þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
||
|
|
|
|
|
|
|
For the quarterly period ended September 30, 2017
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the transition period from to
|
Delaware
|
|
35-2581557
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
|
|
|
7102 Commerce Way
|
|
|
Brentwood, Tennessee
|
|
37027
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
þ
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
Emerging growth company
o
|
|
|
|
|
(Do not check if a smaller reporting company)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1.
|
Financial Statements
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
831.7
|
|
|
$
|
689.2
|
|
Accounts receivable, net
|
|
495.5
|
|
|
265.9
|
|
||
Accounts receivable from related parties
|
|
0.3
|
|
|
0.1
|
|
||
Inventories, net of inventory valuation reserves
|
|
693.5
|
|
|
392.4
|
|
||
Assets of discontinued operations held for sale
|
|
167.2
|
|
|
—
|
|
||
Other current assets
|
|
82.4
|
|
|
49.3
|
|
||
Total current assets
|
|
2,270.6
|
|
|
1,396.9
|
|
||
Property, plant and equipment:
|
|
|
|
|
||||
Property, plant and equipment
|
|
2,732.9
|
|
|
1,587.6
|
|
||
Less: accumulated depreciation
|
|
(585.2
|
)
|
|
(484.3
|
)
|
||
Property, plant and equipment, net
|
|
2,147.7
|
|
|
1,103.3
|
|
||
Goodwill
|
|
796.9
|
|
|
12.2
|
|
||
Other intangibles, net
|
|
91.7
|
|
|
26.7
|
|
||
Equity method investments
|
|
141.4
|
|
|
360.0
|
|
||
Other non-current assets
|
|
120.8
|
|
|
80.7
|
|
||
Total assets
(1)
|
|
$
|
5,569.1
|
|
|
$
|
2,979.8
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
800.9
|
|
|
$
|
494.6
|
|
Accounts payable to related parties
|
|
2.8
|
|
|
1.8
|
|
||
Current portion of long-term debt
|
|
351.0
|
|
|
84.4
|
|
||
Obligation under Supply and Offtake Agreement
|
|
386.7
|
|
|
124.6
|
|
||
Liabilities of discontinued operations held for sale
|
|
103.1
|
|
|
—
|
|
||
Accrued expenses and other current liabilities
|
|
439.7
|
|
|
229.8
|
|
||
Total current liabilities
|
|
2,084.2
|
|
|
935.2
|
|
||
Non-current liabilities:
|
|
|
|
|
||||
Long-term debt, net of current portion
|
|
1,076.8
|
|
|
748.5
|
|
||
Environmental liabilities, net of current portion
|
|
69.8
|
|
|
6.2
|
|
||
Asset retirement obligations
|
|
52.1
|
|
|
5.2
|
|
||
Deferred tax liabilities
|
|
464.5
|
|
|
76.2
|
|
||
Other non-current liabilities
|
|
38.1
|
|
|
26.0
|
|
||
Total non-current liabilities
|
|
1,701.3
|
|
|
862.1
|
|
||
Stockholders’ equity:
|
|
|
|
|
||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value, 110,000,000 shares authorized, 81,450,340 shares and 67,150,352 shares issued at September 30, 2017 and December 31, 2016, respectively
|
|
0.8
|
|
|
0.7
|
|
||
Additional paid-in capital
|
|
905.9
|
|
|
650.5
|
|
||
Accumulated other comprehensive income (loss)
|
|
5.1
|
|
|
(20.8
|
)
|
||
Treasury stock, 5,195,791 shares, at cost, as of December 31, 2016
|
|
—
|
|
|
(160.8
|
)
|
||
Retained earnings
|
|
568.6
|
|
|
522.3
|
|
||
Non-controlling interest in subsidiaries
|
|
303.2
|
|
|
190.6
|
|
||
Total stockholders’ equity
|
|
1,783.6
|
|
|
1,182.5
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
5,569.1
|
|
|
$
|
2,979.8
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net sales
|
|
$
|
2,341.5
|
|
|
$
|
1,079.9
|
|
|
$
|
4,754.3
|
|
|
$
|
3,113.3
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold
|
|
1,988.1
|
|
|
965.6
|
|
|
4,181.6
|
|
|
2,806.7
|
|
||||
Operating expenses
|
|
153.2
|
|
|
61.0
|
|
|
276.5
|
|
|
187.8
|
|
||||
Insurance proceeds — business interruption
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.4
|
)
|
||||
General and administrative expenses
|
|
61.8
|
|
|
24.9
|
|
|
115.8
|
|
|
77.5
|
|
||||
Depreciation and amortization
|
|
46.9
|
|
|
29.0
|
|
|
105.4
|
|
|
86.6
|
|
||||
Other operating expense, net
|
|
0.7
|
|
|
2.2
|
|
|
1.0
|
|
|
2.2
|
|
||||
Total operating costs and expenses
|
|
2,250.7
|
|
|
1,082.7
|
|
|
4,680.3
|
|
|
3,118.4
|
|
||||
Operating income (loss)
|
|
90.8
|
|
|
(2.8
|
)
|
|
74.0
|
|
|
(5.1
|
)
|
||||
Interest expense
|
|
34.1
|
|
|
13.9
|
|
|
62.5
|
|
|
40.7
|
|
||||
Interest income
|
|
(0.9
|
)
|
|
(0.2
|
)
|
|
(2.7
|
)
|
|
(0.9
|
)
|
||||
(Income) loss from equity method investments
|
|
(5.1
|
)
|
|
5.1
|
|
|
(9.7
|
)
|
|
33.7
|
|
||||
Loss on impairment of equity method investment
|
|
—
|
|
|
245.3
|
|
|
—
|
|
|
245.3
|
|
||||
Gain on remeasurement of equity method investment
|
|
(190.1
|
)
|
|
—
|
|
|
(190.1
|
)
|
|
—
|
|
||||
Other expense, net
|
|
0.8
|
|
|
0.1
|
|
|
0.9
|
|
|
0.6
|
|
||||
Total non-operating (income) expenses, net
|
|
(161.2
|
)
|
|
264.2
|
|
|
(139.1
|
)
|
|
319.4
|
|
||||
Income (loss) from continuing operations before income tax expense (benefit)
|
|
252.0
|
|
|
(267.0
|
)
|
|
213.1
|
|
|
(324.5
|
)
|
||||
Income tax expense (benefit)
|
|
133.5
|
|
|
(103.3
|
)
|
|
111.5
|
|
|
(136.8
|
)
|
||||
Income (loss) from continuing operations
|
|
118.5
|
|
|
(163.7
|
)
|
|
101.6
|
|
|
(187.7
|
)
|
||||
Discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
(Loss) income from discontinued operations
|
|
(6.4
|
)
|
|
9.2
|
|
|
(6.4
|
)
|
|
8.1
|
|
||||
Income tax (benefit) expense
|
|
(2.3
|
)
|
|
3.2
|
|
|
(2.3
|
)
|
|
2.6
|
|
||||
(Loss) income from discontinued operations, net of tax
|
|
(4.1
|
)
|
|
6.0
|
|
|
(4.1
|
)
|
|
5.5
|
|
||||
Net income (loss)
|
|
114.4
|
|
|
(157.7
|
)
|
|
97.5
|
|
|
(182.2
|
)
|
||||
Net income attributed to non-controlling interest
|
|
10.0
|
|
|
4.0
|
|
|
19.8
|
|
|
15.7
|
|
||||
Net income (loss) attributable to Delek
|
|
$
|
104.4
|
|
|
$
|
(161.7
|
)
|
|
$
|
77.7
|
|
|
$
|
(197.9
|
)
|
Basic income (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
|
$
|
1.35
|
|
|
$
|
(2.71
|
)
|
|
$
|
1.20
|
|
|
$
|
(3.28
|
)
|
(Loss) income from discontinued operations
|
|
$
|
(0.05
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.09
|
|
Total basic income (loss) per share
|
|
$
|
1.30
|
|
|
$
|
(2.61
|
)
|
|
$
|
1.14
|
|
|
$
|
(3.19
|
)
|
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
|
$
|
1.34
|
|
|
$
|
(2.71
|
)
|
|
$
|
1.19
|
|
|
$
|
(3.28
|
)
|
(Loss) income from discontinued operations
|
|
$
|
(0.05
|
)
|
|
$
|
0.10
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.09
|
|
Total diluted income (loss) per share
|
|
$
|
1.29
|
|
|
$
|
(2.61
|
)
|
|
$
|
1.13
|
|
|
$
|
(3.19
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
80,581,762
|
|
|
61,834,968
|
|
|
68,272,918
|
|
|
61,931,040
|
|
||||
Diluted
|
|
81,245,405
|
|
|
61,834,968
|
|
|
68,975,974
|
|
|
61,931,040
|
|
||||
Dividends declared per common share outstanding
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.45
|
|
|
$
|
0.45
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income (loss) attributable to Delek
|
|
$
|
104.4
|
|
|
$
|
(161.7
|
)
|
|
$
|
77.7
|
|
|
$
|
(197.9
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Commodity contracts designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses), net of ineffectiveness gains of $0.1 million and $0.5 million for the three and nine months ended September 30, 2017, respectively, and $2.2 million and $2.7 million for the three and nine months ended September 30, 2016, respectively
|
|
3.4
|
|
|
(2.2
|
)
|
|
(6.4
|
)
|
|
5.7
|
|
||||
Realized (gains) losses reclassified to cost of goods sold
|
|
(1.0
|
)
|
|
7.0
|
|
|
38.5
|
|
|
21.3
|
|
||||
Increase related to commodity cash flow hedges, net
|
|
2.4
|
|
|
4.8
|
|
|
32.1
|
|
|
27.0
|
|
||||
Income tax expense
|
|
(0.8
|
)
|
|
(1.7
|
)
|
|
(11.2
|
)
|
|
(9.4
|
)
|
||||
Net comprehensive income on commodity contracts designated as cash flow hedges
|
|
1.6
|
|
|
3.1
|
|
|
20.9
|
|
|
17.6
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Interest rate contracts designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gains
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Realized gains reclassified to interest expense
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Increase related to interest rate cash flow hedges, net
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
||||
Income tax expense
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
||||
Net comprehensive income on interest rate contracts designated as cash flow hedges
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation gain
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss) from equity method investments, net of tax expense of $2.2 million for the both the three and nine months ended September 30, 2017, and net of tax expense of a nominal amount and a benefit of $0.1 million for the three and nine months ended September 30, 2016
|
|
4.1
|
|
|
0.1
|
|
|
4.1
|
|
|
(0.1
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Postretirement benefit plans:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gain arising during the year related to:
|
|
|
|
|
|
|
|
|
||||||||
Net actuarial gain
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
||||
Curtailment gain
|
|
6.3
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
||||
Gain reclassified to earnings:
|
|
|
|
|
|
|
|
|
||||||||
Recognized due to curtailment
|
|
(6.1
|
)
|
|
—
|
|
|
(6.1
|
)
|
|
—
|
|
||||
Increase related to postretirement benefit plans, net
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
||||
Income tax expense
|
|
(0.4
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
||||
Net comprehensive income on postretirement benefit plans
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
||||
Total other comprehensive income
|
|
6.6
|
|
|
3.2
|
|
|
25.9
|
|
|
17.7
|
|
||||
Comprehensive income (loss) attributable to Delek
|
|
$
|
111.0
|
|
|
$
|
(158.5
|
)
|
|
$
|
103.6
|
|
|
$
|
(180.2
|
)
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
97.5
|
|
|
$
|
(182.2
|
)
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
105.4
|
|
|
86.6
|
|
||
Amortization of deferred financing costs and debt discount
|
|
5.3
|
|
|
3.5
|
|
||
Accretion of asset retirement obligations
|
|
0.4
|
|
|
0.3
|
|
||
Amortization of unfavorable contract liability
|
|
(4.4
|
)
|
|
—
|
|
||
Deferred income taxes
|
|
97.8
|
|
|
(138.6
|
)
|
||
(Income) loss from equity method investments
|
|
(9.7
|
)
|
|
33.7
|
|
||
Dividends from equity method investments
|
|
12.0
|
|
|
15.2
|
|
||
Loss on disposal of assets
|
|
1.0
|
|
|
2.2
|
|
||
Impairment of equity method investment
|
|
—
|
|
|
245.3
|
|
||
Gain on remeasurement of equity method investment
|
|
(190.1
|
)
|
|
—
|
|
||
Equity-based compensation expense
|
|
12.6
|
|
|
12.5
|
|
||
Income tax benefit of equity-based compensation
|
|
—
|
|
|
2.0
|
|
||
Loss (income) from discontinued operations
|
|
4.1
|
|
|
(5.5
|
)
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
(57.5
|
)
|
|
20.7
|
|
||
Inventories and other current assets
|
|
(38.1
|
)
|
|
(35.7
|
)
|
||
Fair value of derivatives
|
|
18.9
|
|
|
28.0
|
|
||
Accounts payable and other current liabilities
|
|
6.6
|
|
|
9.5
|
|
||
Obligation under Supply and Offtake Agreement
|
|
64.1
|
|
|
(0.5
|
)
|
||
Non-current assets and liabilities, net
|
|
(35.4
|
)
|
|
(1.7
|
)
|
||
Cash provided by operating activities - continuing operations
|
|
90.5
|
|
|
95.3
|
|
||
Cash (used in) provided by operating activities - discontinued operations
|
|
(7.2
|
)
|
|
26.2
|
|
||
Net cash provided by operating activities
|
|
83.3
|
|
|
121.5
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|||
Cash acquired in business combinations
|
|
200.5
|
|
|
—
|
|
||
Equity method investment contributions
|
|
(4.8
|
)
|
|
(54.7
|
)
|
||
Purchases of property, plant and equipment
|
|
(108.4
|
)
|
|
(28.2
|
)
|
||
Purchase of intangible assets
|
|
(5.5
|
)
|
|
(0.7
|
)
|
||
Proceeds from sales of assets
|
|
—
|
|
|
0.2
|
|
||
Cash provided by (used in) investing activities - continuing operations
|
|
81.8
|
|
|
(83.4
|
)
|
||
Cash used in investing activities - discontinued operations
|
|
13.5
|
|
|
(14.2
|
)
|
||
Net cash provided by (used in) investing activities
|
|
95.3
|
|
|
(97.6
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
|||
Proceeds from long-term revolvers
|
|
781.7
|
|
|
235.6
|
|
||
Payments on long-term revolvers
|
|
(920.5
|
)
|
|
(212.2
|
)
|
||
Proceeds from term debt
|
|
248.1
|
|
|
40.4
|
|
||
Payments on term debt
|
|
(79.9
|
)
|
|
(42.3
|
)
|
||
Proceeds from product financing agreements
|
|
21.0
|
|
|
50.4
|
|
||
Repayments of product financing agreements
|
|
(9.0
|
)
|
|
—
|
|
||
Taxes paid due to the net settlement of equity-based compensation
|
|
—
|
|
|
(0.8
|
)
|
||
Income tax benefit expense of equity-based compensation
|
|
(2.7
|
)
|
|
(2.0
|
)
|
||
Repurchase of common stock
|
|
—
|
|
|
(6.0
|
)
|
||
Repurchase of non-controlling interest
|
|
(7.3
|
)
|
|
—
|
|
||
Distribution to non-controlling interest
|
|
(23.8
|
)
|
|
(17.7
|
)
|
||
Dividends paid
|
|
(31.3
|
)
|
|
(28.1
|
)
|
||
Deferred financing costs paid
|
|
(6.1
|
)
|
|
(1.9
|
)
|
||
Cash (used in) provided by financing activities - continuing operations
|
|
(29.8
|
)
|
|
15.4
|
|
||
Cash used in financing activities - discontinued operations
|
|
—
|
|
|
(11.2
|
)
|
||
Net cash (used in) provided by financing activities
|
|
(29.8
|
)
|
|
4.2
|
|
||
Net increase in cash and cash equivalents
|
|
148.8
|
|
|
28.1
|
|
||
Cash and cash equivalents at the beginning of the period
|
|
689.2
|
|
|
287.2
|
|
||
Cash and cash equivalents at the end of the period
|
|
838.0
|
|
|
315.3
|
|
||
Less cash and cash equivalents of discontinued operations at the end of the period
|
|
6.3
|
|
|
17.9
|
|
||
Cash and cash equivalents of continuing operations at the end of the period
|
|
$
|
831.7
|
|
|
$
|
297.4
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Interest, net of capitalized interest of $0.2 and $0.1 for the nine months ended September 30, 2017 and 2016, respectively.
