PBF Energy Inc. 2012 Annual Report
The PBF Energy Refining System
PBF owns three oil refineries located in Ohio, Delaware and New Jersey:
• Aggregate throughput capacity of approximately 540,000 barrels per day
• Weighted average Nelson Complexity of 11.3
•
•
•
Fifth largest U.S. independent refiner
100% of PADD 1 coking capacity
Recent rail infrastructure investment on East Coast provides the entire system access to WTI-
based, cost-advantaged North American crude supply
Toledo Refinery
170,000 bpd light, sweet crude refinery
9.2 Nelson Complexity
•
•
• Mid-Continent location with access to cost-advantaged crudes
•
•
• High-conversion refinery with distillate and gasoline yield of approximately 85%
•
Increasing regional sweet crude supply
Truck and rail unloading infrastructure to run local crudes
Located within 100 miles of Utica production
Delaware City Refinery
190,000 bpd refinery located on 5,000-acre site on Delaware River
11.3 Nelson Complexity
•
•
• Medium and heavy sour crude refinery
64% of East Coast coking capacity
•
110,000 bpd crude-by-rail discharge facilities, 40,000 bpd of which are Canadian heavy crudes
•
Reconfigured crude slate in conjunction with development of rail infrastructure to focus on
•
cost-advantaged North American crudes
Export capability through Delaware River
•
Paulsboro Refinery
180,000 bpd refinery located on Delaware River
13.2 Nelson Complexity
Complex refinery with Group I lubricant production
Connection to major Northeast pipelines
•
•
•
•
• Dedicated jet fuel pipeline to Philadelphia airport
•
•
36% of East Coast coking capacity
Export capability through Delaware River dock complex
TO OUR SHAREHOLDERS
2012 was a very good year for PBF Energy as fundamentally sound operations, in combination with
improved industry margins, resulted in operating earnings of $920 million, per share earnings of
$5.07, on a fully-exchanged and fully-diluted basis, and free cash flow of $593 million.
We finished 2012 in a financially strong position with a cash balance of $286 million, total liquidity of
$600 million and a net debt to capitalization ratio of 20% which is down from a net debt to
capitalization ratio of almost 40% at year-end 2011.
In February 2012, we successfully completed a $675 million bond offering and used the proceeds to
retire higher cost short-term debt that was used to acquire the Paulsboro and Toledo refineries.
On December 12th, 2012, we achieved a major milestone when we completed an initial public
offering of the Company during which our private equity partners, Blackstone and First Reserve, sold
approximately twenty-four percent of their interest to the public at a price of $26 per share.
Our top priority, as always, is to operate our facilities in a safe, reliable and environmentally
responsible manner. We fully understand that without this foundation firmly in place our success
cannot be assured. Safety performance in all three refineries improved in 2012 with our refining
system’s average total employee recordable incident rate (TRIR) at 0.65 versus the industry average
of 1.02. Our contractor TRIR also improved to 0.58 versus an industry average of 0.78.
We continue to improve the environmental performance at all three facilities, with each refinery
experiencing a lower number of environmental incidents in 2012 as compared to 2011. Our Delaware
City Refinery experienced the fewest number of flaring events as compared to frequency under prior
ownerships. After a thorough review by the federal Occupational Safety and Health Administration,
our Paulsboro refinery was re-approved as a “Star Site” in the Voluntary Protection Program of the
agency.
Reliable operations at all three refineries allowed us to capture the strong margins that existed in the
Midwest throughout 2012 and on the East Coast during the second half of the year.
Capital expenditures during 2012 were $223 million including investment in crude-by-rail unloading
infrastructure that allows the Company to take advantage of the phenomenal growth of crude oil
production that is taking place in the Midwest and Canada. We currently have the ability to deliver
and discharge over 110,000 barrels per day of these attractively priced crudes into our East Coast
system and expect to increase this unloading capability by another 40,000 barrels per day by the end
of 2013.
We believe we are advantaged in two important areas relative to our competition in PADD 1 with
these investments. First, our Delaware City refinery sits on an industrial site of over 5,000 acres
allowing us to build the rail unloading infrastructure within our refinery boundaries versus using third
party facilities to trans-load and transport these crudes. This results in an embedded $2.50 per barrel
lower cost of supplying these crudes to our East Coast refineries versus other refiners in the region.
Secondly, and importantly, our Delaware City and Paulsboro refineries are the only refineries in the
region with the sophisticated capacity required to process the heavy crude oils that will be delivered
from Western Canada through these facilities.
As we look forward, we remain focused on increasing shareholder value through both organic and
external growth opportunities. Our recent announcement commencing a $0.30 per share dividend
payment is further evidence of our commitment to returning value to our shareholders.
PBF’s strong operating performance and value creation are built on the dedication of the Company’s
employees. Their spirit, talent and commitment were vividly demonstrated in the aftermath and
response to Superstorm Sandy which significantly impacted the East Coast last October. Our
employees worked tirelessly to keep the keep the East Coast facilities running in a safe and
responsible manner allowing us to continue to supply transportation fuels to the area. Additionally,
we thank our Board of Directors for the oversight and leadership that they provide. Our Board has
been, and remains, a valuable strategic advisor for PBF and a responsible steward for the interests of
all shareholders.
Finally, we thank our shareholders. We are well aware of the investment and confidence you have
placed in PBF and we will continue to work diligently to reward that trust.
Sincerely,
Chairman
Thomas D. O’Malley
Chief Executive Officer
Thomas J. Nimbley
Delaware City Dual Loop Track
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
For the transition period from
to
Commission file Number: 001-35764
PBF Energy Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
One Sylvan Way, Second Floor
Parsippany, New Jersey
(Address of principal executive offices)
45-3763855
(I.R.S. Employer
Identification No.)
07054
(Zip Code)
Registrants’ telephone number, including area code: (973) 455-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Class A Common Stock, $0.001 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ‘ No È
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes ‘ No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule12b-2 of the Exchange Act.
Large accelerated filer ‘
Non-accelerated filer È
Accelerated filer
Smaller reporting company ‘
‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
On June 30, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant’s Class A common stock
was not listed on any exchange or over-the-counter market. The registrant’s Class A common stock began trading on the New York Stock Exchange
on December 13, 2012.
The number of shares of registrants’ common stock outstanding as of February 25, 2013:
PBF Energy Inc. Class A common stock
PBF Energy Inc. Class B common stock
23,613,835 shares
41 shares
DOCUMENTS INCORPORATED BY REFERENCE
PBF Energy Inc. intends to file with the Securities and Exchange Commission a definitive Proxy Statement for its Annual Meeting of
Stockholders within 120 days after December 31, 2012. Portions of the Proxy Statement are incorporated by reference in Part III of this Form 10-K to
the extent stated herein.
CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures
PART IV
PAGE
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PART I
In this Annual Report on Form 10-K, unless the context otherwise requires, references to the “Company,”
“we,” “our,” “us” or “PBF” refer to PBF Energy Inc. (“PBF Energy”), and, in each case, unless the context
otherwise requires, its consolidated subsidiaries, including PBF Energy Company LLC (“PBF LLC”), PBF
Holding Company LLC (“PBF Holding”), PBF Investments LLC (“PBF Investments”), Toledo Refining
Company LLC (“Toledo Refining”), Paulsboro Refining Company LLC (“Paulsboro Refining”), and Delaware
City Refining Company LLC (“Delaware City Refining”). In this Annual Report on Form 10-K, we make certain
forward-looking statements, including statements regarding our plans, strategies, objectives, expectations,
intentions, and resources, under the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. You should read our forward-looking statements together with our disclosures under the heading:
“Cautionary Statement for the Purpose of Safe Harbor Provisions of the Private Securities Litigation Reform Act
of 1995.” When considering forward-looking statements, you should keep in mind the risk factors and other
cautionary statements set forth in this Annual Report on Form 10-K under “Risk Factors” in Item 1A.
ITEM 1. BUSINESS
Overview
We are one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels,
heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. We sell our
products throughout the Northeast and Midwest of the United States, as well as in other regions of the United
States and Canada, and are able to ship products to other international destinations. We were formed in 2008 to
pursue acquisitions of crude oil refineries and downstream assets in North America. We currently own and
operate three domestic oil refineries and related assets, which we acquired in 2010 and 2011. Our refineries have
a combined processing capacity, known as throughput, of approximately 540,000 bpd, and a weighted average
Nelson Complexity Index of 11.3.
Our three refineries are located in Toledo, Ohio, Delaware City, Delaware and Paulsboro, New Jersey. Our
Midcontinent refinery at Toledo processes light, sweet crude, has a throughput capacity of 170,000 bpd and a
Nelson Complexity Index of 9.2. The majority of Toledo’s WTI based crude is delivered via pipelines that
originate in both Canada and the United States. Since our acquisition of Toledo in 2011, we have added
additional truck and rail crude unloading capabilities that provide feedstock sourcing flexibility for the refinery
and enables Toledo to run a more cost-advantaged crude slate. Our East Coast refineries at Delaware City and
Paulsboro have a combined refining capacity of 370,000 bpd and Nelson Complexity Indices of 11.3 and 13.2,
respectively. These high conversion refineries process primarily medium and heavy, sour crudes and have
historically received the bulk of their feedstock via ships and barges on the Delaware River. Importantly, in May
2012 we commenced crude shipments via rail into a newly developed crude rail unloading facility at our
Delaware City refinery. Currently, crude delivered to this facility is consumed at our Delaware City refinery. In
the future we plan to transport some of the crude delivered by rail from Delaware City via barge to our Paulsboro
refinery. The Delaware City rail unloading facility allows our East Coast refineries to source WTI based crudes
from Western Canada and the Midcontinent, which provides significant cost advantages versus traditional Brent
based international crudes.
PBF Energy, a Delaware corporation formed on November 7, 2011, is a holding company that manages its
consolidated subsidiary, PBF LLC. Our sole asset is a controlling equity interest as of December 31, 2012 of
approximately 24.4% of the outstanding Series A Units in PBF LLC as discussed more fully in “History” below.
Available Information.
Our website address is www.pbfenergy.com. Information contained on our website is not part of this Annual
Report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and any other materials filed with (or furnished to) the Securities and Exchange Commission (SEC)
1
by us are available on our website (under “Investors”) free of charge, soon after we file or furnish such material.
