a 78.7% interest at December 31, 2023. Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.
As of December 31, 2022, we believe we were in compliance with all of our debt maintenance covenants, where the most significant long-term obligation subject to such covenants was the Delek Logistics Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.
As of December 31, 2023, we believe we were in compliance with all of our debt maintenance covenants, where the most significant long-term obligation subject to such covenants was the Delek Term Loan Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.
Business Combinations We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date in accordance with the provisions of ASC 805.
Business Combinations We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date in accordance with the provisions of Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805").
Our product financing liabilities consisted primarily of RIN financings as of December 31, 2022, and totaled $258.0 million, all of which is due in the next 12 months. See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our accompanying consolidated financial statements included in Item 8.
Our product financing liabilities consisted primarily of RIN financings as of December 31, 2023, and totaled $224.2 million, all of which is due in the next 12 months. See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our accompanying consolidated financial statements included in Item 8.
Finally, Refining EBITDA is impacted by regulatory costs associated with the cost of RINs as well as energy costs, including the cost of natural gas. In periods of unfavorable regulatory sentiment or uncertainty regarding the possibility of SREs, RINs prices can increase at higher rates than crack spreads, or even when crack spreads are declining.
Finally, Refining EBITDA is impacted by regulatory costs associated with the cost of RINs as well as energy costs, including the cost of natural gas. In periods of unfavorable regulatory sentiment, RINs prices can increase at higher rates than crack spreads, or even when crack spreads are declining.
Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by minimum volume commitments ("MVCs").
Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by MVCs.
The storage and transportation business owns or leases associated crude oil storage tanks with an aggregate of approximately 10.3 million barrels of active shell capacity. It also owns and operates ten light product terminals and markets light products using third-party terminals.
The storage and transportation business owns or leases associated crude oil storage tanks with an aggregate of approximately 10.0 million barrels of active shell capacity. It also owns and operates nine light product terminals and markets light products using third-party terminals.
Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and 85 | Management's Discussion and Analysis secondarily from the Permian, and we do not currently have the capability at our refineries to switch our energy consumption to utilize alternative sources of fuel.
Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, and we do not currently have the capability at our refineries to switch our energy consumption to utilize alternative sources of fuel.
In December 2022, the EPA released proposed volumes for compliance years 2023, 2024 and 2025. The cost of RINs continues to negatively impact our results of operations. Also of note, movements in crack spreads behave independently from movements in RFS regulatory requirements and RINs prices and thus can disproportionately impact small refiners.
In June 2023, the EPA released final volumes for compliance years 2023, 2024 and 2025. The cost of RINs continues to negatively impact our results of operations. Also of note, movements in crack spreads behave independently from movements in RFS regulatory requirements and RINs prices and thus can disproportionately impact small refiners.
The refining segment has a combined nameplate capacity of 302,000 bpd as of December 31, 2022.
The refining segment has a combined nameplate capacity of 302,000 bpd as of December 31, 2023.
There are no “rating triggers” in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. However, a downgrade could adversely impact our interest rate on any credit facility implementations and the ability to economically access debt markets in the future.
There are no "rating triggers" in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level. However, a downgrade could adversely impact our interest rate on new credit facility borrowings and the ability to economically access debt markets in the future.
Retail Overview Our retail segment (or "Retail") at December 31, 2022 includes the operations of 249 owned and leased convenience store sites located primarily in West Texas and New Mexico.
Retail Overview Our retail segment (or "Retail") at December 31, 2023 includes the operations of 250 owned and leased convenience store sites located primarily in West Texas and New Mexico.
We may consider inputs such as a market participant weighted average cost of capital ("WACC"), forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on historical information and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.
We may consider inputs such as WACC, forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on historical information and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K). Additionally, we were in compliance with incurrence covenants that were triggered during the quarter ended December 31, 2022.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K). Additionally, we were in compliance with covenants during the quarter ended December 31, 2023.
See Note 8 of our consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further discussion. The following table provides a reconciliation of refining margin to the most directly comparable U.S.
Refer to Note 19 - Restructuring to our accompanying consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information. The following table provides a reconciliation of refining margin to the most directly comparable U.S.