|
|
$
|
52.7
|
|
|
$
|
36.6
|
|
Income taxes
|
|
$
|
70.6
|
|
|
$
|
1.7
|
|
Non-cash investing activities:
|
|
|
|
|
||||
Increase (decrease) in accrued capital expenditures
|
|
$
|
2.4
|
|
|
$
|
(4.0
|
)
|
Non-cash financing activities:
|
|
|
|
|
||||
Common stock issued in connection with the Delek/Alon Merger
|
|
$
|
509.0
|
|
|
$
|
—
|
|
Equity instruments issued in connection with the Delek/Alon Merger
|
|
$
|
21.7
|
|
|
$
|
—
|
|
Delek common stock issued
|
19,250,795
|
|
|
|||
Ending price per share of Delek Common Stock immediately before the Effective Time
|
$
|
26.44
|
|
|
||
Total value of common stock consideration
|
|
$
|
509.0
|
|
||
Additional consideration
(1)
|
|
21.7
|
|
|||
Fair value of Delek's pre-existing equity method investment in Alon
(2)
|
|
449.0
|
|
|||
|
|
$
|
979.7
|
|
Cash
|
|
$
|
215.3
|
|
Receivables
|
|
176.9
|
|
|
Inventories
|
|
255.5
|
|
|
Prepaids and other current assets
|
|
31.4
|
|
|
Property, plant and equipment
(3)
|
|
1,183.1
|
|
|
Equity method investments
|
|
31.0
|
|
|
Acquired intangible assets
(4)
|
|
65.0
|
|
|
Goodwill
(5)
|
|
784.8
|
|
|
Other non-current assets
|
|
37.0
|
|
|
Accounts payable
|
|
(259.7
|
)
|
|
Obligation under Supply & Offtake Agreements
|
|
(198.0
|
)
|
|
Current portion of environmental liabilities
|
|
(7.5
|
)
|
|
Other current liabilities
|
|
(266.5
|
)
|
|
Environmental liabilities and asset retirement obligations, net of current portion
|
|
(141.7
|
)
|
|
Deferred income taxes
|
|
(280.4
|
)
|
|
Debt
|
|
(568.0
|
)
|
|
Other non-current liabilities
(6)
|
|
(78.5
|
)
|
|
Fair value of net assets acquired
|
|
$
|
979.7
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||
|
|
September 30,
|
|
September 30,
|
|||||||||
(in millions, except per share data)
|
|
|
2016
|
|
2017
|
|
2016
|
||||||
Net sales
|
|
|
$
|
2,119.9
|
|
|
$
|
7,003.6
|
|
|
$
|
6,005.8
|
|
Net income (loss) attributable to Delek
|
|
|
10.2
|
|
|
2.6
|
|
|
(23.6
|
)
|
|||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
$
|
0.12
|
|
|
$
|
0.03
|
|
|
$
|
(0.29
|
)
|
Diluted
|
|
|
0.12
|
|
|
0.03
|
|
|
(0.29
|
)
|
(a)
|
To eliminate transactions between Delek and Alon for purchases and sales of refined product reducing revenue and the associated cost of goods sold. Such pro forma eliminations reduced combined pro forma sales by
$3.7 million
for the three months ended
September 30, 2016
, and
$20.4 million
and
$9.6 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
|
(b)
|
To retrospectively reflect depreciation and amortization of intangibles based on the preliminary fair value of the assets as of the acquisition date, as if that fair value had been reflected beginning January 1, 2016, and to retrospectively eliminate the amortization of any previously recorded intangibles. Such adjustments to depreciation and amortization have been estimated to result in an increase (decrease) to pro forma pre-tax income (loss) attributable to Delek totaling
$21.9 million
for the three months ended
September 30, 2016
, and
$42.1 million
and
$63.7 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
|
(c)
|
To retrospectively reflect adjustments to interest expense, including the impact of discounts or premiums created by the difference in fair value and outstanding amounts as of the acquisition date (collectively, the “new effective yield”), by applying the new effective yield to historical outstanding amounts in the pro forma period and reversing previously recognized interest expense. Such net adjustments to interest expense have been estimated to result in an increase (decrease) to pro forma pre-tax income (loss) attributable to Delek totaling
$7.6 million
for the three months ended
September 30, 2016
, and
$16.7 million
and
$27.8 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
|
(d)
|
To eliminate Delek’s equity income previously recorded on its equity method investment in Alon, prior to the Merger. Such pro forma elimination resulted in an increase (decrease) to pre-tax income
$4.8 million
for the three months ended
September 30, 2016
, and
$(3.2) million
and
$33 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
|
(e)
|
To eliminate the impairment charge recognized on the equity method investment in Alon in the three and nine months ended
September 30, 2016
, and to eliminate the gain on remeasurement of the equity method investment in Alon during the nine months ended
September 30, 2017
.
|
(f)
|
To record the tax effect on pro forma adjustments and additional tax benefit associated with dividends received from Alon at a combined U.S. (federal and state) income tax statutory blended rate of
36.58%
for the
nine
months ended
September 30, 2017
, and
35.37%
for the three and
nine
months ended
September 30, 2016
.
|
(g)
|
To adjust the weighted average number of shares outstanding based on
0.504
of a share of Delek common stock for each share of Alon common stock outstanding as of
September 30, 2017
, reflecting the elimination of Alon historical weighted average shares outstanding and the addition of the estimated New Delek incremental shares issued.
|
Land
|
|
$
|
0.2
|
|
Property, plant and equipment
|
|
6.4
|
|
|
Intangible assets
(1)
|
|
5.5
|
|
|
Total
|
|
$
|
12.1
|
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
|
|
|
||||||
ASSETS
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
5.3
|
|
|
$
|
0.1
|
|
Accounts receivable
|
|
20.3
|
|
|
19.2
|
|
||
Accounts receivable from related parties
|
|
0.7
|
|
|
2.8
|
|
||
Inventory
|
|
7.9
|
|
|
8.9
|
|
||
Other current assets
|
|
—
|
|
|
1.1
|
|
||
Property, plant and equipment, net
|
|
250.7
|
|
|
251.0
|
|
||
Equity method investments
|
|
106.1
|
|
|
101.1
|
|
||
Goodwill
|
|
12.2
|
|
|
12.2
|
|
||
Intangible assets, net
|
|
16.2
|
|
|
14.4
|
|
||
Other non-current assets
|
|
3.5
|
|
|
4.7
|
|
||
Total assets
|
|
$
|
422.9
|
|
|
$
|
415.5
|
|
LIABILITIES AND DEFICIT
|
|
|
|
|
||||
Accounts payable
|
|
$
|
14.5
|
|
|
$
|
10.9
|
|
Accrued expenses and other current liabilities
|
|
14.2
|
|
|
9.8
|
|
||
Long-term debt
|
|
401.3
|
|
|
392.6
|
|
||
Asset retirement obligations
|
|
4.0
|
|
|
3.8
|
|
||
Other non-current liabilities
|
|
14.7
|
|
|
11.7
|
|
||
Deficit
|
|
(25.8
|
)
|
|
(13.3
|
)
|
||
Total liabilities and equity
|
|
$
|
422.9
|
|
|
$
|
415.5
|
|
Balance Sheet Information
|
December 31, 2016
|
||
Current assets
|
$
|
471.3
|
|
Non-current assets
|
1,624.0
|
|
|
Current liabilities
|
445.5
|
|
|
Non-current liabilities
|
1,067.4
|
|
|
Non-controlling interests
|
61.3
|
|
Income Statement Information
|
Three Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2016
|
||||
Revenue
|
$
|
1,043.7
|
|
|
$
|
2,902.1
|
|
Gross profit
|
147.8
|
|
|
399.6
|
|
||
Pre-tax loss
|
(13.0
|
)
|
|
(99.4
|
)
|
||
Net loss
|
(7.3
|
)
|
|
(64.0
|
)
|
||
Net loss attributable to Alon
|
(8.8
|
)
|
|
(64.7
|
)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
|
September 30, 2016
|
|
September 30, 2016
|
||||
Revenue
|
|
$
|
361.7
|
|
|
$
|
1,034.7
|
|
Cost of goods sold
|
|
(306.6
|
)
|
|
(884.5
|
)
|
||
Operating expenses
|
|
(34.2
|
)
|
|
(99.7
|
)
|
||
General and administrative expenses
|
|
(5.4
|
)
|
|
(16.7
|
)
|
||
Depreciation and amortization
|
|
(4.5
|
)
|
|
(20.3
|
)
|
||
Interest expense
|
|
(1.8
|
)
|
|
(5.4
|
)
|
||
Income from discontinued operations before taxes
|
|
9.2
|
|
|
8.1
|
|
||
Income tax expense
|
|
3.2
|
|
|
2.6
|
|
||
Income from discontinued operations, net of tax
|
|
$
|
6.0
|
|
|
$
|
5.5
|
|
|
|
September 30, 2017
|
||
Assets held for sale:
|
|
|
||
Cash and cash equivalents
|
|
$
|
6.4
|
|
Accounts receivable
|
|
7.4
|
|
|
Inventory
|
|
1.2
|
|
|
Other current assets
|
|
1.7
|
|
|
Property, plant & equipment, net
|
|
147.3
|
|
|
Other intangibles, net
|
|
1.0
|
|
|
Other non-current assets
|
|
2.2
|
|
|
Assets held for sale
|
|
$
|
167.2
|
|
Liabilities associated with assets held for sale:
|
|
|
||
Accounts payable
|
|
$
|
12.7
|
|
Accrued expenses and other current liabilities
|
|
25.7
|
|
|
Deferred tax liabilities
|
|
3.7
|
|
|
Other non-current liabilities
|
|
61.0
|
|
|
Liabilities associated with assets held for sale
|
|
$
|
103.1
|
|
|
|
Three and Nine Months Ended
|
||
|
|
September 30, 2017
|
||
Revenue
|
|
$
|
38.3
|
|
Cost of goods sold
|
|
(32.4
|
)
|
|
Operating expenses
|
|
(8.4
|
)
|
|
General and administrative expenses
|
|
(2.9
|
)
|
|
Interest expense
|
|
(1.0
|
)
|
|
Loss from discontinued operations before taxes
|
|
(6.4
|
)
|
|
Income tax benefit
|
|
(2.3
|
)
|
|
Loss from discontinued operations, net of tax
|
|
$
|
(4.1
|
)
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Refinery raw materials and supplies
|
|
$
|
314.5
|
|
|
$
|
145.6
|
|
Refinery work in process
|
|
64.5
|
|
|
37.6
|
|
||
Refinery finished goods
|
|
270.7
|
|
|
200.3
|
|
||
Retail fuel
|
|
9.3
|
|
|
—
|
|
||
Retail merchandise
|
|
26.6
|
|
|
—
|
|
||
Logistics refined products
|
|
7.9
|
|
|
8.9
|
|
||
Total inventories
|
|
$
|
693.5
|
|
|
$
|
392.4
|
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
DKL Revolver
|
|
$
|
158.8
|
|
|
$
|
392.6
|
|
DKL Notes
(1)
|
|
242.5
|
|
|
—
|
|
||
Wells Term Loan
(2)
|
|
46.3
|
|
|
63.6
|
|
||
Wells Revolving Loan
|
|
45.0
|
|
|
—
|
|
||
Reliant Bank Revolver
|
|
17.0
|
|
|
17.0
|
|
||
Promissory Notes
|
|
95.2
|
|
|
130.0
|
|
||
Lion Term Loan Facility
(3)
|
|
210.0
|
|
|
229.7
|
|
||
Alon Partnership Credit Facility
|
|
100.0
|
|
|
—
|
|
||
Alon Partnership Term Loan
|
|
238.1
|
|
|
—
|
|
||
Alon Convertible Senior Notes
(4)
|
|
144.7
|
|
|
—
|
|
||
Alon Term Loan Credit Facilities
(5)
|
|
42.0
|
|
|
—
|
|
||
Alon Retail Credit Facilities
(6)
|
|
88.2
|
|
|
—
|
|
||
|
|
1,427.8
|
|
|
832.9
|
|
||
Less: Current portion of long-term debt and notes payable
|
|
351.0
|
|
|
84.4
|
|
||
|
|
$
|
1,076.8
|
|
|
$
|
748.5
|
|
(1)
|
The DKL Notes are net of deferred financing costs of
$5.7 million
and debt discount of
$1.8 million
at
September 30, 2017
.