In this same location, we also post our corporate governance guidelines, code of business conduct and ethics, and
the charters of the committees of our board of directors. These documents are available free of charge in print to
any stockholder that makes a written request to the Secretary, PBF Energy Inc., One Sylvan Way, Second Floor,
Parsippany, New Jersey 07054.
History
We are a holding company and our sole asset is an equity interest in PBF LLC. We are the sole managing
member of PBF LLC and operate and control all of the business and affairs and consolidate the financial results
of PBF LLC and its subsidiaries. PBF LLC is a holding company for the companies that directly and indirectly
own and operate our business.
On December 18, 2012, we closed the initial public offering of 23,567,686 shares of our Class A common
stock at an offering price of $26.00 per share. In connection with the offering, our shares of Class A common
stock began trading on the New York Stock Exchange under the symbol “PBF”. The proceeds to us from the
offering, before deducting underwriting discounts, were approximately $612.8 million of which we used
approximately $571.2 million to purchase 21,967,686 PBF LLC Series A Units from our financial sponsors,
funds affiliated with The Blackstone Group L.P. (“Blackstone”) and First Reserve Management L.P. (“First
Reserve”), as described in our Prospectus, dated December 12, 2012, filed pursuant to Rule 424 (b) of the
Securities Act.
As of December 31, 2012, Blackstone and First Reserve and our executive officers and directors and certain
employees beneficially owned 72,972,131 PBF LLC Series A Units (we refer to all of the holders of the PBF
LLC Series A Units as “the pre-IPO owners of PBF LLC”) and we owned 23,571,221 PBF LLC Series C Units,
and the pre-IPO owners of PBF LLC through their holdings of Class B common stock have 75.6% of the voting
power in us, and the holders of our issued and outstanding shares of Class A common stock have 24.4% of the
voting power in us. As a result of the current ownership of the Class B common stock and the PBF LLC Series A
Units, Blackstone and First Reserve continue at the present time to control us, and we in turn, as the sole
managing member of PBF LLC, control PBF LLC and its subsidiaries.
PBF Energy consolidates the financial results of PBF LLC and its subsidiaries and records a noncontrolling
interest in its consolidated financial statements representing the economic interests of the pre-IPO owners of
PBF LLC. PBF LLC is PBF Energy’s predecessor for accounting purposes. Our financial statements and results
of operations for periods prior to the completion of our initial public offering are those of PBF LLC.
See “Item 1A. Risk Factors” and “Item 13. Certain Relationships and Related Transactions, and Director
Independence.”
2
The diagram below depicts our organizational structure as of December 31, 2012:
The Pre-IPO
Owners of
PBF LLC and
Management
72,972,131
PBF LLC Series A
Units
(cid:129) Represents 75.6% of
the total economic
interest of PBF LLC
(cid:129) Not publicly traded
(cid:129) No voting rights
(cid:129) Economic rights only
(cid:129) Exchangeable on
one-for-one basis for
shares of Class A
common stock
(cid:129) Certain of the PBF LLC
Series A Units share
profits with the PBF
LLC Series B Units
PBF LLC Series B
Units
(cid:129) Are profits interests
(cid:129) Share in varying
percentages in the profits
of the existing owners,
including the right to receive
shares of Class A common stock
(cid:129) Held solely by our
executive officers
(cid:129) No voting rights
Investors
23,571,221 shares of
Class A common stock
(cid:129) 24.4% of voting power in
PBF Energy
(cid:129) 100% of economic
interests in PBF Energy
Sole Managing Member and 23,571,221
PBF LLC Series C Units
(cid:129) Represents 24.4% of the total
economic interest of PBF LLC
(cid:129) Number of PBF LLC Series C
Units held equals number of shares
of Class A common stock
outstanding
(cid:129) 100% management power in PBF LLC
(cid:129) Do not share with the PBF LLC
Series B Units
(cid:129) ABL Revolving Credit Facility
(cid:129) Senior Secured Notes due 2020
41 Shares of
Class B common stock
(cid:129) Voting rights only
(cid:129) One vote for each PBF
LLC Series A Unit held by
such holder
(cid:129) 75.6% of voting power in
PBF Energy
PBF Energy Inc.
PBF Energy
Company LLC
(PBF LLC)
PBF Holding
Company LLC
(PBF Holding)
Operating
Subsidiaries
Recent Developments
In May 2012 we commenced crude shipments via rail into a newly developed crude rail unloading facility at
our Delaware City refinery. In February 2013, we completed a second crude unloading facility at the refinery that
increased our rail crude unloading capacity at Delaware City from 40,000 barrels per day (“bpd”) to 110,000 bpd,
comprised of 40,000 bpd of heavy crude oil and 70,000 bpd of light crude oil. The Delaware City rail unloading
facility allows our East Coast refineries to source WTI based crudes from Western Canada and the Midcontinent,
which provides significant cost advantages versus traditional Brent based international crudes. Also in February
2013, our board of directors approved a project to add an additional 40,000 bpd of heavy crude rail
unloading capability at the refinery. The project is expected to cost approximately $50 million and to be
completed in the fourth quarter of 2013. Completion of the project will increase our discharge capacity of heavy
crude oil from 40,000 bpd to 80,000 bpd and bring the total rail crude unloading capability up to 150,000 bpd.
3
During 2012 and January 2013, we entered into agreements to lease or purchase a total of 3,600 coiled and
insulated rails cars, which are capable of transporting Canadian heavy crude oils, and 1,300 general purpose cars,
which we intend to use to transport lighter crude oils.
In addition, we recently announced that the Toledo refinery experienced a drop in steam pressure on
January 30, 2013, which was followed by a brief fire within the FCC complex. Emergency response personnel
extinguished the fire and there were no injuries or known offsite impacts. Appropriate government agencies were
contacted and a full investigation into the cause of the incident is underway. The FCC was the only unit involved
and was temporarily shut down. The refinery resumed running at planned rates on February 18, 2013.
Our board of directors recently authorized the Company to continue its activities into establishing a MLP,
including the formation of subsidiaries to hold MLP-qualifying assets. The Company has a number of energy-
related logistical assets that qualify for an MLP structure. However, we continue to evaluate our strategic
alternatives for these assets.
Refining Operations
We own and operate three refineries, all located in regions with currently favorable market dynamics where
finished product demand exceeds operating refining capacity. We produce a variety of products at each of our
refineries, including gasoline, ULSD, heating oil, jet fuel, lubricants, petrochemicals and asphalt. We sell our
products throughout the Northeast and Midwest of the United States, as well as in other regions of the United
States and Canada, and are able to ship products to other international destinations.
Delaware City Refinery
Acquisition and Re-Start. Through our subsidiaries, Delaware City Refining and Delaware Pipeline
Company LLC, we acquired the idle Delaware City refinery and its related assets, including a petroleum product
terminal, a petroleum products pipeline and an electric generation facility, on June 1, 2010 from affiliates of
Valero for approximately $220.0 million in cash, consisting of approximately $170.0 million for the refinery,
terminal and pipeline assets and $50.0 million for the power plant complex located on the property. We also
incurred approximately $4.3 million in acquisition costs.
In the fourth quarter of 2009, due to, among other reasons, financial losses caused by one of the worst
recessions in recent history, the prior owner shut down the Delaware City refinery. We believe we were therefore
able to acquire the refinery at an attractive price. In addition, at the time of acquisition, we reached an agreement
with the State of Delaware that provided for a five-year operating permit and up to approximately $45.0 million
of economic support to re-start the facility, and negotiated a new long-term contract with the relevant union at the
refinery. As of December 31, 2012, we had received $37.4 million in economic support from the State of
Delaware under this agreement. We believe that the refinery’s ability to process lower quality crudes allows us to
capture a higher margin as these lower quality crudes are typically priced at discounts to benchmark crudes, and
to compete effectively in a region where product demand currently significantly exceeds refining capacity.
We restarted the Delaware City Refinery in October 2011. Since our acquisition through December 31,
2012, we have invested more than $500.0 million in turnaround and re-start projects at Delaware City, as well as
in the recent strategic development of crude rail unloading facilities. In the first year of operations we have also
modified the crude slate and product yield, changed operations of the conversion units, and re-started certain
units in order to optimize the refinery. The re-start process included the decommissioning of the gasifier unit
located on the property which allowed us to decrease emissions and improve the reliability of the refinery. We
have also completed a cogeneration project to convert the electric generation units at the refinery to use natural
gas as a fuel and a hydrocracker corrosion control project aimed at increasing the throughput of the hydrocracker.
Through these capital investments and by restructuring certain operations, management estimates that we have
lowered the annual operating expenses of the Delaware City refinery. In 2012, we commenced a project to
4
expand and upgrade the existing on-site railroad infrastructure, including the expansion of the crude rail
unloading facilities that was completed in February 2013 and is capable of discharging approximately 110,000
bpd. The project cost approximately $57.0 million, $49.7 million of which had been spent as of December 31,
2012. Also in February 2013, our board of directors approved a project to add an additional 40,000 bpd of heavy
crude rail unloading capability at the refinery. Additionally, we continue to evaluate the development of a
construction project consisting of a mild hydrocracker and hydrogen plant at the refinery. We estimate that the
construction of the project, if commenced, could take approximately three years from commencement and if
completed could process streams from both Delaware City and Paulsboro.
Overview. The Delaware City refinery is located on a 5,000-acre site, with access to waterborne cargoes and
an extensive distribution network of pipelines, barges and tankers, truck and rail. Delaware City is a fully
integrated operation that receives crude via rail at the crude unloading facility, or ship or barge at its docks
located on the Delaware River. The crude and other feedstocks are transported, via pipes, to an extensive tank
farm where they are stored until processing. In addition, there is a 17-bay, 50,000 bpd capacity truck loading rack
located adjacent to the refinery and a 23-mile interstate pipeline that are used to distribute clean products.