A substantial majority of Delek Logistics' assets are currently integral to our refining and marketing operations. The logistics segment's gathering and processing business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and an approximately 1,120-mile crude oil gathering system.
A substantial majority of Delek Logistics' assets are currently integral to our refining and marketing operations. The logistics segment's gathering and processing business owns or leases capacity on approximately 398 miles of crude oil transportation pipelines, approximately 406 miles of refined product pipelines, and an approximately 1,400-mile crude oil gathering system of which 489 miles is decommissioned.
Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to: • volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products; • reliability of our operating assets; • actions of our competitors and customers; • changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments, including current and future restrictions on commercial and economic activities in response to the COVID-19 Pandemic or future pandemics; • our ability to execute our strategy of growth through acquisitions such as the 3 Bear Acquisition, and capital projects and changes in the expected value of and benefits derived therefrom, including any ability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness; • diminishment in value of long-lived assets may result in an impairment in the carrying value of the assets on our balance sheet and a resultant loss recognized in the statement of operations; • the unprecedented market environment and economic effects of the COVID-19 Pandemic, including uncertainty regarding the timing, pace and extent of economic recovery in the U.S. due to the COVID-19 Pandemic; • general economic and business conditions affecting the southern, southwestern and western U.S., particularly levels of spending related to travel and tourism and the ongoing and future impacts of the COVID-19 Pandemic; • volatility under our derivative instruments; • deterioration of creditworthiness or overall financial condition of a material counterparty (or counterparties); • unanticipated increases in cost or scope of, or significant delays in the completion of, our capital improvement and periodic turnaround projects; • risks and uncertainties with respect to the quantities and costs of refined petroleum products supplied to our pipelines and/or held in our terminals; • operating hazards, natural disasters, weather related disruptions, casualty losses and other matters beyond our control; • increases in our debt levels or costs; • possibility of accelerated repayment on a portion of our Inventory Intermediation Obligation if the purchase price adjustment feature triggers a change on the re-pricing dates; • changes in our ability to continue to access the credit markets; • compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements; • changes in our ability to pay dividends; • seasonality; • earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, and other feedstocks, critical supplies, refined petroleum products and ethanol; • increases in costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements; • legislative and regulatory measures to address climate change and greenhouse gases emissions; • acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities; • impacts of global conflicts; • future decisions by OPEC+ members regarding production and pricing and disputes between OPEC+ members regarding the same; • disruption, failure, or cybersecurity breaches affecting or targeting our IT systems and controls, our infrastructure, or the infrastructure of our cloud-based IT service providers; • changes in the cost or availability of transportation for feedstocks and refined products; and • other factors discussed under Item 1A.
Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to: • volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products; • reliability of our operating assets; • actions of our competitors and customers; • changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments, including current and future restrictions on commercial and economic activities in response to future public health crises; • our ability to execute our long-term sustainability strategy and growth through acquisitions such as the Delaware Gathering Acquisition and joint ventures, including our ability to successfully integrate acquisitions, complete strategic transactions, safety initiatives and capital projects, realize expected synergies, cost savings and other benefits therefrom, return value to shareholders, or achieve operational efficiencies; • diminishment in value of long-lived assets may result in an impairment in the carrying value of the assets on our balance sheet and a resultant loss recognized in the statement of operations; • the impact on commercial activity and other economic effects of any widespread public health crisis, including uncertainty regarding the timing, pace and extent of economic recovery following any such crisis; • general economic and business conditions affecting the southern, southwestern and western U.S., particularly levels of spending related to travel and tourism; • volatility under our derivative instruments; • deterioration of creditworthiness or overall financial condition of a material counterparty (or counterparties); • unanticipated increases in cost or scope of, or significant delays in the completion of, our capital improvement safety initiative and periodic turnaround projects; • risks and uncertainties with respect to the quantities and costs of refined petroleum products supplied to our pipelines and/or held in our terminals; • operating hazards, natural disasters, weather related disruptions, casualty losses and other matters beyond our control; • increases in our debt levels or costs; • possibility of accelerated repayment on a portion of our Inventory Intermediation Agreement obligation if the purchase price adjustment feature triggers a change on the re-pricing dates; • changes in our ability to continue to access the credit markets; • compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements; • changes in our ability to pay dividends; • seasonality; • earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, and other feedstocks, critical supplies, refined petroleum products and ethanol; • increases in costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements; • societal, legislative and regulatory measures to address climate change and GHG; • our ability to execute our sustainability improvement plans, including greenhouse gas reduction targets; • acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities; • impacts of global conflicts such as the war between Israel and Hamas and the Russia-Ukraine War; • future decisions by OPEC and OPEC + regarding production and pricing and disputes between OPEC+ members regarding the same; • disruption, failure, or cybersecurity breaches affecting or targeting our IT systems and controls, our infrastructure, or the infrastructure of our cloud-based IT service providers; • changes in the cost or availability of transportation for feedstocks and refined products; and • other factors discussed under Item 1A.