|
(2)
|
The Wells Term Loan is net of deferred financing costs of a nominal amount and
$0.1 million
, respectively, and debt discount of
$0.4 million
and
$0.5 million
, respectively, at
September 30, 2017
and
December 31, 2016
.
|
(3)
|
The Lion Term Loan Facility is net of deferred financing costs of
$2.3 million
and
$3.0 million
, respectively, and debt discount of
$0.8 million
and
$1.1 million
, respectively, at
September 30, 2017
and
December 31, 2016
.
|
Other Current Assets
|
September 30,
2017 |
|
December 31,
2016 |
||||
Prepaid expenses
|
$
|
16.9
|
|
|
$
|
14.0
|
|
Short-term derivative assets (see Note 16)
|
17.6
|
|
|
6.8
|
|
||
Income and other tax receivables
|
19.9
|
|
|
19.2
|
|
||
RINs Obligation surplus (see Note 15)
|
7.7
|
|
|
4.9
|
|
||
Other
|
20.3
|
|
|
4.4
|
|
||
Total
|
$
|
82.4
|
|
|
$
|
49.3
|
|
Other Non-Current Assets
|
September 30,
2017 |
|
December 31,
2016 |
||||
Prepaid tax asset
|
$
|
57.0
|
|
|
$
|
59.5
|
|
Deferred financing costs
|
6.5
|
|
|
8.2
|
|
||
Long-term income tax receivables
|
2.1
|
|
|
7.5
|
|
||
Supply and Offtake receivable
|
46.3
|
|
|
—
|
|
||
Long-term derivative assets (see Note 15)
|
0.1
|
|
|
—
|
|
||
Other
|
8.8
|
|
|
5.5
|
|
||
Total
|
$
|
120.8
|
|
|
$
|
80.7
|
|
Accrued Expenses and Other Current Liabilities
|
September 30,
2017 |
|
December 31,
2016 |
||||
Income and other taxes payable
|
$
|
81.5
|
|
|
$
|
115.7
|
|
Short-term derivative liabilities (see Note 16)
|
40.8
|
|
|
26.1
|
|
||
Interest payable
|
14.1
|
|
|
9.6
|
|
||
Employee costs
|
36.6
|
|
|
7.3
|
|
||
Environmental liabilities (see Note 17)
|
7.3
|
|
|
1.0
|
|
||
Product financing agreements
|
130.3
|
|
|
6.0
|
|
||
RINs Obligation deficit (see Note 15)
|
39.7
|
|
|
25.6
|
|
||
Other
|
89.4
|
|
|
38.5
|
|
||
Total
|
$
|
439.7
|
|
|
$
|
229.8
|
|
Other Non-Current Liabilities
|
September 30,
2017 |
|
December 31,
2016 |
||||
Pension and other postemployment benefit liabilities, net
(see Note 18) |
$
|
36.0
|
|
|
$
|
—
|
|
Long-term derivative liabilities (see Note 16)
|
1.5
|
|
|
17.3
|
|
||
Other
|
0.6
|
|
|
8.7
|
|
||
Total
|
$
|
38.1
|
|
|
$
|
26.0
|
|
|
|
Delek Stockholders' Equity
|
|
Non-Controlling Interest in Subsidiaries
|
|
Total Stockholders' Equity
|
||||||
Balance at December 31, 2016
|
|
$
|
991.9
|
|
|
$
|
190.6
|
|
|
$
|
1,182.5
|
|
Net income
|
|
77.7
|
|
|
19.8
|
|
|
97.5
|
|
|||
Net unrealized gain on cash flow hedges, net of income tax expense of $11.2 million and ineffectiveness gain of $0.5 million
|
|
20.9
|
|
|
—
|
|
|
20.9
|
|
|||
Other comprehensive income from equity method investments, net of income tax effect of $2.2 million
(1)
|
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|||
Other comprehensive income related to postretirement benefit plans
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|||
Other comprehensive income related to interest rate contracts
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|||
Common stock dividends ($0.45 per share)
|
|
(31.3
|
)
|
|
—
|
|
|
(31.3
|
)
|
|||
Issuance of equity in connection with Delek/Alon Merger
|
|
407.4
|
|
|
123.3
|
|
|
530.7
|
|
|||
Distributions to non-controlling interests
|
|
—
|
|
|
(23.8
|
)
|
|
(23.8
|
)
|
|||
Equity-based compensation expense
|
|
12.0
|
|
|
0.6
|
|
|
12.6
|
|
|||
Repurchase of common stock
|
|
—
|
|
|
(7.3
|
)
|
|
(7.3
|
)
|
|||
Taxes due to the net settlement of equity-based compensation
|
|
(2.7
|
)
|
|
—
|
|
|
(2.7
|
)
|
|||
Other
|
|
(0.5
|
)
|
|
—
|
|
|
(0.5
|
)
|
|||
Balance at September 30, 2017
|
|
$
|
1,480.4
|
|
|
$
|
303.2
|
|
|
$
|
1,783.6
|
|
Date Declared
|
|
Dividend Amount Per Share
|
|
Record Date
|
|
Payment Date
|
February 27, 2017
|
|
$0.15
|
|
March 15, 2017
|
|
March 29, 2017
|
May 8, 2017
|
|
$0.15
|
|
May 23, 2017
|
|
June 2, 2017
|
August 1, 2017
|
|
$0.15
|
|
August 23, 2017
|
|
September 13, 2017
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
September 30,
|
|
September 30,
|
||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Weighted average common shares outstanding
|
|
80,581,762
|
|
|
61,834,968
|
|
|
68,272,918
|
|
|
61,931,040
|
|
Dilutive effect of equity instruments
|
|
663,643
|
|
|
—
|
|
|
703,056
|
|
|
—
|
|
Weighted average common shares outstanding, assuming dilution
|
|
81,245,405
|
|
|
61,834,968
|
|
|
68,975,974
|
|
|
61,931,040
|
|
|
|
Three Months Ended September 30, 2017
|
||||||||||||||||||
(In millions)
|
|
Refining
|
|
Logistics
|
|
Retail
|
|
Corporate,
Other and Eliminations |
|
Consolidated
|
||||||||||
Net sales (excluding intercompany fees and sales)
|
|
$
|
2,005.5
|
|
|
$
|
90.6
|
|
|
$
|
213.9
|
|
|
$
|
(59.1
|
)
|
|
$
|
2,250.9
|
|
Intercompany fees and sales
|
|
108.3
|
|
|
40.1
|
|
|
—
|
|
|
(57.8
|
)
|
|
90.6
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
|
1,823.2
|
|
|
89.1
|
|
|
174.6
|
|
|
(98.8
|
)
|
|
1,988.1
|
|
|||||
Operating expenses
|
|
110.5
|
|
|
10.7
|
|
|
25.8
|
|
|
6.2
|
|
|
153.2
|
|
|||||
Segment contribution margin
|
|
$
|
180.1
|
|
|
$
|
30.9
|
|
|
$
|
13.5
|
|
|
$
|
(24.3
|
)
|
|
200.2
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
61.8
|
|
|||||||||
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
46.9
|
|
|||||||||
Other operating expense, net
|
|
|
|
|
|
|
|
|
|
0.7
|
|
|||||||||
Operating income
|
|
|
|
|
|
|
|
|
|
$
|
90.8
|
|
||||||||
Total assets
(2)
|
|
$
|
4,269.0
|
|
|
$
|
422.9
|
|
|
$
|
371.8
|
|
|
$
|
505.4
|
|
|
$
|
5,569.1
|
|
Capital spending (excluding business combinations)
(3)
|
|
$
|
47.6
|
|
|
$
|
3.8
|
|
|
$
|
10.6
|
|
|
$
|
6.5
|
|
|
$
|
68.5
|
|
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||
|
|
Refining
|
|
Logistics
|
|
Retail
|
|
Corporate,
Other and Eliminations |
|
Consolidated
|
||||||||||
Net sales (excluding intercompany fees and sales)
|
|
$
|
4,240.9
|
|
|
$
|
270.5
|
|
|
$
|
213.9
|
|
|
$
|
(61.6
|
)
|
|
$
|
4,663.7
|
|
Intercompany fees and sales
|
|
125.4
|
|
|
116.4
|
|
|
—
|
|
|
(151.2
|
)
|
|
90.6
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
|
3,888.5
|
|
|
266.7
|
|
|
174.6
|
|
|
(148.2
|
)
|
|
4,181.6
|
|
|||||
Operating expenses
|
|
212.9
|
|
|
31.0
|
|
|
25.8
|
|
|
6.8
|
|
|
276.5
|
|
|||||
Segment contribution margin
|
|
$
|
264.9
|
|
|
$
|
89.2
|
|
|
$
|
13.5
|
|
|
$
|
(71.4
|
)
|
|
296.2
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
115.8
|
|
|||||||||
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
105.4
|
|
|||||||||
Other operating expense, net
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|||||||||
Operating income
|
|
|
|
|
|
|
|
|
|
$
|
74.0
|
|
||||||||
Capital spending (excluding business combinations)
(3)
|
|
$
|
69.6
|
|
|
$
|
8.7
|
|
|
$
|
10.6
|
|
|
$
|
9.8
|
|
|
$
|
98.7
|
|
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||||
|
|
Refining
|
|
Logistics
|
|
Retail
|
|
Corporate,
Other and Eliminations |
|
Consolidated
|
||||||||||
Net sales (excluding intercompany fees and sales)
|
|
$
|
935.1
|
|
|
$
|
71.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,006.3
|
|
Intercompany fees and sales
(1)
|
|
78.1
|
|
|
36.3
|
|
|
—
|
|
|
(40.8
|
)
|
|
73.6
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
|
923.7
|
|
|
73.5
|
|
|
—
|
|
|
(31.6
|
)
|
|
965.6
|
|
|||||
Operating expenses
|
|
51.7
|
|
|
9.2
|
|
|
—
|
|
|
0.1
|
|
|
61.0
|
|
|||||
Segment contribution margin
|
|
$
|
37.8
|
|
|
$
|
24.8
|
|
|
$
|
—
|
|
|
$
|
(9.3
|
)
|
|
53.3
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
24.9
|
|
|||||||||
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
29.0
|
|
|||||||||
Other operating expense
|
|
|
|
|
|
|
|
|
|
2.2
|
|
|||||||||
Operating loss
|
|
|
|
|
|
|
|
|
|
$
|
(2.8
|
)
|
||||||||
Total assets
(2)
|
|
$
|
1,854.3
|
|
|
$
|
393.2
|
|
|
$
|
—
|
|
|
$
|
772.0
|
|
|
$
|
3,019.5
|
|
Capital spending (excluding business combinations)
(3)
|
|
$
|
7.5
|
|
|
$
|
3.2
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
10.8
|
|
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||
|
|
Refining
|
|
Logistics
|
|
Retail
|
|
Corporate,
Other and Eliminations |
|
Consolidated
|
||||||||||
Net sales (excluding intercompany fees and sales)
|
|
$
|
2,651.6
|
|
|
$
|
214.4
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
2,866.5
|
|
Intercompany fees and sales
(1)
|
|
266.6
|
|
|
109.0
|
|
|
—
|
|
|
(128.8
|
)
|
|
246.8
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
|
2,675.1
|
|
|
213.4
|
|
|
—
|
|
|
(81.8
|
)
|
|
2,806.7
|
|
|||||
Operating expenses
|
|
159.6
|
|
|
28.4
|
|
|
—
|
|
|
(0.2
|
)
|
|
187.8
|
|
|||||
Insurance proceeds - business interruption
|
|
(42.4
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(42.4
|
)
|
||||||
Segment contribution margin
|
|
$
|
125.9
|
|
|
$
|
81.6
|
|
|
$
|
—
|
|
|
$
|
(46.3
|
)
|
|
161.2
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
77.5
|
|
|||||||||
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
86.6
|
|
|||||||||
Other operating expense
|
|
|
|
|
|
|
|
|
|
2.2
|
|
|||||||||
Operating loss
|
|
|
|
|
|
|
|
|
|
$
|
(5.1
|
)
|
||||||||
Capital spending (excluding business combinations)
(3)
|
|
$
|
14.4
|
|
|
$
|
5.1
|
|
|
$
|
—
|
|
|
$
|
4.7
|
|
|
$
|
24.2
|
|
(1)
|
Intercompany fees and sales for the refining segment include revenues from the Retail Entities of
$73.6 million
and
$246.8 million
during the
three and nine
months ended
September 30, 2016
, respectively, the operations of which are reported in discontinued operations.