The Delaware City refinery has a throughput capacity of 190,000 bpd and a Nelson Complexity Index of
11.3. As a result of its configuration and process units, Delaware City has the capability of processing a heavy
slate of crudes with a high concentration of high sulfur crudes and is one of the largest and most complex
refineries on the East Coast. The Delaware City refinery is one of two heavy coking refineries, in addition to
Paulsboro, on the East Coast of the United States with coking capacity equal to approximately 25% of crude
capacity.
The Delaware City refinery processes a variety of medium to heavy, sour crude oils. The refinery has large
conversion capacity with its 82,000 bpd FCC unit, 47,000 bpd FCU and 18,000 bpd hydrocracking unit with vacuum
distillation. Hydrogen is provided via the refinery’s steam methane reformer and continuous catalytic reformer.
Delaware City Process Flow Diagram
Naphtha
Kerosene
Diesel
Coker
Middle
Distillate
Crude
Crude
Distillation
ATB
Vacuum
Distillation
Naptha
CCR
Tetra feed
Tetra
Extraction
Benzene
Hydrotreaters
ULSD
Heating Oil
Light
Cycle Oil
FCC
Gas oil
Gas oil
Gas oil
Reformate
B-B
Butane
ISOM
Isobutane
P-P
Gasoline
CNHTU
Gasoline
Alky
(Sales)
Poly
Slurry
(Sales)
Gas oil
SHU
Naphtha to HDS
Heavy
Cycle Oil
VTB
Fluid Coker
Naphtha
Gas Oil
Hydrocracker
5
Diesel
Coke
The following table approximates the Delaware City refinery’s major process unit capacities. Unit capacities
are shown in barrels per stream day.
Refinery Units
Crude Distillation Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacuum Distillation Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluid Catalytic Cracking Unit (FCC) . . . . . . . . . . . . . . . . . . .
Hydrotreating Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hydrocracking Unit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Catalytic Reforming Unit (CCR) . . . . . . . . . . . . . . . . . . . . . .
Benzene / Toluene Extraction Unit
. . . . . . . . . . . . . . . . . . . .
Butane Isomerization Unit (ISOM) . . . . . . . . . . . . . . . . . . . .
Alkylation Unit (Alky) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Polymerization Unit (Poly) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluid Coking Unit (Fluid Coker) . . . . . . . . . . . . . . . . . . . . . .
Nameplate
Capacity
190,000
102,000
82,000
160,000
18,000
43,000
15,000
6,000
11,000
16,000
47,000
Feedstocks and Supply Arrangements. In April 2011, we entered into a crude and feedstock supply
agreement with Statoil that expires in December 31, 2015. Pursuant to the agreement as amended in October
2012, we direct Statoil to purchase waterborne crude and other feedstocks for Delaware City and Statoil
purchases these products on the spot market or through term agreements. Accordingly, Statoil enters into, on our
behalf, hedging arrangements to protect against changes in prices between the time of purchase and the time of
processing the feedstocks. In addition to procurement, for these waterborne deliveries Statoil arranges
transportation and insurance for the crude and feedstock supply and we pay Statoil a per barrel fee for their
procurement and logistics services. Statoil generally holds title to the waterborne crude and feedstocks until we
run the crude or feedstocks through our process units. We pay Statoil on a daily basis for the corresponding
volume of crude or feedstocks that are consumed in conjunction with the refining process. This crude supply and
feedstock arrangement helps us reduce the amount of investment we are required to maintain in crude inventories
and, as a result, helps us manage our working capital.
Product Offtake. We sell the bulk of Delaware City’s clean products to MSCG through our offtake
agreement, which we have given notice to terminate effective June 30, 2013. Under the offtake agreement,
MSCG purchases 100% of our finished clean products at Delaware City, which includes gasoline, heating oil and
jet fuel, as well as our intermediates. Subsequent to termination of the offtake agreement, we intend to market
and independently sell the products currently purchased by MSCG. The remainder of our products are sold to a
variety of customers on the spot market or through term agreements.
Tankage Capacity. The Delaware City refinery has total storage capacity of approximately 10.0 million
barrels. Of the total, 18 tanks with approximately 3.6 million barrels of storage capacity are dedicated to crude oil
and other feedstock storage with the remaining approximately 6.4 million barrels allocated to finished products,
intermediates and other products.
Energy and Other Utilities. Under normal operating conditions, the Delaware City refinery consumes
approximately 55,000 MMBTU per day of natural gas. The Delaware City refinery has a 280 MW power plant
located on-site that consists of two natural gas-fueled turbines with combined capacity of approximately
140 MW and four turbo-generators with combined nameplate capacity of approximately 140 MW. Collectively,
this power plant produces electricity in excess of Delaware City’s refinery load of approximately 90 MW. Excess
electricity is sold into the Pennsylvania-New Jersey-Maryland, or PJM, grid. Steam is primarily produced by a
combination of three dedicated boilers and supplemented by secondary boilers at the FCC and coker.
6
Paulsboro Refinery
Acquisition. We acquired the entities that owned the Paulsboro refinery (including an associated natural gas
pipeline) on December 17, 2010, from Valero for approximately $357.7 million, excluding working capital. The
purchase price excludes inventory purchased on our behalf by MSCG and Statoil. We invested approximately
$60.0 million in capital in early 2011 to complete a scheduled turnaround at the refinery. The refinery was
commissioned in 1917 and was purchased by Valero from Mobil Oil Corporation in 1998.
Overview. Paulsboro has a throughput capacity of 180,000 bpd and a Nelson Complexity Index of 13.2. The
Paulsboro refinery is located on approximately 950 acres on the Delaware River in Paulsboro, New Jersey, just
south of Philadelphia and approximately 30 miles away from Delaware City. Paulsboro receives crude and
feedstocks via its marine terminal on the Delaware River. Paulsboro is one of two operating refineries on the East
Coast with coking capacity, the other being Delaware City. Major units at the Paulsboro refinery include crude
distillation units, vacuum distillation units, an FCC unit, a delayed coking unit, a lube oil processing unit and a
propane deasphalting unit.
The Paulsboro refinery processes a variety of medium and heavy, sour crude oils. The Paulsboro refinery
predominantly produces gasoline, heating oil and jet fuel and also manufactures Group I base oils or lubricants.
In addition to its finished clean products slate, Paulsboro produces asphalt and petroleum coke.
Paulsboro Refinery Process Flow Diagram
Naphtha
CCR
Gasoline
Crude
Crude
Distillation
Naphtha
Kerosene
Diesel
Naphtha
Distillate
Hydrotreaters
Jet Fuel
Heating Oil
ATB
Gas Oil
Vacuum
Distillation
Gas Oil
LCO
Extracts
Lubes
Coker
DAO
Naphtha
Gas Oil
Coke
FCC
B-B
B-B
Isobutane
P-P
Slurry / CSO
Gasoline
Lubes
GDU
Gasoline
Alky
Gasoline
VTB
Propane
Deasphalter
Asphalt
Asphalt
7
The following table approximates the Paulsboro refinery’s major process unit capacities. Unit capacities are
shown in barrels per stream day.
Refinery Units
Crude Distillation Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vacuum Distillation Units . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluid Catalytic Cracking Unit (FCC) . . . . . . . . . . . . . . . . . . .
Hydrotreating Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Catalytic Reforming Unit (CCR) . . . . . . . . . . . . . . . . . . . . . .
Alkylation Unit (Alky) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lube Oil Processing Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delayed Coking Unit (Coker)
. . . . . . . . . . . . . . . . . . . . . . . .
Propane Deasphalting Unit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nameplate
Capacity
168,000
83,000
55,000
141,000
32,000
11,000
12,000
27,000
11,000
Feedstocks and Supply Arrangements. In December 2010, we entered into a crude and feedstock supply
agreement with Statoil that will terminate effective March 31, 2013. Pursuant to the agreement, we direct Statoil
to purchase crude and other feedstocks for Paulsboro and Statoil purchases these products on the spot market.
Accordingly, Statoil enters into, on our behalf, hedging arrangements to protect against changes in prices
between the time of purchase and the time of processing the feedstocks. In addition to procurement, Statoil
generally arranges transportation and insurance for the crude and feedstock supply and we pay Statoil a per barrel
fee for their procurement and logistics services. Statoil holds title to the crude and feedstocks until we run the
crude or feedstocks through our process units. We pay Statoil on a daily basis for the corresponding volume of
crude or feedstocks that are consumed in conjunction with the refining process.
In addition, separate from our agreement with Statoil we have a long-term contract with Saudi Aramco. We
have been purchasing up to approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at
Paulsboro pursuant to this agreement and on a spot basis. The crude purchased is priced off ASCI.
Product Offtake. We sell the bulk of Paulsboro’s clean products to MSCG through our offtake agreement,
which we have elected to terminate effective June 30, 2013. With the exception of certain jet fuel and lubricant
sales, MSCG purchases 100% of our finished clean products and intermediates under the offtake agreement.
Subsequent to termination of the offtake agreement, we intend to market and independently sell the products
currently purchased by MSCG including under certain existing agreements with other customers that we will
assume upon the MSCG termination. In addition to the finished products offtake agreement with MSCG, we sell
the remaining products produced at Paulsboro to third parties under various long-term contracts and on the spot
market.
Tankage Capacity. The Paulsboro refinery has total storage capacity of approximately 7.5 million barrels.
Of the total, approximately 2.1 million barrels are dedicated to crude oil storage with the remaining 5.4 million
barrels allocated to finished products, intermediates and other products.
Energy and Other Utilities. Under normal operating conditions, the Paulsboro refinery consumes
approximately 30,000 MMBTU per day of natural gas. The Paulsboro refinery is virtually self-sufficient for its
electrical power requirements. The refinery supplies approximately 90% of its 63 MW load through a
combination of four generators with a nameplate capacity of 78 MW, in addition to a 30 MW gas turbine
generator and two 15 MW steam turbine generators located at the Paulsboro utility plant. In the event that
Paulsboro requires additional electricity to operate the refinery, supplemental power is available through a local
utility. Paulsboro is connected to the grid via three separate 69 KV aerial feeders and has the ability to run
entirely on imported power. Steam is primarily produced by three boilers, each with continuous rated capacity of
300,000-lb/hr at 900-psi. In addition, Paulsboro has a heat recovery steam generator and a number of waste heat
boilers throughout the refinery that supplement the steam generation capacity. Paulsboro’s current hydrogen
needs are met by the hydrogen supply from the reformer. In addition, the refinery employs a standalone steam
methane reformer that is capable of producing 10 MMSCFD of 99% pure hydrogen. This ancillary hydrogen
plant is utilized as a back-up source of hydrogen for the refinery’s process units.