Refer to the cash flow section for our operating activities spend in 2022. While many of the expenses related to the operating activities are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to forward planning on our level of activity.
Refer to the cash flow section for our operating activities spend during the year ended December 31, 2023. While many of the expenses related to the operating activities are variable in nature, some of the expenditures can be somewhat fixed in the short-term due to forward planning on our level of activity.
Gulf Coast high sulfur diesel (per gallon) $ 2.90 $ 1.75 $ 1.06 Natural gas (MMBTU) $ 6.54 $ 3.73 $ 2.13 (1) For our Tyler and El Dorado refineries, we compare our per barrel refining product margin to the Gulf Coast 5-3-2 crack spread consisting of WTI Cushing crude, U.S. Gulf Coast CBOB and U.S.
Gulf Coast high sulfur diesel (per gallon) $ 1.85 $ 2.90 Natural gas (per MMBtu) $ 2.66 $ 6.54 (1) For our Tyler and El Dorado refineries, we compare our per barrel refining product margin to the Gulf Coast 5-3-2 crack spread consisting of (Argus pricing) WTI Cushing crude, U.S. Gulf Coast CBOB gasoline and U.S.
The increase in net revenues was primarily due to the following: • in our refining segment, increases in the average price of U.S.
The decrease in net revenues was primarily due to the following: • in our refining segment, decreases in the average price of U.S.
Refer to the 'Capital Spending' section for our capital expenditures for 2022 and our anticipated cash requirements for planned capital expenditures for 2023. 104 | Management's Discussion and Analysis Critical Accounting Estimates The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities.
Refer to the 'Capital Spending' section for our capital expenditures for the year ended December 31, 2023 and our anticipated cash requirements for planned capital expenditures for the full year 2024. 92 | Management's Discussion and Analysis Critical Accounting Estimates The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend our business activities.
Cash Flows from Financing Activities Net cash provided by financing activities was $491.1 million for the year ended December 31, 2022, compared to cash used of $124.0 million in the comparable 2021 period.
Cash Flows from Financing Activities Net cash used in financing activities was $624.7 million for the year ended December 31, 2023, compared to cash provided of $491.1 million in the comparable 2022 period.
The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment largely depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.
For this reason, unfavorable Gulf Coast (Henry Hub) differentials can impact our crack spread capture. 77 | Management's Discussion and Analysis The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment largely depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.
In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to): available borrowings under our existing Wells Fargo Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Credit Facility (see further discussion in Note 10 of our consolidated financial statements included in Item 8.
In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to): available borrowings under our existing Delek Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Revolving Facility; the allowance to incur an additional $400.0 million of secured debt under the Delek Term Loan Credit Facility (see further discussion of these facilities in Note 10 of our consolidated financial statements included in Item 8.
Forward-looking statements include, among other things, statements that refer to the 3 Bear Acquisition, including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and the related Pandemic and its impact on oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by the Russia-Ukraine War, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.
Forward-looking statements include, among other things, statements that refer to the acquisition of 3 Bear (subsequently renamed to Delek Delaware Gathering), including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by any ongoing military conflict, such as the Russia-Ukraine War, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.
Gulf Coast Pipeline No. 2 heating oil (high sulfur diesel). The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily a combination of WTI Midland, local Arkansas and other domestic inland crude oil. The Big Spring refinery’s crude oil input is primarily comprised of WTS and WTI Midland.