|
(2)
|
Assets held for sale of
$167.2 million
and
$471.5 million
are included in the corporate, other and eliminations segment as of
September 30, 2017
and
September 30, 2016
, respectively.
|
(3)
|
Capital spending excludes capital spending associated with the California Discontinued Entities of
$0.4 million
and the asset acquisition of pipeline assets totaling
$12.1 million
for the
three and nine
months ended
September 30, 2017
. Capital spending excludes capital spending associated with the Retail Entities of
$6.0 million
and
$12.2 million
during the
three and nine
months ended
September 30, 2016
, respectively.
|
|
|
Refining
|
|
Logistics
|
|
Retail
|
|
Corporate,
Other and Eliminations |
|
Consolidated
|
||||||||||
Property, plant and equipment
|
|
$
|
2,079.9
|
|
|
$
|
357.5
|
|
|
$
|
155.2
|
|
|
$
|
140.3
|
|
|
$
|
2,732.9
|
|
Less: Accumulated depreciation
|
|
(437.8
|
)
|
|
(106.9
|
)
|
|
(3.4
|
)
|
|
(37.1
|
)
|
|
(585.2
|
)
|
|||||
Property, plant and equipment, net
|
|
$
|
1,642.1
|
|
|
$
|
250.6
|
|
|
$
|
151.8
|
|
|
$
|
103.2
|
|
|
$
|
2,147.7
|
|
Depreciation expense for the three months ended September 30, 2017
|
|
$
|
31.6
|
|
|
$
|
5.2
|
|
|
$
|
3.3
|
|
|
$
|
4.5
|
|
|
$
|
44.6
|
|
Depreciation expense for the nine months ended September 30, 2017
|
|
$
|
75.1
|
|
|
$
|
15.6
|
|
|
$
|
3.3
|
|
|
$
|
8.4
|
|
|
$
|
102.4
|
|
|
|
As of September 30, 2017
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
OTC commodity swaps
|
|
$
|
—
|
|
|
$
|
104.6
|
|
|
$
|
—
|
|
|
$
|
104.6
|
|
RIN commitment contracts
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
||||
RINs Obligation surplus
|
|
—
|
|
|
7.7
|
|
|
—
|
|
|
7.7
|
|
||||
Total assets
|
|
—
|
|
|
112.8
|
|
|
—
|
|
|
112.8
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
OTC commodity swaps
|
|
—
|
|
|
(133.0
|
)
|
|
—
|
|
|
(133.0
|
)
|
||||
Interest rate derivatives
|
|
—
|
|
|
(1.3
|
)
|
|
—
|
|
|
(1.3
|
)
|
||||
RIN commitment contracts
|
|
—
|
|
|
(11.7
|
)
|
|
—
|
|
|
(11.7
|
)
|
||||
RINs Obligation deficit
|
|
—
|
|
|
(39.7
|
)
|
|
—
|
|
|
(39.7
|
)
|
||||
J. Aron step-out liability
|
|
—
|
|
|
(386.7
|
)
|
|
—
|
|
|
(386.7
|
)
|
||||
Total liabilities
|
|
—
|
|
|
(572.4
|
)
|
|
—
|
|
|
(572.4
|
)
|
||||
Net liabilities
|
|
$
|
—
|
|
|
$
|
(459.6
|
)
|
|
$
|
—
|
|
|
$
|
(459.6
|
)
|
|
|
As of December 31, 2016
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
OTC commodity swaps
|
|
$
|
—
|
|
|
$
|
53.1
|
|
|
$
|
—
|
|
|
$
|
53.1
|
|
RINs Obligation surplus
|
|
—
|
|
|
4.9
|
|
|
—
|
|
|
4.9
|
|
||||
Total assets
|
|
—
|
|
|
58.0
|
|
|
—
|
|
|
58.0
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
OTC commodity swaps
|
|
—
|
|
|
(103.6
|
)
|
|
—
|
|
|
(103.6
|
)
|
||||
RIN commitment contracts
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
||||
RINs Obligation deficit
|
|
—
|
|
|
(25.6
|
)
|
|
—
|
|
|
(25.6
|
)
|
||||
J. Aron step-out liability
|
|
—
|
|
|
(144.8
|
)
|
|
—
|
|
|
(144.8
|
)
|
||||
Total liabilities
|
|
—
|
|
|
(274.8
|
)
|
|
—
|
|
|
(274.8
|
)
|
||||
Net liabilities
|
|
$
|
—
|
|
|
$
|
(216.8
|
)
|
|
$
|
—
|
|
|
$
|
(216.8
|
)
|
•
|
limiting the exposure to price fluctuations of commodity inventory above or below target levels at each of our segments;
|
•
|
managing our exposure to commodity price risk associated with the purchase or sale of crude oil, feedstocks and finished grade fuel products at each of our segments; and
|
•
|
limiting the exposure to interest rate fluctuations on our floating rate borrowings.
|
(1)
|
As of
September 30, 2017
and
December 31, 2016
, we had open derivative positions representing
44,728,393
barrels and
9,348,000
barrels, respectively, of crude oil and refined petroleum products. Of these open positions, contracts representing
575,000
barrels and
3,392,000
barrels were designated as cash flow hedging instruments as of
September 30, 2017
and
December 31, 2016
, respectively.
|
(2)
|
As of
September 30, 2017
and
December 31, 2016
, we had open RIN contracts representing
443,756,545
and
36,750,000
RINs, respectively.
|
(3)
|
As of
September 30, 2017
and
December 31, 2016
,
$16.3 million
and
$14.7 million
, respectively, of cash collateral held by counterparties has been netted with the derivatives with each counterparty.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Gains (losses) on commodity derivatives not designated as hedging instruments
|
|
$
|
(15.5
|
)
|
|
$
|
3.2
|
|
|
$
|
(5.6
|
)
|
|
$
|
(9.5
|
)
|
Realized losses reclassified out of OCI on commodity derivatives designated as cash flow hedging instruments
|
|
1.0
|
|
|
(7.0
|
)
|
|
(38.5
|
)
|
|
(21.3
|
)
|
||||
Gains recognized on commodity derivatives due to cash flow hedging ineffectiveness
|
|
0.1
|
|
|
2.2
|
|
|
0.5
|
|
|
2.7
|
|
||||
Total
|
|
$
|
(14.4
|
)
|
|
$
|
(1.6
|
)
|
|
$
|
(43.6
|
)
|
|
$
|
(28.1
|
)
|
4th Quarter 2017
|
|
$
|
11.6
|
|
2018
|
|
38.9
|
|
|
2019
|
|
22.2
|
|
|
2020
|
|
13.7
|
|
|
2021
|
|
9.9
|
|
|
Thereafter
|
|
34.6
|
|
|
Total future minimum lease payments
|
|
$
|
130.9
|
|
•
|
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;
|
•
|
risk factors relating to the Delek/Alon Merger, including but not limited to risks surrounding the combining of operations, financial position and cash flows as well as systems, processes and controls going forward, as further discussed in Part II, Item 1A, "Risk Factors";
|
•
|
our ability to execute our strategy of growth through acquisitions and the transactional risks inherent in such acquisitions;
|
•
|
acquired assets may suffer a diminishment in fair value, which may require us to record a write-down or impairment;
|
•
|
liabilities related to, and the effects of, the sale of the Retail Entities (as defined below);
|
•
|
reliability of our operating assets;
|
•
|
competition;
|
•
|
changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments;
|
•
|
diminution 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;
|
•
|
general economic and business conditions affecting the southern, southwestern and western United States;
|
•
|
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, casualty losses and other matters beyond our control;
|
•
|
increases in our debt levels or costs;
|
•
|
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;
|
•
|
the inability of our subsidiaries to freely make dividends, loans or other cash distributions to us;
|
•
|
seasonality;
|
•
|
acts of terrorism aimed at either our facilities or other facilities that could impair our ability to produce or transport refined products or receive feedstocks;
|
•
|
changes in the cost or availability of transportation for feedstocks and refined products; and
|
•
|
other factors discussed under the headings "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" and in our other filings with the SEC.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
Statement of Operations Data
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
|
||||||||
Refining
|
|
$
|
2,113.8
|
|
|
$
|
1,013.2
|
|
|
$
|
4,366.3
|
|
|
$
|
2,918.2
|
|
Logistics
|
|
130.7
|
|
|
107.5
|
|
|
386.9
|
|
|
323.4
|
|
||||
Retail
|
|
213.9
|
|
|
—
|
|
|
213.9
|
|
|
—
|
|
||||
Other
|
|
(116.9
|
)
|
|
(40.8
|
)
|
|
(212.8
|
)
|
|
(128.3
|
)
|
||||
Net sales
|
|
$
|
2,341.5
|
|
|
$
|
1,079.9
|
|
|
$
|
4,754.3
|
|
|
$
|
3,113.3
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold
|
|
1,988.1
|
|
|
965.6
|
|
|
4,181.6
|
|
|
2,806.7
|
|
||||
Operating expenses
|
|
153.2
|
|
|
61.0
|
|
|
276.5
|
|
|
187.8
|
|
||||
Insurance proceeds — business interruption
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.4
|
)
|
||||
General and administrative expenses
|
|
61.8
|
|
|
24.9
|
|
|
115.8
|
|
|
77.5
|
|
||||
Depreciation and amortization
|
|
46.9
|
|
|
29.0
|
|
|
105.4
|
|
|
86.6
|
|
||||
Other operating expense
|
|
0.7
|
|
|
2.2
|
|
|
1.0
|
|
|
2.2
|
|
||||
Total operating costs and expenses
|
|
2,250.7
|
|
|
1,082.7
|
|
|
4,680.3
|
|
|
3,118.4
|
|
||||
Operating (loss) income
|
|
90.8
|
|
|
(2.8
|
)
|
|
74.0
|
|
|
(5.1
|
)
|
||||
Interest expense
|
|
34.1
|
|
|
13.9
|
|
|
62.5
|
|
|
40.7
|
|
||||
Interest income
|
|
(0.9
|
)
|
|
(0.2
|
)
|
|
(2.7
|
)
|
|
(0.9
|
)
|
||||
(Income) loss from equity method investments
|
|
(5.1
|
)
|
|
5.1
|
|
|
(9.7
|
)
|
|
33.7
|
|
||||
Loss on impairment of equity method investment
|
|
—
|
|
|
245.3
|
|
|
—
|
|
|
—
|
|
||||
Gain on investment in Alon
|
|
(190.1
|
)
|
|
—
|
|
|
(190.1
|
)
|
|
245.3
|
|
||||
Other expense (income), net
|
|
0.8
|
|
|
0.1
|
|
|
0.9
|
|
|
0.6
|
|
||||
Total non-operating expenses, net
|
|
(161.2
|
)
|
|
264.2
|
|
|
(139.1
|
)
|
|
319.4
|
|
||||
Income (loss) from continuing operations before income tax expense (benefit)
|
|
252.0
|
|
|
(267.0
|
)
|
|
213.1
|
|
|
(324.5
|
)
|
||||
Income tax expense (benefit)
|
|
133.5
|
|
|
(103.3
|
)
|
|
111.5
|
|
|
(136.8
|
)
|
||||
Income (loss) from continuing operations
|
|
118.5
|
|
|
(163.7
|
)
|
|
101.6
|
|
|
(187.7
|
)
|
||||
(Loss) income from discontinued operations, net of tax
|
|
(4.1
|
)
|
|
6.0
|
|
|
(4.1
|
)
|
|
5.5
|
|
||||
Net income (loss)
|
|
114.4
|
|
|
(157.7
|
)
|
|
97.5
|
|
|
(182.2
|
)
|
||||
Net income attributed to non-controlling interest
|
|
10.0
|
|
|
4.0
|
|
|
19.8
|
|
|
15.7
|
|
||||
Net income (loss) attributable to Delek
|
|
$
|
104.4
|
|
|
$
|
(161.7
|
)
|
|
$
|
77.7
|
|
|
$
|
(197.9
|
)
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) from continuing operations
|
|
$
|
1.35
|
|
|
$
|
(2.71
|
)
|
|
$
|
1.20
|
|
|
$
|
(3.28
|
)
|
(Loss) income from discontinued operations
|
|
(0.05
|
)
|
|
0.10
|
|
|
(0.06
|
)
|
|
0.09
|
|
||||
Total basic income (loss) per share
|
|
$
|
1.30
|
|
|
$
|
(2.61
|
)
|
|
$
|
1.14
|
|
|
$
|
(3.19
|
)
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|||||||
Income (loss) from continuing operations
|
|
$
|
1.34
|
|
|
$
|
(2.71
|
)
|
|
$
|
1.19
|
|
|
$
|
(3.28
|
)
|
(Loss) income from discontinued operations
|
|
(0.05
|
)
|
|
0.10
|
|
|
(0.06
|
)
|
|
0.09
|
|
||||
Total diluted income (loss) per share
|
|
$
|
1.29
|
|
|
$
|
(2.61
|
)
|
|
$
|
1.13
|
|
|
$
|
(3.19
|
)
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net sales
|
|
$
|
2,113.8
|
|
|
$
|
1,013.2
|
|
|
$
|
4,366.3
|
|
|
$
|
2,918.2
|
|
Cost of goods sold
|
|
1,823.2
|
|
|
923.7
|
|
|
3,888.5
|
|
|
2,675.1
|
|
||||
Gross margin
|
|
290.6
|
|
|
89.5
|
|
|
477.8
|
|
|
243.1
|
|
||||
Operating expenses
|
|
110.5
|
|
|
