Segment Data (Notes)

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Data

Segment Data

We report our assets and operating results in two reportable segments: (i) pipelines and transportation and (ii) wholesale marketing and terminalling:

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

• The assets in the wholesale marketing and terminalling segment provide marketing and terminalling services to Delek's refining operations and independent third parties.

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

On February 10, 2014 and March 31, 2015, we acquired the El Dorado Terminal and Tank Assets and the Logistics Assets, respectively, from Delek. Our historical financial statements have been retrospectively adjusted to reflect the results of operations attributable to the El Dorado Terminal and Tank Assets and the Logistics Assets as if we owned the assets for all periods presented. The results of the El Dorado Terminal are included in the wholesale marketing and terminalling segment. The results of the El Dorado Tank Assets and the Logistics Assets are included in the pipelines and transportation segment.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015			2014
Pipelines and Transportation
Net Sales:
Affiliate	$	26,358	$	21,008	$	76,436		$	58,753
Third-Party	7,581		2,759		22,239			7,204
Total Pipelines and Transportation	33,939		23,767		98,675			65,957
Operating costs and expenses:
Cost of goods sold	5,211		1,011		15,126			3,267
Operating expenses (1) (2)	8,368		8,234		23,031			23,718
Segment contribution margin	$	20,360	$	14,522	$	60,518		$	38,972
Capital spending (excluding business combinations) (1) (2)	$	2,872	$	408	$	12,627		$	3,824
Wholesale Marketing and Terminalling
Net Sales:
Affiliate	$	15,466	$	8,674	$	37,539		$	25,102
Third-Party	115,687		195,595		344,524			576,847
Total Wholesale Marketing and Terminalling	131,153		204,269		382,063			601,949
Operating costs and expenses:
Cost of goods sold	119,174		193,122		350,160			559,649
Operating expenses	3,248		2,127		10,160			5,858
Segment contribution margin	$	8,731	$	9,020	$	21,743		$	36,442
Capital spending (excluding business combinations)	$	1,323	$	323	$	5,103		$	1,106
Consolidated
Net Sales:
Affiliate	$	41,824	$	29,682	$	113,975		$	83,855
Third-Party	123,268		198,354		366,763			584,051
Net sales	165,092		228,036		480,738			667,906
Operating costs and expenses:
Cost of goods sold	124,385		194,133		365,286			562,916
Operating expenses (1) (2)	11,616		10,361		33,191			29,576
Contribution margin	29,091		23,542		82,261			75,414
General and administrative expenses	2,703		2,453		9,094			7,358
Depreciation and amortization	4,541		3,847		13,785			10,947
(Gain) loss on asset disposals	—		—		(18		)	74
Operating income	$	21,847	$	17,242	$	59,400		$	57,035
Capital spending (excluding business combinations) (1) (2)	$	4,195	$	731	$	17,730		$	4,930

⁽¹⁾ Includes operating expenses and capital spending expenditures incurred in connection with the El Dorado Offloading Racks Acquisition and the Tyler Crude Tank Acquisition for the nine months ended September 30, 2015.

⁽²⁾ Adjusted to include operating expenses and capital spending expenditures incurred in connection with the assets acquired in the El Dorado Offloading Racks Acquisition and the Tyler Crude Tank Acquisition for the three and nine months ended September 30, 2014.

The following table summarizes the total assets for each segment as of September 30, 2015 and December 31, 2014 (in thousands).

	September 30, 2015		December 31, 2014
Pipelines and Transportation	$	274,336	$	230,293
Wholesale Marketing and Terminalling	87,467		100,993
Total Assets	$	361,803	$	331,286

Property, plant and equipment and accumulated depreciation as of September 30, 2015 and depreciation expense by reporting segment as of and for the three and nine months ended September 30, 2015 were as follows (in thousands):

	Pipelines and Transportation			Wholesale Marketing and Terminalling			Consolidated
Property, plant and equipment	$	262,853		$	58,541		$	321,394
Less: accumulated depreciation	(45,690		)	(20,547		)	(66,237		)
Property, plant and equipment, net	$	217,163		$	37,994		$	255,157
Depreciation expense for the three months ended September 30, 2015	$	3,373		$	902		$	4,275
Depreciation expense for the nine months ended September 30, 2015	$	10,296		$	2,692		$	12,988

In accordance with ASC 360, Property, Plant & Equipment, we evaluate the realizability of property, plant and equipment as events occur that might indicate potential impairment.