The Tyler refinery's crude oil input is primarily WTI Midland and East Texas, while the El Dorado refinery's crude input is primarily a combination of WTI Midland, local Arkansas and other domestic inland crude oil. The Big Spring refinery’s crude oil input is primarily comprised of WTS and WTI Midland.
For our Big Spring refinery, we compare our refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast CBOB gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast CBOB gasoline and U.S.
Gulf Coast Pipeline No. 2 heating oil (ultra-low sulfur diesel). For our Big Spring refinery, we compare our per barrel refining margin to the Gulf Coast 3-2-1 crack spread consisting of (Argus pricing) WTI Cushing crude, U.S. Gulf Coast CBOB gasoline and Gulf Coast ultra-low sulfur diesel.
Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. Non-GAAP Reconciliations The following table provides a reconciliation of segment EBITDA to the most directly comparable U.S.
Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. For both arrangements and the related commitments, see also our "Contractual Obligations" section included in Item 7. Management's Discussion and Analysis. Debt Ratings We receive debt ratings from the major ratings agencies in the U.S.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. For both arrangements and the related commitments, see also our "Cash Requirements" section below. Debt Ratings We receive debt ratings from the major ratings agencies in the U.S.
Other Operating Income, Net 2022 vs. 2021 Other operating income, net was $12.5 million and $27.3 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $14.8 million; primarily due to hedge losses realized in 2022 compared to hedge gains realized in 2021 associated with our trading derivatives. 2021 vs. 2020 Other operating income, net was $27.3 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively, an increase of $14.2 million, primarily due to an increase in gains from our trading derivatives in 2021 compared to 2020. 82 | Management's Discussion and Analysis Non-Operating Expenses, Net Interest Expense, Net 2022 vs. 2021 Interest expense, net was $195.3 million in the year ended December 31, 2022, compared to $136.7 million for 2021, an increase of $58.6 million, or 42.9% primarily due to the following: • an increase in the average effective interest rate of 129 basis points during the year ended December 31, 2022 compared to the year ended December 31, 2021 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding); and • an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $449.7 million during the year ended December 31, 2022 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2021. 2021 vs. 2020 Interest expense, net was $136.7 million in the year ended December 31, 2021, compared to $125.7 million for 2020, an increase of $11.0 million, or 8.8% primarily due to the following: • an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $80.6 million during the year ended December 31, 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2020; and • an increase in the average effective interest rate of 16 basis points during the year ended December 31, 2021 compared to the year ended December 31, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).
Other Operating Income, Net 2023 vs. 2022 Other operating income, net was $7.2 million and $12.5 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $5.3 million, primarily due to decreased hedge gains in 2023 compared to 2022 associated with our derivatives. 75 | Management's Discussion and Analysis Non-Operating Expenses, Net Interest Expense, Net 2023 vs. 2022 Interest expense, net was $318.2 million in the year ended December 31, 2023, compared to $195.3 million for year ended December 31, 2022, an increase of $122.9 million, or 62.9% primarily due to the following: • an increase in the average effective interest rate of 390 basis points during the year ended December 31, 2023 compared to the year ended December 31, 2022 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding); and • an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $151.0 million during the year ended December 31, 2023 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2022.
Our retail segment purchased finished product from our refining segment of $355.7 million and $220.0 million for the years ended December 31, 2021 and 2020, respectively. We eliminate this intercompany cost in consolidation.
Our retail segment purchased finished product from our refining segment of $432.5 million and $511.7 million for the years ended December 31, 2023 and 2022, respectively. We eliminate this intercompany cost in consolidation.
Management measures the operating performance of each of its reportable segments based on the segment EBITDA. 78 | Management's Discussion and Analysis Non-GAAP Measures Our management uses certain “non-GAAP” operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S.
Non-GAAP Measures Our management uses certain “non-GAAP” operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP.
See Note 8 of our consolidated financial statements included in Item 8.
Refer to Note 13 of our consolidated financial statements included in Item 8.
Consolidated net income attributable to Delek for the year ended December 31, 2022 was $257.1 million, or $3.63 per basic share, compared to a loss of $128.3 million, or $(1.73) per basic share, for the year ended December 31, 2021.