8
Toledo Refinery
Acquisition. Through our subsidiary, Toledo Refining, we acquired the Toledo refinery on March 1, 2011,
from Sunoco for approximately $400.0 million, excluding working capital. We also purchased refined and certain
intermediate products in inventory for approximately $299.6 million, and MSCG purchased the refinery’s crude
oil inventory on our behalf. Additionally, included in the terms of the sale is a five-year participation payment
of up to $125.0 million payable to Sunoco based upon post-acquisition earnings of the refinery, of which
$103.6 million was paid in 2012. We currently anticipate paying the balance of the participation payment in
April 2013.
Overview. Toledo has a throughput capacity of approximately 170,000 bpd and a Nelson Complexity Index
of 9.2. Toledo processes a slate of light, sweet crudes from Canada, the Midcontinent, the Bakken region and the
U.S. Gulf Coast. Toledo produces a high percentage of finished products including gasoline and ULSD, in
addition to a variety of high-value petrochemicals including nonene, xylene, tetramer and toluene.
The Toledo refinery is located on a 282-acre site near Toledo, Ohio, approximately 60 miles from Detroit.
Major units at the Toledo refinery include an FCC unit, a hydrocracker, an alkylation unit and a UDEX unit.
Crude is delivered to the Toledo refinery through three primary pipelines: (1) Enbridge from the north,
(2) Capline from the south and (3) Mid-Valley from the south. Crude is also delivered to a nearby terminal by
rail and from local sources by truck to a truck unloading facility within the refinery.
Toledo Refinery Process Flow Diagram
OVHD
Frac / HDT
Light Naphtha
R
S
L
Jet
Jet Treater
Jet
Jet Drying
Jet Fuel
Crude
Crude
Distillation
Heavy Naphtha
BTX
Reformer /
Splitter
Gasoline
Benzene
Toluene
Xylene
Gasoline
Gasoline
ULSD
Propane
Propane
iC4 / nC4
Reformer
Diesel
AGO
LUK /
HUK
HCC
l
e
u
F
r
u
o
S
O
C
L
e
n
i
l
o
s
a
G
6
C
/
5
C
CT Btms
FCC / GPU
Amine
P-P
BB
FCC Gasoline
LSR
LSG
Poly
Nonene / Tetramer
Clarified Slury Oil
Alky / DIB
Iso-Butane
Normal Butane
Gasoline
Gasoline
9
The following table approximates the Toledo refinery’s major process unit capacities. Unit capacities are
shown in barrels per stream day.
Refinery Units
Crude Distillation Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fluid Catalytic Cracking Unit (FCC) . . . . . . . . . . . . . . . . . . .
Hydrotreating Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hydrocracking Unit (HCC) . . . . . . . . . . . . . . . . . . . . . . . . . .
Catalytic Reforming Units . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alkylation Unit (Alky) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Polymerization Unit (Poly) . . . . . . . . . . . . . . . . . . . . . . . . . . .
UDEX Unit (BTX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nameplate
Capacity
170,000
79,000
95,000
45,000
45,000
10,000
7,000
16,300
Feedstocks and Supply Arrangements. We have a short term crude oil acquisition agreement with MSCG
pursuant to which we direct MSCG to purchase crude and other feedstocks for Toledo. MSCG purchases these
products on the spot market. Accordingly, MSCG enters into, on our behalf, hedging arrangements to protect
against changes in prices between the time of purchase and the time of processing the feedstocks. In addition to
procurement, MSCG arranges transportation and insurance for the crude and feedstock supply and we pay
MSCG a per barrel fee for their procurement and logistics services. We pay MSCG on a daily basis for the
corresponding volume of crude or feedstocks two days after they are consumed in conjunction with the refining
process. This arrangement helps us reduce the amount of investment we are required to maintain in crude
inventories and, as a result, helps us manage our working capital.
Product Offtake. Toledo is connected, via pipelines, to an extensive distribution network throughout Ohio,
Illinois, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. The finished products are transported on
pipelines owned by Sunoco Logistics Partners L.P. and Buckeye Partners. In addition, we have proprietary
connections to a variety of smaller pipelines and spurs that help us optimize our clean products distribution. A
significant portion of Toledo’s gasoline and ULSD are distributed through the approximately 28 terminals in this
network.
In March 2011, we entered into an agreement with Sunoco whereby Sunoco purchases gasoline and
distillate products representing approximately one-third of the Toledo refinery’s gasoline and distillates
production. The agreement has a three year term, subject to certain early termination rights. We sell the bulk of
the petrochemicals produced at the Toledo refinery through short-term contracts or on the spot market and the
majority of the petrochemical distribution is done via rail.
Tankage Capacity. The Toledo refinery has total storage capacity of approximately 4.0 million barrels. The
Toledo refinery receives its crude through pipeline connections and a truck rack. Of the total, approximately
0.4 million barrels are dedicated to crude oil storage with the remaining 3.6 million barrels allocated to
intermediates and products.
Energy and Other Utilities. Under normal operating conditions, the Toledo refinery consumes approximately
17,000 MMBTU per day of natural gas. The Toledo refinery purchases its electricity from a local utility and has a
long-term contract to purchase hydrogen and steam from a local third party supplier. In addition to the third party
steam supplier, Toledo consumes a portion of the steam that is generated by its various process units.
Customers
We sell a variety of refined products to a diverse customer base. We currently have product offtake
agreements in place for a large portion of our clean product sales. For the year ended December 31, 2012, MSCG
and Sunoco accounted for 57% and 10% of our revenues, respectively. The remainder of our refined products are
primarily sold through short-term contracts or on the spot market.
10
Seasonality
Demand for gasoline is generally higher during the summer months than during the winter months due to
seasonal increases in highway traffic and construction work. Decreased demand during the winter months can
lower gasoline prices. As a result, our operating results for the first and fourth calendar quarters may be lower
than those for the second and third calendar quarters of each year.
Competition
The refining business is very competitive. We compete directly with various other refining companies both
on the East and Gulf Coasts and in the Midcontinent, with integrated oil companies, with foreign refiners that
import products into the United States and with producers and marketers in other industries supplying alternative
forms of energy and fuels to satisfy the requirements of industrial, commercial and individual consumers. Some
of our competitors have expanded the capacity of their refineries and internationally new refineries are coming
on line which could also affect our competitive position.
Profitability in the refining industry depends largely on refined product margins, which can fluctuate
significantly, as well as operating efficiency and reliability, product mix and costs of product distribution and
transportation. Certain of our competitors that have larger and more complex refineries may be able to realize
lower per-barrel costs or higher margins per barrel of throughput. Several of our principal competitors are
integrated national or international oil companies that are larger and have substantially greater resources.
Because of their integrated operations and larger capitalization, these companies may be more flexible in
responding to volatile industry or market conditions, such as shortages of feedstocks or intense price fluctuations.
Refining margins are frequently impacted by sharp changes in crude oil costs, which may not be immediately
reflected in product prices.
The refining industry is highly competitive with respect to feedstock supply. Unlike certain of our
competitors that have access to proprietary controlled sources of crude oil production available for use at their
own refineries, we obtain substantially all of our crude oil and other feedstocks from unaffiliated sources. The
availability and cost of crude oil is affected by global supply and demand. We have no crude oil reserves and are
not engaged in the exploration or production of crude oil. We believe, however, that we will be able to obtain
adequate crude oil and other feedstocks at generally competitive prices for the foreseeable future.
Corporate Offices
We lease approximately 53,000 square feet for our principal corporate offices in Parsippany, New Jersey.
The lease for our principal corporate offices expires in 2016. Functions performed in the Parsipanny office
include overall corporate management, refinery and HSE management, planning and strategy, corporate finance,
commercial operations, logistics, contract administration, marketing, investor relations, governmental affairs,
accounting, tax, treasury, information technology, legal and human resources support functions.
Employees
As of December 31, 2012, we had approximately 1,612 employees. At Paulsboro, 295 of our 457 employees
are covered by a collective bargaining agreement that expires in March 2015. In addition, 652 of our
994 employees at Delaware City and Toledo are covered by a collective bargaining agreement that expires in
February of 2015. None of our corporate employees are covered by a collective bargaining agreement. We
consider our relations with the represented employees to be satisfactory.
11
Executive Officers of the Registrant
The following is a list of our executive officers as of February 25, 2013:
Name
Age
Position
Thomas D. O’Malley . . . . . . . . . . . . . . . . . . . . . . . .
Thomas J. Nimbley . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael D. Gayda . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donald F. Lucey . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Matthew C. Lucey . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeffrey Dill
President
71 Executive Chairman of the Board of Directors
61 Chief Executive Officer
58
60 Executive Vice President, Chief Commercial Officer
Senior Vice President, Chief Financial Officer
39
Senior Vice President, General Counsel
51
Thomas D. O’Malley has served as Executive Chairman of the Board of Directors of PBF Energy since its
formation in November 2011, served as Executive Chairman of PBF LLC and its predecessors from March 2008 to
February 2013 and was our Chief Executive Officer from inception until June 2010. Mr. O’Malley has more than
30 years experience in the refining industry. He served as Chairman of the Board of Petroplus Holdings A.G., listed
on the Swiss Exchange, from May 2006 until February 2011, and was Chief Executive Officer from May 2006 until
September 2007. Mr. O’Malley was Chairman of the Board and Chief Executive Officer of Premcor, a domestic oil
refiner and Fortune 250 company listed on the NYSE, from February 2002 until December 2004, and continued as
Chairman until its sale to Valero in August 2005. Before joining Premcor, Mr. O’Malley was Chairman and Chief
Executive Officer of Tosco Corporation. This Fortune 100 company, listed on the NYSE, was the largest
independent oil refiner and marketer of oil products in the United States, with annualized revenues of approximately
$25.0 billion when it was sold to Philips Petroleum Company in September 2001.