51.7
|
|
|
212.9
|
|
|
159.6
|
|
||||
Insurance proceeds — business interruption
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.4
|
)
|
||||
Contribution margin
|
|
$
|
180.1
|
|
|
$
|
37.8
|
|
|
$
|
264.9
|
|
|
$
|
125.9
|
|
Refining Segment
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Tyler, TX Refinery
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Days in period
|
|
92
|
|
|
92
|
|
|
273
|
|
|
274
|
|
||||
Total sales volume (average barrels per day)
(1)
|
|
77,719
|
|
|
72,456
|
|
|
73,865
|
|
|
73,055
|
|
||||
Products manufactured (average barrels per day):
|
|
|
|
|
|
|
|
|
||||||||
Gasoline
|
|
42,448
|
|
|
38,909
|
|
|
39,313
|
|
|
38,192
|
|
||||
Diesel/Jet
|
|
30,192
|
|
|
27,215
|
|
|
28,474
|
|
|
27,836
|
|
||||
Petrochemicals, LPG, NGLs
|
|
2,052
|
|
|
3,195
|
|
|
2,422
|
|
|
2,760
|
|
||||
Other
|
|
1,797
|
|
|
1,483
|
|
|
1,668
|
|
|
1,561
|
|
||||
Total production
|
|
76,489
|
|
|
70,802
|
|
|
71,877
|
|
|
70,349
|
|
||||
Throughput (average barrels per day):
|
|
|
|
|
|
|
|
|
||||||||
Crude Oil
|
|
71,898
|
|
|
68,954
|
|
|
67,157
|
|
|
67,462
|
|
||||
Other feedstocks
|
|
6,750
|
|
|
2,945
|
|
|
6,108
|
|
|
3,723
|
|
||||
Total throughput
|
|
78,648
|
|
|
71,899
|
|
|
73,265
|
|
|
71,185
|
|
||||
Per barrel of sales:
|
|
|
|
|
|
|
|
|
||||||||
Tyler refining margin
|
|
$
|
13.63
|
|
|
$
|
8.10
|
|
|
$
|
8.07
|
|
|
$
|
7.56
|
|
Direct operating expenses
|
|
$
|
3.39
|
|
|
$
|
3.56
|
|
|
$
|
3.62
|
|
|
$
|
3.69
|
|
Crude Slate: (% based on amount received in period)
|
|
|
|
|
|
|
|
|
||||||||
WTI crude oil
|
|
83
|
%
|
|
82
|
%
|
|
81
|
%
|
|
82
|
%
|
||||
East Texas crude oil
|
|
17
|
%
|
|
18
|
%
|
|
18
|
%
|
|
18
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
El Dorado, AR Refinery
|
|
|
|
|
|
|
|
|
||||||||
Days in period
|
|
92
|
|
|
92
|
|
|
273
|
|
|
274
|
|
||||
Total sales volume (average barrels per day)
(2)
|
|
84,610
|
|
|
76,893
|
|
|
81,679
|
|
|
78,863
|
|
||||
Products manufactured (average barrels per day):
|
|
|
|
|
|
|
|
|
||||||||
Gasoline
|
|
37,267
|
|
|
39,120
|
|
|
37,853
|
|
|
40,545
|
|
||||
Diesel
|
|
28,610
|
|
|
27,367
|
|
|
27,373
|
|
|
27,046
|
|
||||
Petrochemicals, LPG, NGLs
|
|
1,776
|
|
|
1,325
|
|
|
1,728
|
|
|
957
|
|
||||
Asphalt
|
|
6,741
|
|
|
5,836
|
|
|
6,671
|
|
|
4,744
|
|
||||
Other
|
|
1,255
|
|
|
1,298
|
|
|
1,087
|
|
|
1,039
|
|
||||
Total production
|
|
75,649
|
|
|
74,946
|
|
|
74,712
|
|
|
74,331
|
|
||||
Throughput (average barrels per day):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Crude Oil
|
|
74,733
|
|
|
72,578
|
|
|
74,098
|
|
|
72,652
|
|
||||
Other feedstocks
|
|
2,734
|
|
|
3,639
|
|
|
1,908
|
|
|
3,261
|
|
||||
Total throughput
|
|
77,467
|
|
|
76,217
|
|
|
76,006
|
|
|
75,913
|
|
||||
Per barrel of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
El Dorado refining margin
|
|
$
|
7.48
|
|
|
$
|
4.26
|
|
|
$
|
7.94
|
|
|
$
|
3.77
|
|
Direct operating expenses
|
|
$
|
3.68
|
|
|
$
|
3.73
|
|
|
$
|
3.58
|
|
|
$
|
3.75
|
|
Crude Slate: (% based on amount received in period)
|
|
|
|
|
|
|
|
|
||||||||
WTI crude oil
|
|
62
|
%
|
|
64
|
%
|
|
63
|
%
|
|
67
|
%
|
||||
Local Arkansas crude oil
|
|
11
|
%
|
|
21
|
%
|
|
11
|
%
|
|
21
|
%
|
||||
Other
|
|
27
|
%
|
|
15
|
%
|
|
26
|
%
|
|
12
|
%
|
Refining Segment
|
|
Three Months Ended September 30,
|
||
|
|
2017
|
||
Big Spring, TX Refinery (acquired on July 1, 2017)
|
|
(Unaudited)
|
||
Days in period
|
|
92
|
|
|
Total sales volume (average barrels per day)
(3)
|
|
74,357
|
|
|
Products manufactured (average barrels per day):
|
|
|
||
Gasoline
|
|
35,990
|
|
|
Diesel/Jet
|
|
27,001
|
|
|
Petrochemicals, LPG, NGLs
|
|
2,956
|
|
|
Asphalt
|
|
1,213
|
|
|
Other
|
|
2,196
|
|
|
Total production
|
|
69,356
|
|
|
Throughput (average barrels per day):
|
|
|
||
Crude Oil
|
|
69,117
|
|
|
Other feedstocks
|
|
605
|
|
|
Total throughput
|
|
69,722
|
|
|
Per barrel of sales:
|
|
|
||
Big Spring refining margin
|
|
$
|
11.71
|
|
Direct operating expenses
|
|
$
|
3.88
|
|
Crude Slate: (% based on amount received in period)
|
|
|
||
WTI crude oil
|
|
75
|
%
|
|
WTS crude oil
|
|
25
|
%
|
|
|
|
|
||
Krotz Springs, LA Refinery (acquired on July 1, 2017)
|
|
|
||
Days in period
|
|
92
|
|
|
Total sales volume (average barrels per day)
|
|
71,129
|
|
|
Products manufactured (average barrels per day):
|
|
|
||
Gasoline
|
|
32,383
|
|
|
Diesel/Jet
|
|
21,792
|
|
|
Heavy Oils
|
|
6,202
|
|
|
Other
|
|
7,743
|
|
|
Total production
|
|
68,120
|
|
|
Throughput (average barrels per day):
|
|
|
|
|
Crude Oil
|
|
68,998
|
|
|
Other feedstocks
|
|
(706
|
)
|
|
Total throughput
|
|
68,292
|
|
|
Per barrel of sales:
|
|
|
|
|
Krotz Springs refining margin
|
|
$
|
8.18
|
|
Direct operating expenses
|
|
$
|
4.08
|
|
Crude Slate: (% based on amount received in period)
|
|
|
||
WTI Crude
|
|
46
|
%
|
|
Gulf Coast Sweet Crude
|
|
54
|
%
|
|
|
|
|
Pricing statistics (average for the period presented):
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
WTI — Cushing crude oil (per barrel)
|
|
$
|
48.16
|
|
|
$
|
44.88
|
|
|
$
|
49.31
|
|
|
$
|
41.40
|
|
WTI — Midland crude oil (per barrel)
|
|
$
|
47.37
|
|
|
$
|
45.17
|
|
|
$
|
48.78
|
|
|
$
|
41.21
|
|
WTS -- Midland crude oil (per barrel)
(4)
|
|
$
|
47.19
|
|
|
$
|
43.41
|
|
|
$
|
48.16
|
|
|
$
|
40.57
|
|
LLS (per barrel)
(4)
|
|
$
|
51.62
|
|
|
$
|
46.52
|
|
|
$
|
51.72
|
|
|
$
|
43.19
|
|
Brent crude oil (per barrel)
|
|
$
|
52.21
|
|
|
$
|
46.93
|
|
|
$
|
52.49
|
|
|
$
|
43.21
|
|
|
|
|
|
|
|
|
|
|
||||||||
US Gulf Coast 5-3-2 crack spread (per barrel)
|
|
$
|
15.92
|
|
|
$
|
9.85
|
|
|
$
|
12.46
|
|
|
$
|
9.15
|
|
US Gulf Coast 3-2-1 crack spread (per barrel)
(4)
|
|
$
|
20.16
|
|
|
$
|
13.16
|
|
|
$
|
16.20
|
|
|
$
|
12.25
|
|
US Gulf Coast 2-1-1 crack spread (per barrel)
(4)
|
|
$
|
13.63
|
|
|
$
|
9.21
|
|
|
$
|
11.30
|
|
|
$
|
8.28
|
|
|
|
|
|
|
|
|
|
|
||||||||
US Gulf Coast Unleaded Gasoline (per gallon)
|
|
$
|
1.58
|
|
|
$
|
1.35
|
|
|
$
|
1.52
|
|
|
$
|
1.26
|
|
Gulf Coast Ultra low sulfur diesel (per gallon)
|
|
$
|
1.62
|
|
|
$
|
1.37
|
|
|
$
|
1.55
|
|
|
$
|
1.25
|
|
US Gulf Coast high sulfur diesel (per gallon)
|
|
$
|
1.44
|
|
|
$
|
1.23
|
|
|
$
|
1.40
|
|
|
$
|
1.12
|
|
Natural gas (per MMBTU)
|
|
$
|
2.95
|
|
|
$
|
2.79
|
|
|
$
|
3.05
|
|
|
$
|
2.35
|
|
(1)
|
Total sales volume includes
869
and
851
bpd sold to the logistics segment during the
three and nine
months ended
September 30, 2017
, respectively, and
114
and
686
bpd during the
three and nine
months ended
September 30, 2016
, respectively. Total sales volume also includes sales of
350
and
121
bpd of intermediate and finished products to the El Dorado refinery during the
three and nine
months ended
September 30, 2017
, respectively, and
885
and
659
bpd during the
three and nine
months ended
September 30, 2016
, respectively. Total sales volume also includes
49
bpd of produced finished product sold to the Alon Partnership during the three months ended September 30, 2017. Total sales volume excludes
3,038
and
4,536
bpd of wholesale activity during the
three and nine
months ended
September 30, 2017
, respectively, and
1,778
and
843
during the
three and nine
months ended
September 30, 2016
, respectively.
|
(2)
|
Total sales volume includes
460
and
674
bpd of produced finished product sold to the Tyler refinery during the
three and nine
months ended
September 30, 2017
, respectively, and includes
996
bpd of produced finished product sold to Alon Asphalt Company during the three months ended September 30, 2017. There were no produced finished products sold to the Tyler refinery during the
three and nine
months ended
September 30, 2016
. Total sales volume excludes
23,921
and
19,236
bpd of wholesale activity during the
three and nine
months ended
September 30, 2017
, respectively, and
19,671
and
21,606
bpd during the
three and nine
months ended
September 30, 2016
, respectively.
|
(3)
|
Total sales volume includes
14,071
bpd sold to the retail segment during the three months ended
September 30, 2017
.
|
(4)
|
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 Pipeline No. 2 heating oil (high sulfur diesel). For our Big Spring refinery, we compare our per barrel refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast 87 Conventional 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 87 Conventional gasoline and U.S, 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 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 Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland. The Big Spring and Krotz Springs refineries were acquired July 1, 2017 as part of the Delek/Alon Merger, so Gulf Coast 3-2-1 and 2-1-1 crack spreads, LLS and WTS statistics are presented only for the period Delek owned these refineries.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Logistics Segment Contribution:
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
130.7
|
|
|
$
|
107.5
|
|
|
$
|
386.9
|
|
|
$
|
323.4
|
|
Cost of goods sold
|
|
89.1
|
|
|
73.5
|
|
|
266.7
|
|
|
213.4
|
|
||||
Gross margin
|
|
41.6
|
|
|
34.0
|
|
|
120.2
|
|
|
110.0
|
|
||||
Operating expenses
|
|
10.7
|
|
|
9.2
|
|
|
31.0
|
|
|
28.4
|
|
||||
Contribution margin
|
|
$
|
30.9
|
|
|
$
|
24.8
|
|
|
$
|
89.2
|
|
|
$
|
81.6
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Information:
|
|
|
|
|
|
|
|
|
||||||||
East Texas - Tyler Refinery sales volumes (average bpd)
(1)
|
|
74,357
|
|
|
67,812
|
|
|
71,917
|
|
|
68,137
|
|
||||
West Texas wholesale marketing throughputs (average bpd)
|
|
12,929
|
|
|
12,162
|
|
|
13,647
|
|
|
13,039
|
|
||||
West Texas wholesale marketing margin per barrel
|
|
$
|
4.00
|
|
|
$
|
1.16
|
|
|
$
|
3.62
|
|
|
$
|
1.24
|
|
Terminalling throughputs (average bpd)
(2)
|
|
127,229
|
|
|
120,099
|
|
|
123,780
|
|
|
121,791
|
|
||||
Throughputs (average bpd)
|
|
|
|
|
|
|
|
|
||||||||
Lion Pipeline System:
|
|
|
|
|
|
|
|
|
||||||||
Crude pipelines (non-gathered)
|
|
60,247
|
|
|
55,217
|
|
|
59,653
|
|
|
55,951
|
|
||||
Refined products pipelines to Enterprise Systems
|
|
51,623
|
|
|
47,974
|
|
|
50,933
|
|
|
51,794
|
|
||||
SALA Gathering System
|
|
15,997
|
|
|
17,237
|
|
16,160
|
|
|
18,172
|
||||||
East Texas Crude Logistics System
|
|
15,260
|
|
|
17,026
|
|
15,006
|
|
|
13,108
|
||||||
El Dorado Rail Offloading Rack
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Excludes jet fuel and petroleum coke.