Consolidated net income attributable to Delek for the year ended December 31, 2023 was $19.8 million, or $0.30 per basic share, compared to income of $257.1 million, or $3.63 per basic share, for the year ended December 31, 2022.
One of our near-term initiatives is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets.
Strategic Initiatives One of our near-term strategic initiatives is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to diversify the Company’s geographic footprint and revenue stream, including in the alternative energy markets, as well as enhance its scale, compensate investors and develop other areas of its business.
Results from Equity Method Investments 2022 vs. 2021 We recognized income from equity method investments of $57.7 million for the year ended December 31, 2022, compared to $18.3 million for the year ended December 31, 2021, an increase of $39.4 million.
Results from Equity Method Investments 2023 vs. 2022 We recognized income from equity method investments of $86.2 million for the year ended December 31, 2023, compared to $57.7 million for the year ended December 31, 2022, an increase of $28.5 million.
Operating Expenses 2022 vs. 2021 Operating expenses for the retail segment increased by $7.8 million, or 8.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily driven by higher employee cost in 2022. 2021 vs. 2020 Operating expenses for the retail segment decreased by $0.5 million, or 0.5%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Operating Expenses 2023 vs. 2022 Operating expenses for the retail segment increased by $4.3 million, or 4.4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily driven by higher employee cost in 2023.
We continue to monitor market conditions, our financial position and our credit ratings and expect future funding sources to be at terms that are sustainable and profitable for the Company.
In addition, we have historically been able to source funding at terms that reflect market conditions, our financial position and our credit ratings and expect future funding sources to be at terms that are sustainable and profitable for the Company.
Depreciation and Amortization 2022 vs. 2021 Depreciation and amortization (included in both cost of sales and other operating expenses) was $287.0 million and $264.6 million for the years ended December 31, 2022 and 2021, respectively, an increase of $22.4 million, or 8.5%. 2021 vs. 2020 Depreciation and amortization (included in both cost of sales and other operating expenses) was $264.6 million and $267.6 million for the years ended December 31, 2021 and 2020, respectively, a decrease of $3.0 million, or 1.1%.
Depreciation and Amortization 2023 vs. 2022 Depreciation and amortization (included in both cost of sales and other operating expenses) was $351.6 million and $287.0 million for the years ended December 31, 2023 and 2022, respectively, an increase of $64.6 million, or 22.5%.
Refining Margin 2022 vs. 2021 Refining margin increased by $796.9 million, or 144.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, with a refining margin percentage of 6.8% as compared to 5.4% for the years ended December 31, 2022 and 2021, respectively, primarily driven by the following: • a 96.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), an 89.0% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 133.1% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery); and • an increase in total sales volumes.
Refining Margin 2023 vs. 2022 Refining margin decreased by $185.6 million, or 13.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, with a refining margin percentage of 7.1% as compared to 6.8% for the years ended December 31, 2023 and 2022, respectively, primarily driven by the following: • a 19.0% decrease in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 17.4% decrease in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery) and a 42.9% decrease in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery).
See the Consolidated Statements of Income included in item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net loss per share. (2) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.
See the Consolidated Statements of Income included in item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net income per share.
This increase was primarily driven by the following: • increases in the average cost per gallon of gasoline and diesel sold, partially offset by decreases in the average volumes of gasoline sold in our West Texas marketing operations: ◦ the average cost per gallon of gasoline and diesel sold increased $0.74 per gallon and $1.43 per gallon, respectively; ◦ the average volumes of diesel sold increased by 1.0 million gallons, while gasoline volumes sold increased by 2.0 million gallons; and • incremental cost of materials and other from the 3 Bear Acquisition.
This decrease was primarily driven by the following: • decrease in costs of materials and other in our West Texas marketing operations primarily driven by decreases in the average cost per gallon and the average volumes of diesel sold in our West Texas marketing operations: ◦ the average cost per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.74 per gallon, respectively; and ◦ the volumes of diesel sold decreased by 3.6 million gallons, partially offset by a 0.6 million increase in gallons of gasoline sold.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Evaluation of Variable Interest Entities ("VIEs") Our consolidated financial statements include the financial statements of our subsidiaries and VIEs, of which we are the primary beneficiary.