Thomas J. Nimbley has served as our Chief Executive Officer since June 2010 and was our Executive Vice
President, Chief Operating Officer from March 2010 through June 2010. Prior thereto, he served as a Principal
for Nimbley Consultants LLC from June 2005 to April 2010, where he provided consulting services and assisted
on the acquisition of two refineries. He previously served as Senior Vice President and head of Refining for
Phillips Petroleum Company and subsequently Senior Vice President and head of Refining for ConocoPhillips
domestic refining system (13 locations) following the merger of Phillips and Conoco. Before joining Phillips at
the time of its acquisition of Tosco in September 2001, Mr. Nimbley served in various positions with Tosco
Corporation and its subsidiaries starting in April 1993.
Michael D. Gayda joined us as our Executive Vice President, General Counsel and Secretary in April 2010
and has served as our President since June 2010, and was a director of PBF LLC from inception until October
2009. Prior thereto, from May 2006 until January 2010 Mr. Gayda served as Executive Vice President, General
Counsel and Secretary of Petroplus. Prior to Petroplus, he served as an executive officer of Premcor until its sale
to Valero in August 2005 and as General Counsel—Refining for Phillips 66 Company, a division of Phillips
Petroleum Company, following Phillips Petroleum’s acquisition of Tosco in September 2001. Mr. Gayda
previously served as a Vice President of certain of Tosco’s subsidiaries.
Donald F. Lucey joined us as our Senior Vice President, Commercial Operations in April 2008 and has
served as our Executive Vice President, Chief Commercial Officer since April 2010. From 2005 until April 2008,
Mr. Lucey provided consulting services to a variety of energy companies. Prior thereto, Mr. Lucey served as
Senior Vice President, Commercial for Premcor from April 2002 until August 2005. Prior to that, Mr. Lucey
worked at both Tosco and Phillips Petroleum Company, where he managed Atlantic Basin fuel oil activities.
Before joining Tosco, Mr. Lucey worked with Phibro Energy in its fuel oil products and solid fuels departments
throughout the United States and abroad.
Matthew C. Lucey joined us as our Vice President, Finance in April 2008 and has served as our Senior Vice
President, Chief Financial Officer since April 2010. Prior thereto, Mr. Lucey served as a Managing Director of
M.E. Zukerman & Co., a New York-based private equity firm specializing in several sectors of the broader
energy industry, from 2001 to 2008. While at M.E. Zukerman & Co., Mr. Lucey participated in all aspects of the
firm’s energy investment activities and served on the Management Committee of Penreco, a manufacturer of
12
specialty petroleum products; Cortez Pipeline Company, a 500 mile CO2 pipeline; and Venture Coke Company,
a merchant petroleum coke calciner. Before joining M.E. Zukerman & Co., Mr. Lucey spent six years in the
banking industry.
Jeffrey Dill has served as our Senior Vice President, General Counsel and Secretary since May 2010 and
from March 2008 until September 2009. Mr. Dill served as Senior Vice President, General Counsel and Secretary
for Maxum Petroleum, Inc., a national marketer and logistics company for petroleum products, from September
2009 to May 2010 and as Consulting General Counsel and Secretary for NTR Acquisition Co., a special purpose
acquisition company focused on downstream energy opportunities, from April 2007 to February 2008. Previously
he served as Vice President, General Counsel and Secretary at Neurogen Corporation, a drug discovery and
development company, from March 2006 to December 2007. Mr. Dill has over 15 years experience providing
legal support to refining, transportation and marketing organizations in the petroleum industry, including
positions at Premcor, ConocoPhillips, Tosco and Unocal.
Environmental, Health and Safety Matters
Refinery and pipeline operations are subject to federal, state and local laws regulating the discharge of
matter into the environment or otherwise relating to human health and safety or the protection of the
environment. These laws regulate, among other things, the generation, storage, handling, use and transportation
of petroleum and other regulated materials, the emission and discharge of materials into the environment, waste
management, remediation of contaminated sites, characteristics and composition of gasoline and distillates and
other matters otherwise relating to the protection of the environment. Permits are also required under these laws
for the operation of our refineries, pipelines and related operations and these permits are subject to revocation,
modification and renewal. Compliance with applicable environmental laws, regulations and permits will continue
to have an impact on our operations, results of operations and capital requirements. We believe that our current
operations are in substantial compliance with existing environmental laws, regulations and permits.
Our operations and many of the products we manufacture are subject to certain specific requirements of the
CAA, and related state and local regulations. The CAA contains provisions that require capital expenditures for
the installation of certain air pollution control devices at our refineries. Subsequent rule making authorized by the
CAA or similar laws or new agency interpretations of existing rules, may necessitate additional expenditures in
future years.
Additionally, as of January 1, 2011 we are required to meet an EPA regulation limiting the average sulfur
content in gasoline to 30 PPM. The EPA has also announced that it plans to propose new “Tier 3” motor vehicle
emission and fuel standards. It has been reported that these new Tier 3 regulations may, among other things,
lower the maximum average sulfur content of gasoline from 30 PPM to 10 PPM. If the Tier 3 regulations are
eventually implemented and lower the maximum allowable content of sulfur or other constituents in fuels that we
produce, we may at some point in the future be required to make significant capital expenditures and/or incur
materially increased operating costs to comply with the new standards. As of January 1, 2011, we are required to
comply with the EPA’s Control of Hazardous Air Pollutants From Mobile Sources, or MSAT2, regulations on
gasoline that impose reductions in the benzene content of our produced gasoline. We purchase benzene credits to
meet these requirements. Our planned capital projects will reduce the amount of benzene credits that we need to
purchase. In addition, the renewable fuel standards mandate the blending of prescribed percentages of renewable
fuels (e.g., ethanol and biofuels) into our produced gasoline and diesel. These new requirements, other
requirements of the CAA and other presently existing or future environmental regulations may cause us to make
substantial capital expenditures as well as the purchase of credits at significant cost, to enable our refineries to
produce products that meet applicable requirements.
Our operations are also subject to the federal Clean Water Act, or the CWA, the federal Safe Drinking
Water Act, or the SDWA, and comparable state and local requirements. The CWA, the SDWA and analogous
laws prohibit any discharge into surface waters, ground waters, injection wells and publicly-owned treatment
13
works except in strict conformance with permits, such as pre-treatment permits and discharge permits, issued by
federal, state and local governmental agencies. Federal waste-water discharge permits and analogous state waste-
water discharge permits are valid for a maximum of five years and must be renewed.
We generate wastes that may be subject to the federal Resource Conservation and Recovery Act, or RCRA,
and comparable state and local requirements. The EPA and various state agencies have limited the approved
methods of disposal for certain hazardous and non-hazardous wastes.
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, or
CERCLA, also known as “Superfund,” imposes liability, without regard to fault or the legality of the original
conduct, on certain classes of persons who are considered to be responsible for the release of a “hazardous
substance” into the environment. These persons include the current or former owner or operator of the disposal
site or sites where the release occurred and companies that disposed of or arranged for the disposal of the
hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for
investigation and the costs of cleaning up the hazardous substances that have been released into the environment,
for damages to natural resources and for the costs of certain health studies. As discussed more fully below,
certain of our sites are subject to these laws and we may be held liable for investigation and remediation costs or
claims for natural resource damages. It is not uncommon for neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants
released into the environment. Analogous state laws impose similar responsibilities and liabilities on responsible
parties. In our current normal operations, we have generated waste, some of which falls within the statutory
definition of a “hazardous substance” and some of which may have been disposed of at sites that may require
cleanup under Superfund.
As is the case with all companies engaged in industries similar to ours, we face potential exposure to future
claims and lawsuits involving environmental matters. These matters include soil and water contamination, air
pollution, personal injury and property damage allegedly caused by substances which we manufactured, handled,
used, released or disposed of.
Current and future environmental regulations are expected to require additional expenditures, including
expenditures for investigation and remediation, which may be significant, at our refineries and at our other
facilities. To the extent that future expenditures for these purposes are material and can be reasonably
determined, these costs are disclosed and accrued.
Our operations are also subject to various laws and regulations relating to occupational health and safety.
We maintain safety, training and maintenance programs as part of our ongoing efforts to ensure compliance with
applicable laws and regulations. Compliance with applicable health and safety laws and regulations has required
and continues to require substantial expenditures.
In connection with each of our acquisitions, we assumed certain environmental remediation obligations. In
the case of Paulsboro, a trust fund established to meet state financial assurance requirements, in the amount of
approximately $12.1 million, the estimated cost of the remediation obligations assumed based on investigation
undertaken as of the acquisition date, was acquired as part of the acquisition. The short term portion of the trust
fund and corresponding liability are recorded as restricted cash and accrued expenses, the long term portion is
recorded in other assets and other long-term liabilities. In connection with the acquisition of Delaware City, the
prior owners remain responsible subject to certain limitations, for certain environmental obligations including
ongoing remediation of soil and groundwater contamination at the site. Further, in connection with the Delaware
City and Paulsboro acquisitions, we purchased two individual ten-year, $75.0 million environmental insurance
policies to insure against unknown environmental liabilities at each refinery. In connection with the acquisition
of Toledo, the seller, subject to certain limitations, initially retains remediation obligations which will transition
to us over a 20-year period. However, there can be no assurance that any available indemnity, trust fund or
insurance will be sufficient to cover any ultimate environmental liabilities we may incur with respect to our
refineries which could be significant.
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We cannot predict what additional health, safety and environmental legislation or regulations will be
enacted or become effective in the future or how existing or future laws or regulations will be administered or
interpreted with respect to our operations. Compliance with more stringent laws or regulations or adverse
changes in the interpretation of existing requirements or discovery of new information such as unknown
contamination could have an adverse effect on the financial position and the results of our operations and could
require substantial expenditures for the installation and operation of systems and equipment that we do not
currently possess.
GLOSSARY OF SELECTED TERMS
Unless otherwise noted or indicated by context, the following terms used in this Annual Report on
Form 10-K have the following meanings:
“ASCI” refers to the Argus Sour Crude Index, a pricing index used to approximate market prices for sour,
heavy crude oil.
“Bakken” refers to both a crude oil production region generally covering North Dakota, Montana and
Western Canada, and the crude oil that is produced in that region.