|
(2)
|
Consists of terminalling throughputs at our Tyler, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas, and Memphis and Nashville, Tennessee terminals.
|
|
|
Three Months Ended September 30,
|
|||
|
|
2017
|
|
||
Net sales
|
|
$
|
213.9
|
|
|
Cost of goods sold
|
|
174.6
|
|
|
|
Gross margin
|
|
39.3
|
|
|
|
Operating expenses
|
|
25.8
|
|
|
|
Contribution margin
|
|
$
|
13.5
|
|
|
Operating Information:
|
|
|
|
||
Number of stores (end of period)
|
|
302
|
|
|
|
Average number of stores
|
|
302
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash Flow Data:
|
|
|
|
|
||||
Operating activities
|
|
$
|
83.3
|
|
|
$
|
121.5
|
|
Investing activities
|
|
95.3
|
|
|
(97.6
|
)
|
||
Financing activities
|
|
(29.8
|
)
|
|
4.2
|
|
||
Net increase
|
|
$
|
148.8
|
|
|
$
|
28.1
|
|
|
|
Full Year
2017 Forecast |
|
Nine Months Ended September 30, 2017
|
||||
Refining:
|
|
|
|
|
||||
Sustaining maintenance, including turnaround activities
|
|
$
|
50.9
|
|
|
$
|
30.9
|
|
Regulatory
|
|
21.1
|
|
|
8.7
|
|
||
Discretionary projects
|
|
42.8
|
|
|
30.0
|
|
||
Refining segment total
|
|
114.8
|
|
|
69.6
|
|
||
Logistics:
|
|
|
|
|
||||
Regulatory
|
|
3.4
|
|
|
0.9
|
|
||
Sustaining maintenance
|
|
6.8
|
|
|
4.4
|
|
||
Discretionary projects
|
|
6.8
|
|
|
3.4
|
|
||
Logistics segment total
|
|
17.0
|
|
|
8.7
|
|
||
Retail:
|
|
|
|
|
||||
Regulatory
|
|
0.6
|
|
|
0.2
|
|
||
Sustaining maintenance
|
|
1.6
|
|
|
0.8
|
|
||
Discretionary projects
|
|
13.5
|
|
|
9.6
|
|
||
Retail segment total
|
|
15.7
|
|
|
10.6
|
|
||
Other:
|
|
|
|
|
||||
Regulatory
|
|
0.5
|
|
|
0.1
|
|
||
Sustaining maintenance
|
|
0.2
|
|
|
1.2
|
|
||
Discretionary projects
|
|
13.4
|
|
|
8.5
|
|
||
Other total
|
|
14.1
|
|
|
9.8
|
|
||
Total capital spending
|
|
$
|
161.6
|
|
|
$
|
98.7
|
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
<
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
>5 Years
|
|
Total
|
||||||||||
Long-term debt and notes payable obligations
|
|
$
|
358.6
|
|
|
$
|
770.0
|
|
|
$
|
68.9
|
|
|
$
|
250.0
|
|
|
$
|
1,447.5
|
|
Interest
(1)
|
|
79.9
|
|
|
72.1
|
|
|
36.7
|
|
|
44.9
|
|
|
233.6
|
|
|||||
Operating lease commitments
(2)
|
|
42.6
|
|
|
40.8
|
|
|
18.8
|
|
|
28.7
|
|
|
130.9
|
|
|||||
Purchase commitments
(3)
|
|
450.4
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
451.7
|
|
|||||
Transportation agreements
(4)
|
|
115.1
|
|
|
217.7
|
|
|
131.9
|
|
|
173.2
|
|
|
637.9
|
|
|||||
Total
|
|
$
|
1,046.6
|
|
|
$
|
1,101.9
|
|
|
$
|
256.3
|
|
|
$
|
496.8
|
|
|
$
|
2,901.6
|
|
(1)
|
Expected interest payments on debt outstanding under credit facilities in place at
September 30, 2017
. Floating interest rate debt is calculated using
September 30, 2017
rates.
|
(2)
|
Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of
September 30, 2017
.
|
(3)
|
We have supply agreements to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices. We have estimated future payments under the market based agreements using current market rates.
|
(4)
|
Balances consist of contractual obligations under agreements with third parties (not including Delek Logistics) for the transportation of crude oil to our refineries.
|
|
|
Total Outstanding
|
|
Notional Contract Volume by
Year of Maturity
|
||||||||||||
Contract Description
|
|
Fair Value
|
|
Notional Contract Volume
|
|
2017
|
|
2018
|
|
2019
|
||||||
Contracts not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
||||||
Crude oil price swaps - long
(1)
|
|
$
|
2.6
|
|
|
3,090,000
|
|
|
180,000
|
|
|
2,910,000
|
|
|
—
|
|
Crude oil price swaps - short
(1)
|
|
(5.4
|
)
|
|
3,590,000
|
|
|
180,000
|
|
|
3,410,000
|
|
|
—
|
|
|
Inventory, refined product and crack spread swaps - long
(1)
|
|
30.0
|
|
|
20,701,197
|
|
|
13,181,197
|
|
|
7,520,000
|
|
|
—
|
|
|
Inventory, refined product and crack spread swaps - short
(1)
|
|
(33.0
|
)
|
|
16,772,197
|
|
|
11,747,197
|
|
|
5,025,000
|
|
|
—
|
|
|
RIN commitment contracts - long
(2)
|
|
(34.6
|
)
|
|
249,616,545
|
|
|
249,616,545
|
|
|
—
|
|
|
—
|
|
|
RIN commitment contracts - short
(2)
|
|
23.4
|
|
|
194,140,000
|
|
|
194,140,000
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
(17.0
|
)
|
|
487,909,939
|
|
|
469,044,939
|
|
|
18,865,000
|
|
|
—
|
|
Contracts designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
||||||
Crude oil price swaps - long
(1)
|
|
$
|
(22.6
|
)
|
|
575,000
|
|
|
—
|
|
|
575,000
|
|
|
—
|
|
Total
|
|
$
|
(22.6
|
)
|
|
575,000
|
|
|
—
|
|
|
575,000
|
|
|
—
|
|
•
|
the inability to successfully combine the businesses of Old Delek and Alon in a manner that permits us to achieve the synergies anticipated to result from the Delek/Alon Merger, which would result in the anticipated benefits of the Delek/Alon Merger not being realized partly or wholly in the time frame currently anticipated or at all;
|
•
|
lost sales and customers as a result of certain customers of either of the two companies deciding not to do business with us;
|
•
|
complexities associated with managing the combined businesses;
|
•
|
integrating personnel from the two companies;
|
•
|
challenges in the creation of uniform standards, controls, procedures, policies and information systems;
|
•
|
potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Delek/Alon Merger; and
|
•
|
performance shortfalls as a result of the diversion of management’s attention caused by completing the Delek/Alon Merger and integrating the companies’ operations.
|
Exhibit No.
|
|
Description
|
||
2.1
|
|
^
|
|
Agreement and Plan of Merger dated as of January 2, 2017, among Delek US Holdings, Inc., Delek Holdco, Inc., Dione Mergeco, Inc., Astro Mergeco, Inc. and Alon USA Energy, Inc. (incorporated by reference to Exhibit 2.1 to Old Delek’s Form 8-K filed on January 3, 2017).
|
2.2
|
|
|
|
First Amendment to Agreement and Plan of Merger dated as of February 27, 2017, among Delek US Holdings, Inc. Delek Holdco, Inc., Dion Mergco, Inc, Astro Mergco, Inc. and Alon USA Energy, Inc. (incorporated by reference to Exhibit 2.6 to Old Delek’s Form 10-K filed on February 28, 2017).
|
2.3
|
|
|
|
Second Amendment to Agreement and Plan of Merger dated as of April 21, 2017, among Delek US Holdings, Inc. Delek Holdco, Inc., Dion Mergco, Inc, Astro Mergco, Inc. and Alon USA Energy, Inc. (incorporated by reference to Annex B-2 to the Company’s Proxy Statement/Prospectus filed pursuant to Rule 424(b)(3) on May 30, 2017).
|
10.1
|
|
|
|
First Supplemental Indenture, effective as of July 1, 2017, by and among Alon USA Energy, Inc., Delek US Holdings Inc. (f/k/a Delek Holdco, Inc.) and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K12B filed on July 3, 2017).
|
10.2
|
|
§
|
|
Alon USA Energy, Inc. Second Amended and Restated 2005 Incentive Compensation Plan, as amended (incorporated by reference to Exhibit 4.6 to the Company’s Form S-8 filed on July 10, 2017).
|
|
§ *
|
|
Executive Employment Agreement, effective November 1, 2017, by and between Delek US Holdings, Inc. and Ezra Uzi Yemin.
|
|
|
*
|
|
Certification of the Company’s Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
*
|
|
Certification of the Company’s Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.
|
|
|
**
|
|
Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
**
|
|
Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
|
|
|
The following materials from Delek US Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (Unaudited), (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016 (Unaudited), (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016 (Unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (Unaudited), and (v) Notes to Condensed Consolidated Financial Statements (Unaudited).
|
§
|
Management contract or compensatory plan or arrangement.
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
^
|
Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any of the omitted schedules or exhibits upon request by the United States Securities and Exchange Commission, provided, however, that Delek may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, as amended, for any schedules or exhibits so furnished.
|
Delek US Holdings, Inc.
|
|
|
|
By:
|
/s/ Ezra Uzi Yemin
|
|
Ezra Uzi Yemin
|
|
Director (Chairman), President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
By:
|
/s/ Kevin Kremke
|
|
Kevin Kremke
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
1.
|
Term
. The term of this Agreement (the “Term”) shall commence upon the Effective Date and expire on October 31, 2020 unless terminated earlier as provided for herein.
|
2.
|
Scope of Employment
. During the Term, the Company shall employ Executive and he shall render services to the Company in the capacity as the Company’s principal executive officer with the title of Chairman of the Board and Chief Executive Officer and such other titles as may be established by the Company from time to time. During the Term, Executive shall also serve as the principal executive officer of any subsidiary of the Company required to be listed by the Company under Item 601(b)(21) of Regulation S-K of the United States Securities and Exchange Commission (the “SEC”). Executive shall devote his full business time and best effort to the successful functioning of the Company’s business and shall faithfully and industriously perform all duties pertaining to his position, including such additional duties as may be assigned from time to time, to the best of his ability, experience and talent; provided, however, that Executive may pursue charitable or civic activities, engage in passive personal investments, participate in industry association and trade groups, and serve as an executor, trustee or in other similar fiduciary capacities; provided that any such activities do not interfere with the performance of his responsibilities and obligations pursuant to this Agreement. Executive shall be subject at all times during the Term hereof to the direction and control of the Company’s Board of Directors (the “Board”) in respect of the work to be done.
|
3.
|
Compensation
.
|
(a)
|
Base Compensation
. During the Term, Executive’s annual salary (the “Base Compensation”) shall be (i) no less than the annualized equivalent of $972,500, (ii) subject to all appropriate federal and state withholding taxes and (iii) payable at the same times and under the same conditions as salaries are paid to the Company’s other employees in accordance with the normal payroll practices of the Company. The Base Compensation shall be reviewed and may be increased from time to time following the Effective Date by the Board (or any applicable committee thereof) in its sole discretion applied consistent with this Section 3(a). The Base Compensation shall at all times during the Term be, and remain, more than the compensation of Executive’s subordinates at such times. If the Base Compensation is adjusted after the Effective Date, the Base Compensation defined above shall also be adjusted for all purposes of this Agreement.
|
(b)
|
Annual Bonus
. Executive will be eligible to participate in the Company’s annual cash incentive plan at a level that is commensurate with Executive’s position as determined by the Board (or any applicable committee thereof) in its sole and
|
(c)
|
Long-Term Incentive Compensation
. Executive shall be eligible to participate in the Company’s long-term incentive plans that may be in effect from time to time for the Company and its subsidiaries including, without limitation, the Company’s 2016 Long-Term Incentive Plan and the Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (collectively the “Plans”), on terms commensurate with his position and duties, as determined by the Board or any other authorized administrator of a Plan (the “Plan Administrator”) in their sole discretion. Program design, including, without limitation, performance measures and weighting, is at the sole discretion of the Plan Administrator. Executive acknowledges that he may be granted awards under Plans that are not subject to the control of the Board (or any applicable committee thereof) including, without limitation, pursuant to the Delek Logistics GP, LLC 2012 Long-Term Incentive Plan. If so, the obligations of the Board (or any applicable committee thereof) hereunder including, without limitation, any obligation to accelerate the vesting of any such award, shall be fully discharged so long as the Board (or any applicable committee thereof) uses reasonable efforts to ensure that such obligations are met by the applicable Plan Administrator.
|
4.
|
Fringe Benefits / Reimbursement of Business Expenses
.
|
(a)
|
General Employee Benefits
. The Company shall make available to Executive, or cause to be made available to him, throughout the period of his employment hereunder, such benefits as may be put into effect from time to time by the Company generally for other senior executives of the Company. The Company expressly reserves the right to modify such benefits available to Executive at any time provided that such modifications apply to other similarly situated employees.
|
(b)
|
Business Expenses
. Executive will be reimbursed for all reasonable out-of-pocket business, business entertainment and travel expenses paid by him in connection with the performance of his duties for the Company, in accordance with and subject to applicable Company expense incurrence and reimbursement policies.