Details of remaining goodwill balances by segment are included in Note 16 to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Evaluation of Variable Interest Entities ("VIEs") Our consolidated financial statements include the financial statements of our subsidiaries and VIEs, of which we are the primary beneficiary.
Our refineries produce the following products: Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate 74 | Management's Discussion and Analysis The charts below illustrate the quarterly average prices of CBOB, HSD and ULSD over the past three years.
Our refineries produce the following products: Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate The charts below illustrate the quarterly average prices of CBOB, HSD and ULSD over the past three years. 68 | Management's Discussion and Analysis Crack Spreads Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks/crude oil and the resultant refined products.
The Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland. 89 | Management's Discussion and Analysis Refining Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020 Revenues 2022 vs. 2021 Revenues for the refining segment increased $9,495.2 million, or 92.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.
The Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland. 81 | Management's Discussion and Analysis Refining Segment Operational Comparison of the Year Ended December 31, 2023 versus the Year Ended December 31, 2022 Revenues 2023 vs. 2022 Revenues for the refining segment decreased $3,356.1 million, or 17.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Refined Product Prices We are impacted by refined product prices in two ways: (1) in terms of the prices we are able to sell our refined product for in our refining segment, and (2) in terms of the cost to acquire the refined products to meet Refining production shortfalls (e.g., when we have outages), or to acquire refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment.
The chart below illustrates the key differentials impacting our refining operations, including WTI Cushing to Brent, WTI Midland to WTI Cushing, and LLS to WTI Cushing over the past three years. 67 | Management's Discussion and Analysis Refined Product Prices We are impacted by refined product prices in two ways: (1) in terms of the prices we are able to sell our refined product for in our refining segment, and (2) in terms of the cost to acquire the refined products to meet Refining production shortfalls (e.g., when we have outages), or to acquire refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment.
Cost of Materials and Other 2022 vs. 2021 Cost of materials and other increased $8,698.3 million, or 89.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cost of Materials and Other 2023 vs. 2022 Cost of materials and other decreased $3,170.5 million, or 17.2%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.
These costs and fees were $367.9 million and $339.1 million during the years ended December 31, 2021 and 2020, respectively. We eliminate these intercompany fees in consolidation.
These costs and fees were $562.2 million and $477.1 million during the years ended December 31, 2023 and 2022, respectively. We eliminate these intercompany fees in consolidation.
Other funding sources including borrowings under existing credit agreements and issuance of equity and debt securities have been utilized to meet our funding requirements and support our growth capital projects and acquisitions. In addition, we have historically been able to source funding at terms that reflect market conditions, our financial position and our credit ratings.
Other funding sources including borrowings under existing credit agreements, and issuance of equity and debt securities have been utilized to meet our funding requirements and support our growth capital projects and acquisitions.
In November 2018, we terminated the license agreement with 7-Eleven, Inc. and the terms of such termination and subsequent amendments require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023. Merchandise at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed pursuant to the termination.
In November 2018, we terminated the license agreement with 7-Eleven, Inc. and the terms of such termination and subsequent amendments required the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023. As of December 31, 2023, we have removed the 7-Eleven brand name from all of our store locations.
(5) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas terminals, El Dorado and North Little Rock, Arkansas terminals and Memphis and Nashville, Tennessee terminals.
(4) Mcfd - average thousand cubic feet per day. (5) Excludes jet fuel and petroleum coke. (6) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas terminals, El Dorado and North Little Rock, Arkansas terminals and Memphis and Nashville, Tennessee terminals.
Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate.
Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate. We understand that if our assets run reliably and safely, it is better for the safety of our employees, communities, and environment.