“barrel” refers to a common unit of measure in the oil industry, which equates to 42 gallons.
“blendstocks” refers to various compounds that are combined with gasoline or diesel from the crude oil
refining process to make finished gasoline and diesel; these may include natural gasoline, FCC unit gasoline,
ethanol, reformate or butane, among others.
“bpd” refers to an abbreviation for barrels per day.
“CAPP” refers to the Canadian Association of Petroleum Producers.
“catalyst” refers to a substance that alters, accelerates, or instigates chemical changes, but is not produced
as a product of the refining process.
“coke” refers to a coal-like substance that is produced from heavier crude oil fractions during the refining
process.
“complexity” refers to the number, type and capacity of processing units at a refinery, measured by the
Nelson Complexity Index, which is often used as a measure of a refinery’s ability to process lower quality crude
in an economic manner.
“crack spread” refers to a simplified calculation that measures the difference between the price for light
products and crude oil. For example, we reference (a) the 2-1-1 crack spread, which is a general industry standard
that approximates the per barrel refining margin resulting from processing two barrels of crude oil to produce one
barrel of gasoline and one barrel of heating oil or ULSD, and (b) the 4-3-1 crack spread, which is a benchmark
utilized by our Toledo refinery that approximates the per barrel refining margin resulting from processing four
barrels of crude oil to produce three barrels of gasoline and one-half barrel of jet fuel and one-half barrel of
ULSD.
“Dated Brent” refers to Brent blend oil, a light, sweet North Sea crude oil, characterized by an API gravity
of 38° and a sulfur content of approximately 0.4 weight percent that is used as a benchmark for other crude oils.
“distillates” refers primarily to diesel, heating oil, kerosene and jet fuel.
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“downstream” refers to the downstream sector of the energy industry generally describing oil refineries,
marketing and distribution companies that refine crude oil and sell and distribute refined products. The opposite
of the downstream sector is the upstream sector, which refers to exploration and production companies that
search for and/or produce crude oil and natural gas underground or through drilling or exploratory wells.
“EPA” refers to the United States Environmental Protection Agency.
“ethanol” refers to a clear, colorless, flammable oxygenated liquid. Ethanol is typically produced
chemically from ethylene, or biologically from fermentation of various sugars from carbohydrates found in
agricultural crops and cellulosic residues from crops or wood. It is used in the United States as a gasoline octane
enhancer and oxygenate.
“feedstocks” refers to crude oil and partially refined petroleum products that are processed and blended into
refined products.
“FCC” refers to fluid catalytic cracking.
“FCU” refers to fluid coking unit.
“GHG” refers to greenhouse gas.
“Group I base oils or lubricants” refers to conventionally refined products characterized by a sulfur
content less than 0.03% with a viscosity index between 80 and 120. Typically, these products are used in a
variety of automotive and industrial applications.
“heavy crude oil” refers to a relatively inexpensive crude oil with a low API gravity characterized by high
relative density and viscosity. Heavy crude oils require greater levels of processing to produce high value
products such as gasoline and diesel.
“IPO” refers to the initial public offering of PBF Energy’s Class A common stock which closed on
December 18, 2012.
“KV” refers to Kilovolts.
“light crude oil” refers to a relatively expensive crude oil with a high API gravity characterized by low
relative density and viscosity. Light crude oils require lower levels of processing to produce high value products
such as gasoline and diesel.
“light products” refers to the group of refined products with lower boiling temperatures, including gasoline
and distillates.
“light-heavy differential” refers to the price difference between light crude oil and heavy crude oil.
“LPG” refers to liquefied petroleum gas.
“Maya” refers to Maya crude oil, a heavy, sour crude oil characterized by an API gravity of approximately 22°
and a sulfur content of approximately 3.3 weight percent that is used as a benchmark for other heavy crude oils.
“MLP” refers to master limited partnership.
“MMbbls” refers to an abbreviation for million barrels.
“MMBTU” refers to million British thermal units.
“MMSCFD” refers to million standard cubic feet per day.
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“MSCG” refers to Morgan Stanley Capital Group Inc.
“MW” refers to Megawatt.
“Nelson Complexity Index” refers to the complexity of an oil refinery as measured by the Nelson
Complexity Index, which is calculated on an annual basis by the Oil and Gas Journal. The Nelson Complexity
Index assigns a complexity factor to each major piece of refinery equipment based on its complexity and cost in
comparison to crude distillation, which is assigned a complexity factor of 1.0. The complexity of each piece of
refinery equipment is then calculated by multiplying its complexity factor by its throughput ratio as a percentage
of crude distillation capacity. Adding up the complexity values assigned to each piece of equipment, including
crude distillation, determines a refinery’s complexity on the Nelson Complexity Index. A refinery with a
complexity of 10.0 on the Nelson Complexity Index is considered ten times more complex than crude distillation
for the same amount of throughput.
“NYH” refers to the New York Harbor market value of petroleum products.
“Platts” refers to Platts, a division of The McGraw-Hill Companies.
“PPM” refers to parts per million.
“refined products” refers to petroleum products, such as gasoline, diesel and jet fuel, that are produced by
a refinery.
“sour crude oil” refers to a crude oil that is relatively high in sulfur content, requiring additional processing
to remove the sulfur. Sour crude oil is typically less expensive than sweet crude oil.
“Sunoco” refers to Sunoco, Inc. (R&M).
“sweet crude oil” refers to a crude oil that is relatively low in sulfur content, requiring less processing to
remove the sulfur than sour crude oil. Sweet crude oil is typically more expensive than sour crude oil.
“Syncrude” refers to a blend of Canadian synthetic oil, a light, sweet crude oil, typically characterized by
an API gravity between 30° and 32° and a sulfur content of approximately 0.1-0.2 weight percent.
“throughput” refers to the volume processed through a unit or refinery.
“turnaround” refers to a periodically required shutdown and comprehensive maintenance event to
refurbish and maintain a refinery unit or units that involves the inspection of such units and occurs generally on a
periodic cycle.
“ULSD” refers to ultra-low-sulfur diesel.
“WCS” refers to Western Canadian Select, a heavy, sour crude oil blend typically characterized by an API
gravity between 20° and 22° and a sulfur content of approximately 3.5 weight percent that is used as a benchmark
for heavy Western Canadian crude oil.
“WTI” refers to West Texas Intermediate crude oil, a light, sweet crude oil, typically characterized by an
API gravity between 38° and 40° and a sulfur content of approximately 0.3 weight percent that is used as a
benchmark for other crude oils.
“WTS” refers to West Texas Sour crude oil, a sour crude oil characterized by an API gravity between 30°
and 33° and a sulfur content of approximately 1.28 weight percent that is used as a benchmark for other sour
crude oils.
“yield” refers to the percentage of refined products that is produced from crude oil and other feedstocks.
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ITEM 1A. RISK FACTORS
Risks Relating to Our Business and Industry
You should carefully read the risks and uncertainties described below. The risks and uncertainties described
below are not the only ones facing our company. Additional risks and uncertainties may also impair our business
operations. If any of the following risks actually occurs, our business, financial condition, results of operations or
cash flows would likely suffer. In that case, the trading price of our Class A common stock could fall.
We have incurred losses in the past and may incur losses in the future. If we incur losses over an extended
period of time, the value of our Class A common stock could decline.
We experienced losses during our time as a development company and certain periods thereafter. We may
not be profitable in future periods. A lack of profitability could adversely affect the price of our Class A common
stock. We may not continue to remain profitable, which could impair our ability to complete future financings
and have a material adverse effect on our business.
Our limited operating history makes it difficult to evaluate our current business and future prospects. If we
are unsuccessful in executing our business model, our business and operating results will be adversely
affected.
We were formed in March 2008, we acquired our first oil refinery in June 2010 in an idle state and we
acquired our first operating asset in December 2010. Therefore, we have a limited operating history and track
record in executing our business model. Our future success depends on our ability to execute our business
strategy effectively. Our limited operating history may make it difficult to evaluate our current business and
future prospects. We may not be successful in operating any of our refineries or any other properties we may
acquire in the future. In addition, we have encountered and will continue to encounter risks and difficulties
frequently experienced by new companies, and specifically companies in the oil refining industry. If we do not
manage these risks successfully, our business, results of operations and financial condition will be adversely
affected.
The price volatility of crude oil, other feedstocks, blendstocks, refined products and fuel and utility services
may have a material adverse effect on our revenues, profitability, cash flows and liquidity.
Our revenues, profitability, cash flows and liquidity from operations depend primarily on the margin above
operating expenses (including the cost of refinery feedstocks, such as crude oil, intermediate partially refined
petroleum products, and natural gas liquids that are processed and blended into refined products) at which we are
able to sell refined products. Refining is primarily a margin-based business and, to increase profitability, it is
important to maximize the yields of high value finished products while minimizing the costs of feedstock and
operating expenses. When the margin between refined product prices and crude oil and other feedstock costs
contracts, our earnings, profitability and cash flows are negatively affected. Refining margins historically have
been volatile, and are likely to continue to be volatile, as a result of a variety of factors, including fluctuations in
the prices of crude oil, other feedstocks, refined products and fuel and utility services. An increase or decrease in
the price of crude oil will likely result in a similar increase or decrease in prices for refined products; however,
there may be a time lag in the realization, or no such realization, of the similar increase or decrease in prices for
refined products. The effect of changes in crude oil prices on our refining margins therefore depends in part on
how quickly and how fully refined product prices adjust to reflect these changes.
In addition, the nature of our business requires us to maintain substantial crude oil, feedstock and refined
product inventories. Because crude oil, feedstock and refined products are commodities, we have no control over
the changing market value of these inventories. Our crude oil, feedstock and refined product inventories are
valued at the lower of cost or market value under the last-in-first-out (“LIFO”) inventory valuation methodology.
If the market value of our crude oil, feedstock and refined product inventories were to decline to an amount less
than our LIFO cost, we would record a write-down of inventory and a non-cash charge to cost of sales.
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Prices of crude oil, other feedstocks, blendstocks, and refined products depend on numerous factors beyond
our control, including the supply of and demand for crude oil, other feedstocks, gasoline, diesel, ethanol, asphalt
and other refined products. Such supply and demand are affected by a variety of economic, market,
environmental and political conditions.