|
(c)
|
Other Benefits
. During the Term, the Company will pay the reasonable costs of professional tax and financial counseling and provide him with the use of an automobile including fuel and maintenance, provided that the cost of each benefit does not exceed $25,000 in any calendar year. Perquisites and other personal benefits that are not integrally and directly related to the performance of Executive’s duties
|
(d)
|
Residence
. During the Term, the Company shall offer to lease Executive’s primary residence as of the Effective Date (the “Residence”) to Executive for residential use at fair market rental value. During the term of Executive’s employment and for a period of 18 months thereafter, Executive shall also have the exclusive option (the “Residence Option”) to purchase the Residence from the Company upon the terms set forth below.
|
(i)
|
Term/Exercise of Option
. The Residence Option may be exercised by Executive’s delivery of written notice to the Company pursuant to the notice provisions of this Agreement at any time during the Residence Option Term. The Residence Option Term shall begin on the Effective Date and end at 5:00 p.m. U.S. Central Time 18 months following the termination of employment. The Residence Option shall expire immediately, automatically and without notice, and shall be of no further force or effect, if (A) Executive’s employment is terminated by the Company for Cause, (B) the Residence ceases to be used by Executive as a personal residence or (C) Executive does not exercise the Residence Option during the Residence Option Term.
|
(ii)
|
Purchase Price
. The price to be paid by Executive to the Company to purchase the Residence (the “Purchase Price”) shall be equal to the fair market value (the “FMV”) of the Residence at the time of purchase as determined by a reputable MAI appraiser chosen by the Company who has at least six years experience appraising improved residential properties in the county where the Residence is located. The determination of FMV by this appraiser shall be binding and conclusive. The fee of any such appraiser selected hereunder above shall be borne equally by the parties.
|
(iii)
|
More Definitive Agreement
. If Executive exercises the Residence Option, the parties shall promptly negotiate in good faith a written purchase and sale agreement for the Residence containing a commitment to close the transaction within 60 days following the full execution of the agreement, an earnest money deposit of at least five percent of the Purchase Price and such other terms, conditions, representations and warranties that are not inconsistent with the terms hereof and that are reasonable and customary for similar transactions.
|
5.
|
Vacation Time / Sick Leave
. Executive will be granted 25 business days of vacation per calendar year. Unused vacation will accrue and carry over into a new calendar year during the Term and the amount attributed to accrued and unused vacation will be paid to Executive upon the termination of employment. Executive will be provided with sick leave according to the Company’s standard policies.
|
6.
|
Compliance With Company Policies
. Executive shall comply with and abide by all applicable policies and directives of the Company and its subsidiaries including, without limitation, the Codes of Business Conduct & Ethics for the Company and its subsidiaries, the Supplemental Insider Trading Policies for the Company and its subsidiaries and any applicable employee handbooks or manuals. The Company and its subsidiaries may, in their sole discretion, change, modify or adopt new policies and directives affecting Executive’s employment. In the event of any conflict between the terms of this Agreement and the employment policies and directives of the Company and its subsidiaries, the terms of this Agreement will control. The Executive acknowledges that the Company and its subsidiary, Delek Logistics Partners, LP (“DKL”), are currently subject to SEC reporting requirements pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the continued listing requirements of the New York Stock Exchange or any other securities exchange on which the securities of the Company may be listed from time to time for public trading (collectively a “Securities Market”), and other federal securities laws and regulations applicable to publicly traded companies in the United States. As an employee, officer and director of the Company and as an officer and director of DKL, Executive will, in such capacities, be required to comply with applicable federal securities laws and regulations (including, without limitation, the reporting requirements under Exchange Act Section 16(a) and related SEC rules and regulations), Securities Market listing requirements as well as certain policies of the Company and its subsidiaries designed to comply with such laws and regulations.
|
7.
|
Confidentiality
. Executive recognizes that during the course of his employment, he will be exposed to information or ideas of a confidential or proprietary nature that pertain to Company’s business, financial, legal, marketing, administrative, personnel, technical or other functions or which constitute trade secrets (including, without limitation, specifications, designs, plans, drawings, software, data, prototypes, the identity of sources and markets, marketing information and strategies, business and financial plans and strategies, methods of doing business, data processing and technical systems, programs and practices, customers and users and their needs, sales history, financial health or material non-public information as defined under federal securities law) (collectively “Confidential Information”). Confidential Information also includes such information of third parties that has been provided to Company in confidence. All such information is deemed “confidential” or “proprietary” whether or not it is so marked. Information will not be considered Confidential Information to the extent that it is or becomes generally available to the public other than through any breach of this Agreement by or at the discretion of Executive. Nothing in this Section will prohibit the use or disclosure by Executive of knowledge that is in general use in the industry or general business knowledge, was known to him prior to his service to the Company or which enters the public domain other than through any breach of this Agreement by or at the discretion of Executive. Executive may also disclose such information if required by court order or applicable law provided that he (a) uses his reasonable best efforts to give the Company written notice as far in advance as is practicable to allow the Company to seek a protective order or other appropriate remedy (except to the extent that his compliance with the foregoing would cause him to violate a court order or other legal requirement), (b) discloses only such information as is required by law, and (c) uses his
|
8.
|
Restrictive Covenants
.
|
(a)
|
Non-Competition
.
|
(i)
|
In consideration of the Confidential Information provided to Executive and the other benefits provided to him pursuant to this Agreement, Executive agrees that, if his employment ends during the Term, then, during a six-month Non-Compete Period (as defined below), he will not, without the prior written consent of the Company (which shall not be unreasonably withheld), directly or indirectly, either as an individual or as an employee, officer, director, shareholder, partner, equity participant, sole proprietor, independent contractor, consultant or in any other capacity conduct any business, or assist any person in conducting any business, that is directly in competition with the Company’s Business (as defined below) in the Territory (as defined below). The terms of this Section 8(a) shall not apply to the passive ownership
|
(ii)
|
For any termination except for a termination by the Company for Cause, the “Non-Compete Period” shall commence upon the date that notice of termination of employment is delivered or deemed delivered under the notice provisions of this Agreement, it being acknowledged and agreed that the Non-Compete Period may commence to run, or even completely run, during a period of time during which Executive remains employed by the Company (assuming that he continues to be so employed after the delivery of such notice of termination). In the event of a termination by the Company for Cause, the Non-Compete Period shall commence upon the date that Executive’s employment with the Company ends.
|
(iii)
|
For purposes of this Section 8(a), the “Company’s Business” means the businesses conducted by the Company or its subsidiaries at the time of the termination of Executive’s employment over which he has primary responsibility at the time of the termination of his employment (it being agreed and understood that other aspects of the businesses conducted by the Company or its subsidiaries is not within such definition).
|
(iv)
|
For purposes of Section 8(a), the “Territory” shall mean the following geographic areas as of the commencement of the Non-Compete Period (A) a 75 mile radius from any of the Company’s petroleum refining facilities, (B) a 75 mile radius from any of the Company’s wholesale refined products distribution facilities and (C) a 50 mile radius from any of the Company’s retail fuel and/or convenience merchandise facilities.
|
(b)
|
Non-Interference with Commercial Relationships
. During Executive’s employment with the Company, and for a period of six months thereafter, Executive will not, directly or indirectly, either as an individual or as an employee, officer, director, shareholder, partner, equity participant, sole proprietor, independent contractor, consultant or in any other capacity whatsoever approach or solicit any customer or vendor of Company for the purpose of causing, directly or indirectly, any such customer or vendor to cease doing business with the Company or its affiliates, nor will Executive engage in any other activity that interferes or could reasonably be expected to interfere in any material way with the commercial relationships between the Company and its affiliates and such customers or vendors. The foregoing covenant shall be in addition to any other covenants or agreements to which Executive may be subject.
|
(c)
|
Non-Interference with Employment Relationships
. During Executive’s employment with the Company, and for a period of one year thereafter, Executive shall not, without the Company’s prior written consent, directly or indirectly: (i) induce or attempt to induce any Company employee to terminate his/her employment with the Company; or (ii) interfere with or disrupt the Company’s relationship with any of its employees
|
(d)
|
It is understood and agreed that the scope of each of the covenants contained in this Section 8 is reasonable as to time, area, and persons and is necessary to protect the legitimate business interest of the Company. It is further agreed that such covenants will be regarded as divisible and will be operative as to time, area and persons to the extent that they may be so operative.
|
9.
|
Copyright, Inventions, Patents
. The Company shall have all right, title and interest to all intellectual property (including, without limitation, graphic designs, copyrights, trademarks and patents) created by Executive during the course of Executive’s employment with the Company. Executive hereby assigns to Company all copyright ownership and rights to any work product developed by him or at his discretion and reduced to practice for or on behalf of the Company or which relate to the Company’s business during the course of the employment relationship. At the Company’s expense and for a period of three years following the termination of his employment, Executive shall use his reasonable best efforts to assist or support the Company to obtain, maintain, and assert its rights in such intellectual property and work product including, without limitation, the giving of evidence in suits and proceedings, and the furnishing and/or assigning of all documentation and other materials relative to the Company’s intellectual property rights.
|
10.
|
Termination of Employment
.
|
(a)
|
Termination By Company For Cause
. The Company may immediately terminate this Agreement and/or Executive’s employment at any time for Cause. Upon any such termination, the Company shall be under no further obligation to Executive hereunder except as otherwise required by law, and the Company will reserve all further rights and remedies available to it at law or in equity.
|
(b)
|
Termination By Executive For Good Reason
. Within 30 calendar days after Executive becomes (or should have become) aware of the occurrence of a Good Reason during the Term, Executive may terminate this Agreement (and his employment hereunder) by providing 30 calendar days advance written notice of termination and provided that the condition remains uncured by the end of such 30-day period. After such 30-day period, Executive shall either resign his employment immediately or, if he continues in employment beyond such 30-day period, Executive shall have irrevocably waived and released any right to resign for Good Reason based upon the circumstances identified in his advance notice of termination. In the event of any such termination, Executive shall be entitled to the separation benefits under Section 10(c) as if the Company had terminated his employment without Cause. This provision shall not apply if Executive is terminated by reason of death or Disability.
|
(c)
|
Termination At-Will By Company
. Subject to the provisions of (f) below, the Company may terminate this Agreement (and Executive’s employment hereunder) at any time and for any reason. If the termination occurs during the Term and is other than for Cause, Executive shall be entitled to the following (in addition to all accrued compensation and benefits through the date of termination): (i) the Separation Payment, (ii) the costs of continuing family health insurance coverage under COBRA for 18 months (payable each month as such premiums are due) following termination of employment, provided, that the Company may, in its sole discretion, (A) pay such amounts directly to the applicable provider or (B) pay an equivalent amount directly to Executive, (iii) the Post-Employment Annual Bonus and (iv) Accelerated Vesting upon termination. This provision shall not apply if Executive is terminated by reason of death or Disability.
|
(d)
|
Termination At-Will By Executive
. Executive may terminate this Agreement (and Executive’s employment hereunder) at any time and for any reason (other than death or Disability). If Executive terminates this Agreement and his employment hereunder during the Term, Executive must provide the Company with advance written notice of termination equal to the lesser of three months or the balance of the Term (the “Required Notice”).
|
(i)
|
If Executive terminates his employment during the Term other than for a Good Reason and provides at least three months advance written notice of termination (even if the Required Notice is less than three months), Executive shall be entitled to a single lump sum payment upon termination equal to his Base Compensation at the time the notice of termination is delivered and the costs of continuing family health insurance coverage under COBRA for 18 months (payable each month as such premiums are due) following termination of employment, provided, that the Company may, in its sole discretion, (A) pay such amounts directly to the applicable provider or (B) pay an equivalent amount directly to Executive.
|
(ii)
|
If Executive (A) terminates his employment during the Term other than for a Good Reason without providing the Required Notice or (B) fails to render services to the Company in a diligent and good faith manner after the delivery of the Required Notice and continues or repeats such failure after receiving written notice of such failure, he shall receive compensation only in the manner stated in Section 10(a) and the Company may immediately terminate his employment. This Section 10(d)(ii) shall not apply if Executive is terminated by reason of death or Disability.
|
(e)
|
Accelerated Termination After Notice
. Nothing herein shall limit the Company’s right to terminate this Agreement and/or Executive’s employment after the Company receives notice of termination from him. However, if the Company receives the Required Notice from Executive and then terminates this Agreement and/or his employment for any reason other than for Cause or under Section 10(d)(ii)(B), his
|
(f)
|
Separation Release
. Notwithstanding anything to the contrary, but subject to any applicable six-month delay required by Section 18 hereof and Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), if a payment is otherwise payable to Executive hereunder, payment of such Separation Payment shall be payable in cash to him at the end of the month following the month in which his separation from service (within the meaning of Section 409A) occurs (or such later date as may be required by law). However, Executive’s right to receive the Separation Payment shall be conditioned upon (i) his execution and delivery to the Company of a Separation Release (and the expiration of any statutorily mandated revocation period) within 30 days (or such longer period as may be required by law) following the separation from service date and (ii) his continued compliance with this Agreement and any other restrictive covenants to which he is bound. If Executive fails to timely execute and deliver the Separation Release or if he timely revokes his acceptance of the Separation Release thereafter (if such revocation is permitted), he shall not be entitled to the Separation Payment and shall repay any Separation Payment received. If the foregoing consideration and revocation periods begin in one taxable year and end in a second taxable year, payment will be made in the second taxable year.
|
(g)
|
Termination upon Disability or Death
. In the event that Executive’s employment ceases due to his death or Disability, Executive shall be entitled to the following (in addition to all accrued compensation and benefits through the date of termination): (i) the costs of continuing family health insurance coverage under COBRA for 18 months (payable each month as such premiums are due) following termination of employment, provided, that the Company may, in its sole discretion, (A) pay such amounts directly to the applicable provider or (B) pay an equivalent amount directly to Executive (or his designated beneficiary or legal representative, if applicable), (ii) the Post-Employment Annual Bonus and (iii) Accelerated Vesting upon termination.