(4) Balances consist of obligations under RINs product financing arrangements, as described in the 'Environmental Credits and Related Regulatory Obligations' accounting policy included in Note 2 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K and further discussed in the ''Environmental Credits and Related Regulatory Obligations" accounting policy included in Note 2 to our consolidated financial statements in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−6 removed10 unchanged
Biggest changeThe following table sets forth information relating to our open commodity derivative contracts, excluding our trading derivative contracts (which are presented separately below), as of December 31, 2022 ($ in millions): Total Outstanding Notional Contract Volume by Year of Maturity Contract Description Fair Value Notional Contract Volume 2023 2024 Contracts not designated as hedging instruments: Crude oil price swaps - long (1) $ (5.3) 74,009,000 68,680,000 5,329,000 Crude oil price swaps - short (1) 10.7 71,035,000 65,700,000 5,335,000 Inventory, refined product and crack spread swaps - long (1) 10.4 3,303,000 3,303,000 — Inventory, refined product and crack spread swaps - short (1) (27.8) 6,010,000 6,010,000 — Natural gas swaps - long (3) (7.5) 2,030,000 2,030,000 — Natural gas swaps - short (3) 0.7 280,000 280,000 — RINs commitment contracts - long (2) (0.1) 217,350,000 — — RINs commitment contracts - short (2) 3.2 41,672,967 — — Total $ (15.7) (1) Volume in barrels.
Biggest changeGains or losses on commodity derivative contracts accounted for as cash flow hedges are recognized in other comprehensive income on the consolidated balance sheets and, ultimately, when the forecasted transactions are completed in net revenues or cost of materials and other in the consolidated statements of income. 94 | Management's Discussion and Analysis The following table sets forth information relating to our open commodity derivative contracts, excluding our trading derivative contracts (which are presented separately below), as of December 31, 2023 ($ in millions): Total Outstanding Notional Contract Volume by Year of Maturity Contract Description Fair Value Notional Contract Volume 2024 Contracts not designated as hedging instruments: Crude oil price swaps - long (1) $ 1.2 26,530,000 26,530,000 Crude oil price swaps - short (1) (2.5) 26,479,000 26,479,000 Inventory, refined product and crack spread swaps - long (1) (1.2) 784,000 784,000 Inventory, refined product and crack spread swaps - short (1) 1.2 1,306,000 1,306,000 RINs commitment contracts - long (2) (3.1) 41,521,206 41,521,206 RINs commitment contracts - short (2) — 115,255 115,255 Total $ (4.4) (1) Volume in barrels.
In addition, current or future governmental policies may increase the risk of inflation, which could further increase costs and may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales if the prices at which we are able to sell our products and services do not increase in line with increases in costs.
In addition, current or future governmental policies may increase or decrease the risk of inflation, which could further increase costs and may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales if the prices at which we are able to sell our products and services do not increase in line with increases in costs.
Price Risk Management Activities At times, we enter into the following instruments/transactions in order to manage our market-indexed pricing risk: commodity derivative contracts which we use to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production; and future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs obligations and meet the definition of derivative instruments under Accounting Standards Codification ("ASC") 815, Derivatives and Hedging ("ASC 815").
Price Risk Management Activities At times, we enter into the following instruments/transactions in order to manage our market-indexed pricing risk: commodity derivative contracts which we use to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production; and future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs obligations and meet the definition of derivative instruments under ASC 815, Derivatives and Hedging ("ASC 815").
For the years ended December 31, 2022, 2021 and 2020, the majority of our forward purchase and sales contracts that were accounted for as derivative instruments consisted of contracts related to our Canadian trading activities.
For the years ended December 31, 2023, 2022 and 2021, all of our forward purchase and sales contracts that were accounted for as derivative instruments consisted of contracts related to our Canadian trading activities.
At December 31, 2022, we held approximately 15 million barrels of crude and product inventories associated with the Tyler, El Dorado, Big Spring and Krotz Springs refineries valued under FIFO, with an average cost of $81.88 per barrel.
At December 31, 2023 and December 31, 2022, we held approximately 10.0 million and 15.0 million, respectively, barrels of crude and product inventories associated with the Tyler, El Dorado, Big Spring and Krotz Springs refineries valued under FIFO, with an average cost of $76.37 and $81.88, respectively, per barrel.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Changes in commodity prices (mainly crude oil and unleaded gasoline) and interest rates are our primary sources of market risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Changes in commodity prices (mainly crude oil and refined products) and interest rates are our primary sources of market risk.