Our direct operating expense structure also impacts our profitability. Our major direct operating expenses
include employee and contract labor, maintenance and energy. Our predominant variable direct operating cost is
energy, which is comprised primarily of fuel and other utility services. The volatility in costs of fuel, principally
natural gas, and other utility services, principally electricity, used by our refineries and other operations affect
our operating costs. Fuel and utility prices have been, and will continue to be, affected by factors outside our
control, such as supply and demand for fuel and utility services in both local and regional markets. Natural gas
prices have historically been volatile and, typically, electricity prices fluctuate with natural gas prices. Future
increases in fuel and utility prices may have a negative effect on our revenues, profitability and cash flows.
Our historical financial statements may not be helpful in predicting our future performance.
We have grown rapidly since our inception and have not owned or operated our refineries for a substantial
period of time. Accordingly, our historical financial information may not be useful either as a means of
understanding our current financial situation or as an indicator of our future results. For the period from March 1,
2008 to December 16, 2010, we were considered to be in the development stage. Our historical financial
information for that period reflects our activities principally in connection with identifying acquisition
opportunities; acquiring the Delaware City refinery assets and commencing a reconfiguration of the refinery; and
acquiring the Paulsboro refinery. As a result of the Paulsboro and Toledo acquisitions, our historical consolidated
financial results include the results of operations for Paulsboro and Toledo from December 17, 2010 and
March 1, 2011 forward, respectively. Certain information in our financial statements and certain other financial
data included in this Annual Report on Form 10-K are based in part on financial data related to, and the
operations of, those companies that previously owned and operated our refineries. For example, at the time of its
acquisition, Paulsboro represented the major portion of our business and assets. As has been the case in our
acquisitions to date, it is likely that, when we acquire refineries, we will not have access to the type of historical
financial information that we will report regarding the prior operation of the refineries. As a result, it may be
difficult for investors to evaluate the probable impact of major acquisitions on our financial performance until we
have operated the acquired refineries for a substantial period of time.
Our profitability is affected by crude oil differentials, which fluctuate substantially.
A significant portion of our profitability is derived from the ability to purchase and process crude oil
feedstocks that historically have been cheaper than benchmark crude oils, such as the heavy, sour crude oils
processed at our Delaware City and Paulsboro refineries and the WTI based crude oils processed at our Toledo
refinery. These crude oil differentials vary significantly from quarter to quarter depending on overall economic
conditions and trends and conditions within the markets for crude oil and refined products. Any change in these
crude oil differentials may have an impact on our earnings. Our rail investment and strategy to acquire cost
advantaged Midcontinent and Canadian crude, which are priced based on WTI, could be adversely affected if the
WTI-Brent differential narrows. For example, the WTI/WCS differential, a proxy for the difference between
light U.S. and heavy Canadian crudes, has increased from $15.63 per barrel in 2011 to $21.80 per barrel for the
year ended December 31, 2012, however, this increase may not be indicative of the differential going forward.
Conversely, a narrowing of the light-heavy differential may reduce our refining margins and adversely affect our
recent profitability and earnings. In addition, while our Toledo refinery benefits from a widening of the Dated
Brent/WTI differential, a narrowing of this differential may result in our Toledo refinery losing a portion of its
crude price advantage over certain of our competitors, which negatively impacts our profitability. Divergent
views have been expressed as to the expected magnitude of changes to these crude differentials in future periods,
including some analysts that expect these crude differentials to contract in upcoming periods. Any narrowing of
these differentials could have a material adverse effect on our business and profitability.
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Our recent historical earnings have been concentrated and may continue to be concentrated in the future.
Our three refineries have similar throughput capacity, however, favorable market conditions due to, among
other things, geographic location, crude and refined product slates, and customer demand, may cause an
individual refinery to contribute more significantly to our earnings than others for a period of time. For example,
our Toledo, Ohio refinery has produced a substantial portion of our earnings over the past several quarters. As a
result, if there were a significant disruption to operations at this refinery, our earnings could be materially
adversely affected (to the extent not recoverable through insurance) disproportionally to Toledo’s portion of our
consolidated throughput. The Toledo refinery, or one of our other refineries, may continue to disproportionally
affect our results of operations in the future. Any prolonged disruption to the operations of such refinery, whether
due to labor difficulties, destruction of or damage to such facilities, severe weather conditions, interruption of
utilities service or other reasons, could have a material adverse effect on our business, results of operations or
financial condition.
A significant interruption or casualty loss at any of our refineries and related assets could reduce our
production, particularly if not fully covered by our insurance. Failure by one or more insurers to honor its
coverage commitments for an insured event could materially and adversely affect our future cash flows,
operating results and financial condition.
Our business currently consists of owning and operating three refineries and related assets. As a result, our
operations could be subject to significant interruption if any of our refineries were to experience a major
accident, be damaged by severe weather or other natural disaster, or otherwise be forced to shut down or curtail
production due to unforeseen events, such as acts of God, nature, orders of governmental authorities, supply
chain disruptions impacting our crude rail facilities or other logistical assets, power outages, acts of terrorism,
fires, toxic emissions and maritime hazards. Any such shutdown or disruption would reduce the production from
that refinery. There is also risk of mechanical failure and equipment shutdowns both general and following
unforeseen events. Further, in such situations, undamaged refinery processing units may be dependent on or
interact with damaged sections of our refineries and, accordingly, are also subject to being shut down. In the
event any of our refineries is forced to shut down for a significant period of time, it would have a material
adverse effect on our earnings, our other results of operations and our financial condition as a whole.
As protection against these hazards, we maintain insurance coverage against some, but not all, such
potential losses and liabilities. We may not be able to maintain or obtain insurance of the type and amount we
desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance
policies may increase substantially. In some instances, certain insurance could become unavailable or available
only for reduced amounts of coverage. For example, coverage for hurricane damage can be limited, and coverage
for terrorism risks can include broad exclusions. If we were to incur a significant liability for which we were not
fully insured, it could have a material adverse effect on our financial position.
Our insurance program includes a number of insurance carriers. Significant disruptions in financial markets
could lead to a deterioration in the financial condition of many financial institutions, including insurance companies
and, therefore, we may not be able to obtain the full amount of our insurance coverage for insured events.
Our Toledo refinery is subject to interruptions of supply and distribution as a result of our reliance on
pipelines for transportation of crude oil and refined products.
Our Toledo refinery receives a substantial portion of its crude oil and delivers a portion of its refined
products through pipelines. The Enbridge system is our primary supply route for crude oil from Canada, the
Bakken region and Michigan, and supplies approximately 55% to 60% of the crude oil used at our Toledo
refinery. In addition, we source domestic crude oil through our connections to the Capline and Mid-Valley
pipelines. We also distribute a portion of our transportation fuels through pipelines owned and operated by
Sunoco Logistics Partners L.P. and Buckeye Partners L.P. We could experience an interruption of supply or
delivery, or an increased cost of receiving crude oil and delivering refined products to market, if the ability of
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these pipelines to transport crude oil or refined products is disrupted because of accidents, weather interruptions,
governmental regulation, terrorism, other third party action or any of the types of events described in the
preceding risk factor.
In addition, due to the common carrier regulatory obligation applicable to interstate oil pipelines, capacity is
prorated among shippers in accordance with the tariff then in effect in the event there are nominations in excess
of capacity. Therefore, nominations by new shippers or increased nominations by existing shippers may reduce
the capacity available to us. Any prolonged interruption in the operation or curtailment of available capacity of
the pipelines that we rely upon for transportation of crude oil and refined products could have a further material
adverse effect on our business, financial condition, results of operations and cash flows.
We may have capital needs for which our internally generated cash flows and other sources of liquidity may
not be adequate.
If we cannot generate sufficient cash flows or otherwise secure sufficient liquidity to support our short-term
and long-term capital requirements, we may not be able to meet our payment obligations (including any earn-
outs), or our future debt obligations, comply with certain deadlines related to environmental regulations and
standards, or pursue our business strategies, in which case our operations may not perform as we currently
expect. We have substantial short-term capital needs and may have substantial long term capital needs. Our
short-term working capital needs are primarily related to financing certain of our refined products inventory not
covered by our various supply and products offtake agreements. We terminated our agreement with Statoil for
our Paulsboro refinery effective March 31, 2013 and our MSCG Offtake Agreements for our Paulsboro and
Delaware City refineries effective June 30, 2013. If we cannot adequately handle our crude oil and feedstock
requirements without the benefit of the Statoil arrangement at Paulsboro, or if we are required to obtain our crude
oil supply at our other refineries without the benefit of the existing supply arrangements or the applicable
counterparty defaults in its obligations, our crude oil pricing costs may increase as the number of days between
when we pay for the crude oil and when the crude oil is delivered to us increases. Further, if we are not able to
market and sell our finished products to credit worthy customers without benefit of the MSCG Offtake
Agreements, we may be subject to delays in the collection of our accounts receivable and exposure to additional
credit risk. Such increased exposure could negatively impact our liquidity due to our increased working capital
needs as a result of the increase in the amount of crude oil inventory and accounts receivable we would have to
carry on our balance sheet. Our long-term needs for cash include those to support ongoing capital expenditures
for equipment maintenance and upgrades during turnarounds at our refineries and to complete our routine and
normally scheduled maintenance, regulatory and security expenditures. In addition, from time to time, we are
required to spend significant amounts for repairs when one or more processing units experiences temporary
shutdowns. We continue to utilize significant capital to upgrade equipment, improve facilities, and reduce
operational, safety and environmental risks. In connection with the Paulsboro acquisition, we assumed certain
significant environmental obligations, and may similarly do so in future acquisitions. We will likely incur
substantial compliance costs in connection with new or changing environmental, health and safety regulations.
See “Item 7. Management’s Discussion and Analysis of Financial Condition.” Our liquidity will affect our ability
to satisfy any of these needs or obligations.
We may not be able to obtain funding on acceptable terms or at all because of volatility and uncertainty in the
credit and capital markets. This may hinder or prevent us from meeting our future capital needs.