|
(h)
|
Definitions
. The following terms shall have the following meanings as used in this Agreement:
|
(i)
|
“Accelerated Vesting” means the immediate vesting of all unvested equity awards granted to Executive under the Plans. However, any Accelerated Vesting that occurs other than in the context of a Change in Control will apply to unvested (A) performance awards on a prorated basis through the termination of employment, based on actual results evaluated after the close
|
(ii)
|
“Cause” means Executive’s: (A) fraud, gross negligence, willful misconduct involving the Company or its affiliates or willful breach of a fiduciary duty, including, without limitation, Section 7 hereof, owed to the Company or its affiliates, (B) conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude or (C) deliberate and continual refusal to perform his duties in any material respect on substantially a full-time basis or to act in accordance with any specific and lawful instruction of his supervisor provided that Executive has been given written notice of such conduct and such conduct is not cured within 30 days thereafter.
|
(iii)
|
“Good Reason” means (A) the Company materially breaches this Agreement (it being acknowledged that any failure to pay any significant compensation or benefits at the times due under this Agreement shall be deemed a material breach), (B) the Company significantly reduces the scope of Executive’s duties under Section 2, (C) the Company reduces Executive’s Base Compensation under Section 3 other than as part of a base compensation reduction plan generally applicable to other similar senior executive employees, (D) the Company pays base compensation to any of Executive’s subordinates at an annualized rate in excess of Executive’s then-current Base Compensation, (E) Executive is removed, or not reelected or appointed, as the Chief Executive Officer or Chairman of the Board unless such removal or failure to be reelected or appointed is required by applicable law, including, without limitation, SEC rules and regulations and Securities Market listing requirements or (F) the Company requires Executive to relocate to any location that increases his commuting distance by more than 50 miles.
|
(iv)
|
“Release Expiration Date” shall mean the date of the expiration of any and all waiting and revocation periods in the Separation Release.
|
(v)
|
“Disability” means the inability of Executive to perform the customary duties of his employment or other service with the Company or its affiliates by reason of a physical or mental incapacity or illness that is expected to result in death or to be of indefinite duration, as determined by a duly licensed physician selected by the Company.
|
(vi)
|
“Post-Employment Annual Bonus” shall mean the Annual Bonus to which Executive would have otherwise been entitled if his employment had
|
(vii)
|
“Separation Release” means a general release of claims against the Company (and its subsidiaries and affiliates) in a form reasonably satisfactory to Executive and the Company that pertains to all claims related to Executive’s employment and the termination of his employment and that contains appropriate anti-disparagement and continuing confidentiality covenants. Notwithstanding the foregoing or any other provision in Separation Release or the Agreement to the contrary, the Company and Executive further agree that nothing in the Separation Release or the Agreement (i) will limit Executive’s ability to file a charge or complaint with the EEOC, the NLRB, OSHA, the SEC or any other federal, state or local governmental agency or commission (each a “Government Agency” and collectively “Government Agencies”); (ii) will limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information and reporting possible violations of law or regulation or other disclosures protected under the whistleblower provisions of applicable law or regulation, without notice to the Company; or (iii) will limit Executive’s right to receive an award for information provided to any Government Agencies.
|
(viii)
|
“Separation Payment” shall mean an amount equal the sum of Executive’s Base Compensation and target Annual Bonus as in effect immediately before any notice of termination multiplied by (A) three in the case of a Change in Control and (B) two in all other cases. The Separation Payment shall be payable in a cash lump sum pursuant to Section 10(f). Executive shall have no responsibility for mitigating the amount of any payment provided for herein by seeking other employment or otherwise, and any such payment will not be reduced in the event such other employment is obtained.
|
11.
|
Change in Control
.
|
(a)
|
If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason within two years following a Change in Control, the termination of his employment shall be deemed to have occurred in the context of a Change in Control, and he shall be entitled to the separation benefits set forth in Section 10(c); provided, however, that if the separation benefits would result in an excess parachute payment under Internal Revenue Code Section 280G(a), the separation benefits shall be reduced so as not to result in an excess parachute payment.
|
(b)
|
For purposes of this Agreement, a “Change in Control” of the Company shall mean any of the following:
|
(i)
|
Any “person” (as defined in Section 13(h)(8)(E) of the Exchange Act), other than the Company or any of its subsidiaries or any employee benefit plan of the Company or any of its subsidiaries, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (or any successor to all or substantially all of the Company’s assets) representing more than 30% of the combined voting power of the Company’s (or such successor’s) then outstanding voting securities that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company (or such successor) in the ordinary course of business);
|
(ii)
|
As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination or contested election, or any combination of the foregoing transactions, less than 51% of the combined voting power of the then outstanding securities of the Company or any successor company or entity entitled to vote generally in the election of the directors of the Company or such other corporation or entity after such transaction are held in the aggregate by the holders of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction;
|
(iii)
|
All or substantially all of the assets of the Company are sold, exchanged or otherwise transferred;
|
(iv)
|
The Company’s stockholders approve a plan of liquidation or dissolution of the Company; or
|
(v)
|
During any 12 month period within the Term, Continuing Directors cease for any reason to constitute at least a majority of the Board. For this purpose, a “Continuing Director” is any person who at the beginning of the Term was a member of the Board, or any person first elected to the Board during the Term whose election, or the nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the Continuing Directors then in office, but excluding any person (A) initially appointed or elected to office as result of either an actual or threatened election and/or proxy contest by or on behalf of any “person” or “group” (within the meaning of Section 13(d) of the Exchange Act) other than the Board, or (B) designated by any “person” or “group” (within the meaning of Section 13(d) of the Exchange Act) ) who has entered into an agreement with the Company to effect a transaction described in Section 11(b)(i) through (iv).
|
12.
|
Survival of Terms
. The provisions of Sections 4(d), 7, 8(b), 8(c), 9 and 10 shall survive the termination or expiration of this Agreement and will continue in effect following the termination of Executive’s employment for the periods described therein. If a Change in Control occurs during the Term, the provisions of Section 11 shall survive the termination or expiration of this Agreement and will continue in effect following the Change in Control for the periods described therein. The provisions of Section 8(a) shall survive the termination (but not the expiration) of this Agreement.
|
13.
|
Assignment
. This Agreement shall not be assignable by either party without the written consent of the other party except that the Company may assign this Agreement to a subsidiary or affiliate of the Company. Any failure by the Company to assign this Agreement to an unaffiliated third party successor upon the Company’s sale or transfer of all or substantially all of its business will be considered the termination of Executive’s employment in the context of a Change in Control effective upon the closing of the applicable transaction without an assignment to the successor, which closing constitutes a Change in Control. Any failure by Executive to consent to the assignment of this Agreement to such unaffiliated third party successor will be considered the termination of his employment for a Good Reason other than in the context of a Change in Control effective upon the closing of the applicable Change in Control transaction without any assignment to the successor. For the avoidance of doubt, the parties acknowledge that the payment of any benefits under this Section 13 shall be made in accordance with the applicable provision of Section 10 or 11 of this Agreement within 30 days of the closing date of the Change in Control transaction, and no payments will be made pursuant to this Section 13 if a Change in Control transaction does not occur.
|
14.
|
No Inducement / Agreement Voluntary
. Executive represents that (a) he has not been pressured, misled, or induced to enter into this Agreement based upon any representation by Company or its agents not contained herein, (b) he has entered into this Agreement voluntarily, after having the opportunity to consult with legal counsel and other advisors of his own choosing, and (c) his assent is freely given.
|
15.
|
Interpretation
. Any Section, phrase or other provision of this Agreement that is determined by a court, arbitrator or arbitration panel of competent jurisdiction to be unreasonable or in conflict with any applicable statute or rule, shall be deemed, if possible, to be modified or altered so that it is not unreasonable or in conflict or, if that is not possible, then it shall be deemed omitted from this Agreement. The invalidity of any portion of this Agreement shall not affect the validity of the remaining portions. Unless expressly stated to the contrary, all references to “days” in this Agreement shall mean calendar days.
|
16.
|
Prior Agreements / Amendments
. This Agreement (a) represents the entire agreement between the parties in relation to the employment of Executive by the Company on, and subsequent to, the Effective Date and (b) revokes and supersedes all prior agreements
|
17.
|
Notices
. All notices of any kind to be delivered in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by nationally-recognized overnight courier (e.g., FedEx, UPS, DHL, etc.) or by registered or certified mail, return receipt requested and postage prepaid, addressed to the Company at 7102 Commerce Way, Brentwood, Tennessee 37027, Attn: General Counsel, to Executive at his then-existing payroll address, or to such other address as the party to whom notice is to be given may have furnished to the other in writing in accordance with the provisions of this Section. Any such notice or communication shall be deemed to have been received: (a) if by personal delivery or nationally-recognized overnight courier, on the date of such delivery and (b) if by registered or certified mail, on the third postal service day following the date postmarked.
|
18.
|
Applicable Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee without giving effect to its principles of conflicts of law. The state and federal courts for Davidson County, Tennessee shall be the exclusive venue for any litigation based in significant part upon this Agreement.
|
19.
|
Mediation / Arbitration
.
|
(a)
|
Any dispute concerning a legally cognizable claim arising out of this Agreement or in connection with the employment of Executive by Company, including, without limitation, claims of breach of contract, fraud, unlawful termination, discrimination, harassment, retaliation, defamation, tortious infliction of emotional distress, unfair competition, arbitrability and conversion (collectively a “Legal Dispute”) shall be resolved according to the following protocol:
|
(i)
|
The parties shall first submit the Legal Dispute to mediation under the auspices of the American Arbitration Association (“AAA”) and pursuant to the mediation rules and procedures promulgated by the AAA. The Company shall pay the expenses associated with the mediation.
|
(ii)
|
In the event mediation is unsuccessful in fully resolving the Legal Dispute, binding arbitration shall be the method of final resolution. The parties expressly waive their rights to bring action against one another in a court of law except as expressly provided herein. In addition to remedies at law, the parties acknowledge that failure to comply with this provision shall entitle the non-breaching party to injunctive relief to enjoin the actions of the breaching party. Any Legal Dispute submitted to Arbitration shall be under
|
(b)
|
Notice of submission of any Legal Dispute to mediation shall be provided no later than one year following the date the submitting party became aware, or should have become aware of, the conduct constituting the alleged claims. Failure to do so shall result in the irrevocable waiver of the claim made in the Legal Dispute.
|
(c)
|
Notwithstanding that mediation and arbitration are established as the exclusive procedures for resolution of any Legal Dispute, (i) either party may apply to an appropriate judicial or administrative forum for injunctive relief and (ii) claims by Company arising in connection with Sections 7, 8 and/or 9 may be brought in any court of competent jurisdiction.
|
(d)
|
With respect to any breach or attempted breach of Sections 7, 8 and/or 9 of this Agreement, each party acknowledges that a remedy at law will be inadequate, agrees that the Company will be entitled to specific performance and injunctive and other equitable relief and agrees not to use as a defense that any party has an adequate remedy at law. This Agreement shall be enforceable in a court of equity, or other tribunal with jurisdiction, by a decree of specific performance, and appropriate injunctive relief may be applied for and granted in connection herewith. Such remedy shall not be exclusive and shall be in addition to any other remedies now or hereafter existing at law or in equity, by statute or otherwise. No delay or omission in exercising any right or remedy set forth in this Agreement shall operate as a waiver thereof or of any other right or remedy and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy.
|
20.
|
Section 409A
.
|
(a)
|
It is intended that each installment of the payments provided under this Agreement, if any, is a separate “payment” for purposes of Section 409A and the payments satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(9)(iii) and 1.409A-1(b)(9)(v). Notwithstanding any other provision to the contrary, a termination of employment with the Company shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of “deferred compensation” (as such term is defined in Section 409A and the Treasury Regulations promulgated thereunder) upon or following a termination of employment unless such termination is also a “separation from service” from the Company within the meaning of Section 409A and Section 1.409A-1(h) of the Treasury Regulations and, for purposes of any such provision of this Agreement,
|
(b)
|
Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date his employment with the Company terminates or at such other time that the Company determines to be relevant, Executive is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of the Company and (ii) that any payments to be provided to him pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) or any other taxes or penalties imposed under Section 409A if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six months after the date of his “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)) with the Company, or, if earlier, the date of his death. Any payments delayed pursuant to this Section shall be made in a lump sum on the first business day of the seventh month following Executive’s “separation from service” (as such term is defined under Treasury Regulation 1.409A-1(h)), or if earlier, the date of his death.
|
(c)
|
In addition, to the extent that any reimbursement, fringe benefit or other, similar plan or arrangement in which Executive participates during the term of his employment under this Agreement or thereafter provides for a “deferral of compensation” within the meaning of Section 409A, then such amount shall be reimbursed in accordance with Section 1.409A-3(i)(1)(iv) of the Treasury Regulations, including (i) the amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid), (ii) subject to any shorter time periods provided herein or the applicable plans or arrangements, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to any reimbursement or in-kind benefit is not subject to liquidation or exchange for another benefit.
|
(d)
|
For the avoidance of doubt, any payment due under this Agreement within a period following Executive’s termination of employment or other event, shall be made on a date during such period as determined by the Company in its sole discretion.
|
(e)
|
Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Section 409A and the Treasury Regulations promulgated thereunder be subject to offset by any other amount unless otherwise permitted by Section 409A.
|
(f)
|
This Agreement is intended to comply with the applicable requirements under Section 409A and the related Treasury Regulations and guidance issued by the Department of the Treasury, as modified from time to time, including exceptions
|
By:
|
/s/ Ezra Uzi Yemin
|
|
Ezra Uzi Yemin,
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
By:
|
/s/ Kevin Kremke
|
|
Kevin Kremke,
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
By:
|
/s/ Ezra Uzi Yemin
|
|
Ezra Uzi Yemin,
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
By:
|
/s/ Kevin Kremke
|
|
Kevin Kremke,
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|