(2) Volume in RINs. (3) Volume in MMBTU. Interest Rate Risk We have market exposure to changes in interest rates relating to our outstanding floating rate borrowings, which totaled approximately $2,470.5 million as of December 31, 2022.
(2) Volume in RINs. Interest Rate Risk We have market exposure to changes in interest rates relating to our outstanding floating rate borrowings, which totaled approximately $2,007.3 million as of December 31, 2023.
The following table sets forth information relating to trading commodity derivative contracts as of December 31, 2022 ($ in millions): 107 | Management's Discussion and Analysis Total Outstanding Notional Contract Volume by Year of Maturity Contract Description Fair Value Notional Contract Volume 2023 Crude forward contracts- long (1) 104.6 1,646,520 1,646,520 Crude forward contracts- short (1) (115.0) 1,773,499 1,773,499 Total $ (10.4) (1) Volume in barrels.
The following table sets forth information relating to trading commodity derivative contracts as of December 31, 2023 ($ in millions): Total Outstanding Notional Contract Volume by Year of Maturity Contract Description Fair Value Notional Contract Volume 2023 Crude forward contracts - long (1) $ 7.2 118,935 118,935 Crude forward contracts - short (1) (7.2) 118,935 118,935 Total $ — (1) Volume in barrels.
In periods of declining crude oil and refined product pricing, market prices may decline to a level below the average cost of our inventories For the years ended December 31, 2022, 2021 and 2020, we recognized net inventory valuation (losses) gains of $(11.2) million, $(9.3) million and $(0.8) million, respectively, which were recorded as a component of cost of materials and other in the consolidated statements of income.
For the years ended December 31, 2023, 2022 and 2021, we recognized net inventory valuation (losses) gains of $(0.4) million, $(1.9) million and $(8.5) million, respectively, which were recorded as a component of cost of materials and other in the consolidated statements of income.
The annualized impact of a hypothetical one percent change in interest rates on our floating rate debt outstanding as of December 31, 2022 would be to change interest expense by approximately $24.7 million. Inflation Inflationary factors, such as increases in the costs of our inputs, operating expenses, and interest rates may adversely affect our operating results.
The annualized impact of a hypothetical one percent change in interest rates on our floating rate debt outstanding as of December 31, 2023 would be to change interest expense by approximately $20.1 million.
Removed
Effective January 1, 2022, we changed our method for valuing the inventory held at the Tyler refinery to the first-in, first-out ("FIFO") inventory valuation method from the last-in, first-out ("LIFO") inventory valuation method.
Added
We also have interest rate exposure in connection with our Inventory Intermediation Agreement under which we pay a time value of money charge based on Secured Overnight Financing Rate ("SOFR"). Inflation Inflationary factors, such as increases in the costs of our inputs, operating expenses, and interest rates may adversely affect our operating results.
Removed
At December 31, 2021, we held approximately 13.0 million barrels of crude and product inventories associated with the Tyler, El Dorado, Big Spring and Krotz Springs refineries valued under FIFO, with an average cost of $80.23 per barrel.
Removed
Gains or losses on commodity derivative contracts accounted for as cash flow hedges 106 | Management's Discussion and Analysis are recognized in other comprehensive income on the consolidated balance sheets and, ultimately, when the forecasted transactions are completed in net revenues or cost of materials and other in the consolidated statements of income.
Removed
During 2022, our results of operations were negatively affected by higher natural gas costs, higher labor costs and supply chain disruptions, in part, by the COVID-19 Pandemic, the uncertain economic environment, and macroeconomic and geopolitical events and trends. We expect these cost pressures and supply chain challenges to continue into fiscal year 2023.
Removed
LIBOR Transition LIBOR is a commonly used indicative measure of the average interest rate at which major global banks could borrow from one another. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR discontinued the reporting of certain LIBOR rates on December 31, 2021, and has publicly announced that it intends to discontinue all USD LIBOR rates after June 2023.
Removed
Certain of our agreements used LIBOR as a “benchmark” or “reference rate” for various terms. During 2022, we completed the transition of all agreements form LIBOR to an alternative reference rate. it did not have a significant impact on our business or operations.

Other DK 10-K year-over-year comparisons