Global financial markets and economic conditions have been, and continue to be, disrupted and volatile due
to a variety of factors, including uncertainty in the financial services sector, low consumer confidence, continued
high unemployment, geopolitical issues and the current weak economic conditions. In addition, the fixed income
markets have experienced periods of extreme volatility that have negatively impacted market liquidity
conditions. As a result, the cost of raising money in the debt and equity capital markets has increased
substantially at times while the availability of funds from those markets diminished significantly. In particular, as
a result of concerns about the stability of financial markets generally and the solvency of lending counterparties
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specifically, the cost of obtaining money from the credit markets may increase as many lenders and institutional
investors increase interest rates, enact tighter lending standards, refuse to refinance existing debt on similar terms
or at all and reduce or, in some cases, cease to provide funding to borrowers. Due to these factors, we cannot be
certain that new debt or equity financing will be available on acceptable terms. If funding is not available when
needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due.
Moreover, without adequate funding, we may be unable to execute our growth strategy, complete future
acquisitions, take advantage of other business opportunities or respond to competitive pressures, any of which
could have a material adverse effect on our revenues and results of operations.
Competition from companies who produce their own supply feedstocks, have extensive retail outlets, make
alternative fuels or have greater financial and other resources than we do could materially and adversely
affect our business and results of operations.
Our refining operations compete with domestic refiners and marketers in regions of the United States in
which we operate, as well as with domestic refiners in other regions and foreign refiners that import products into
the United States. In addition, we compete with producers and marketers in other industries that supply
alternative forms of energy and fuels to satisfy the requirements of our industrial, commercial and individual
consumers. Certain of our competitors have larger and more complex refineries, and may be able to realize lower
per-barrel costs or higher margins per barrel of throughput. Several of our principal competitors are integrated
national or international oil companies that are larger and have substantially greater resources than we do and
access to proprietary sources of controlled crude oil production. Unlike these competitors, we obtain substantially
all of our feedstocks from unaffiliated sources. We are not engaged in the petroleum exploration and production
business and therefore do not produce any of our crude oil feedstocks. We do not have a retail business and
therefore are dependent upon others for outlets for our refined products. Because of their integrated operations
and larger capitalization, these companies may be more flexible in responding to volatile industry or market
conditions, such as shortages of crude oil supply and other feedstocks or intense price fluctuations.
Newer or upgraded refineries will often be more efficient than our refineries, which may put us at a
competitive disadvantage. We have taken significant measures to maintain our refineries including the installation
of new equipment and redesigning older equipment to improve our operations. However, these actions involve
significant uncertainties, since upgraded equipment may not perform at expected throughput levels, the yield and
product quality of new equipment may differ from design specifications and modifications may be needed to correct
equipment that does not perform as expected. Any of these risks associated with new equipment, redesigned older
equipment or repaired equipment could lead to lower revenues or higher costs or otherwise have an adverse effect
on future results of operations and financial condition. Over time, our refineries may become obsolete, or be unable
to compete, because of the construction of new, more efficient facilities by our competitors.
Any political instability, military strikes, sustained military campaigns, terrorist activity, or changes in foreign
policy could have a material adverse effect on our business, results of operations and financial condition.
Any political instability, military strikes, sustained military campaigns, terrorist activity, or changes in
foreign policy in areas or regions of the world where we acquire crude oil and other raw materials or sell our
refined petroleum products may affect our business in unpredictable ways, including forcing us to increase
security measures and causing disruptions of supplies and distribution markets. We may also be subject to United
States trade and economic sanctions laws, which change frequently as a result of foreign policy developments,
and which may necessitate changes to our crude oil acquisition activities. Further, like other industrial
companies, our facilities may be the target of terrorist activities. Any act of war or terrorism that resulted in
damage to any of our refineries or third-party facilities upon which we are dependent for our business operations
could have a material adverse effect on our business, results of operations and financial condition.
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Continued economic turmoil in the global financial system has had and may continue to have an adverse
impact on the refining industry.
Our business and profitability are affected by the overall level of demand for our products, which in turn is
affected by factors such as overall levels of economic activity and business and consumer confidence and spending.
Declines in global economic activity and consumer and business confidence and spending during the recent global
downturn have significantly reduced the level of demand for our products. Reduced demand for our products has
had and may continue to have an adverse impact on our business, financial condition, results of operations and cash
flows. In addition, continued downturns in the economy impact the demand for refined fuels and, in turn, result in
excess refining capacity. Refining margins are impacted by changes in domestic and global refining capacity, as
increases in refining capacity can adversely impact refining margins, earnings and cash flows.
Our business is indirectly exposed to risks faced by our suppliers, customers and other business partners.
The impact on these constituencies of the risks posed by the continued economic turmoil in the global financial
system have included or could include interruptions or delays in the performance by counterparties to our
contracts, reductions and delays in customer purchases, delays in or the inability of customers to obtain financing
to purchase our products and the inability of customers to pay for our products. Any of these events may have an
adverse impact on our business, financial condition, results of operations and cash flows.
The geographic concentration of our East Coast refineries creates a significant exposure to the risks of the
local economy and other local adverse conditions.
Our East Coast refineries are both located in the mid-Atlantic region on the East Coast and therefore are
vulnerable to economic downturns in that region. These refineries are located within a relatively limited
geographic area and we primarily market our refined products in that area. As a result, we are more susceptible to
regional conditions than the operations of more geographically diversified competitors and any unforeseen events
or circumstances that affect the area could also materially adversely affect our revenues and profitability. These
factors include, among other things, changes in the economy, damages to infrastructure, weather conditions,
demographics and population.
We must make substantial capital expenditures on our operating facilities to maintain their reliability and
efficiency. If we are unable to complete capital projects at their expected costs and/or in a timely manner, or if
the market conditions assumed in our project economics deteriorate, our financial condition, results of
operations or cash flows could be materially and adversely affected.
Delays or cost increases related to capital spending programs involving engineering, procurement and
construction of new facilities (or improvements and repairs to our existing facilities and equipment) could adversely
affect our ability to achieve targeted internal rates of return and operating results. Such delays or cost increases may
arise as a result of unpredictable factors in the marketplace, many of which are beyond our control, including:
•
•
•
•
•
denial or delay in issuing regulatory approvals and/or permits;
unplanned increases in the cost of construction materials or labor;
disruptions in transportation of modular components and/or construction materials;
severe adverse weather conditions, natural disasters or other events (such as equipment malfunctions,
explosions, fires or spills) affecting our facilities, or those of vendors and suppliers;
shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;
• market-related increases in a project’s debt or equity financing costs; and/or
•
non-performance or force majeure by, or disputes with, vendors, suppliers, contractors or sub-
contractors involved with a project.
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Our refineries contain many processing units, a number of which have been in operation for many years.
Equipment, even if properly maintained, may require significant capital expenditures and expenses to keep it
operating at optimum efficiency. One or more of the units may require unscheduled downtime for unanticipated
maintenance or repairs that are more frequent than our scheduled turnarounds for such units. Scheduled and
unscheduled maintenance could reduce our revenues during the period of time that the units are not operating.
Our forecasted internal rates of return are also based upon our projections of future market fundamentals,
which are not within our control, including changes in general economic conditions, available alternative supply
and customer demand. Any one or more of these factors could have a significant impact on our business. If we
were unable to make up the delays associated with such factors or to recover the related costs, or if market
conditions change, it could materially and adversely affect our financial position, results of operations or cash
flows.
Acquisitions that we may undertake in the future involve a number of risks, any of which could cause us not
to realize the anticipated benefits.
We may not be successful in acquiring additional assets, and any acquisitions that we do consummate may
not produce the anticipated benefits or may have adverse effects on our business and operating results. We may
selectively consider strategic acquisitions in the future within the refining and mid-stream sector based on
performance through the cycle, advantageous access to crude oil supplies, attractive refined products market
fundamentals and access to distribution and logistics infrastructure. Our ability to do so will be dependent upon a
number of factors, including our ability to identify acceptable acquisition candidates, consummate acquisitions
on acceptable terms, successfully integrate acquired assets and obtain financing to fund acquisitions and to
support our growth and many other factors beyond our control. Risks associated with acquisitions include those
relating to the diversion of management time and attention from our existing business, liability for known or
unknown environmental conditions or other contingent liabilities and greater than anticipated expenditures
required for compliance with environmental, safety or other regulatory standards or for investments to improve
operating results, and the incurrence of additional indebtedness to finance acquisitions or capital expenditures
relating to acquired assets. We may also enter into transition services agreements in the future with sellers of any
additional refineries we acquire. Such services may not be performed timely and effectively, and any significant
disruption in such transition services or unanticipated costs related to such services could adversely affect our
business and results of operations.
Our business may suffer if any of our senior executives or other key employees discontinues employment with
us. Furthermore, a shortage of skilled labor or disruptions in our labor force may make it difficult for us to
maintain labor productivity.
Our future success depends to a large extent on the services of our senior executives and other key employees.
Our business depends on our continuing ability to recruit, train and retain highly qualified employees in all areas of our
operations, including engineering, accounting, business operations, finance and other key back-office and mid-office
personnel. Furthermore, our operations require skilled and experienced employees with proficiency in multiple tasks.
The competition for these employees is intense, and the loss of these executives or employees could harm our business.
If any of these executives or other key personnel resigns or becomes unable to continue in his or her present role and is
not adequately replaced, our business operations could be materially adversely affected.
A portion of our workforce is unionized, and we may face labor disruptions that would interfere with our
operations.
As of December 31, 2012, approximately 295 of our 457 employees at Paulsboro are covered by a collective
bargaining agreement that expires in March of 2015. In addition, 652 of our 994 employees at Delaware City and
Toledo are covered by a collective bargaining agreement that expires in February of 2015. We may not be able to
renegotiate our collective bargaining agreements on satisfactory terms or at all when such agreements expire. A
24
failure to do so may increase our costs. Other employees of ours who are not presently represented by a union
may become so represented in the future as well. In addition, our existing labor agreements may not prevent a
strike or work stoppage at any of our facilities in the future, and any work stoppage could negatively affect our
results of operations and financial condition.
Our hedging activities may limit our potential gains, exacerbate potential losses and involve other risks.
We may enter into commodity derivatives contracts to hedge our crude price risk or crack spread risk with
respect to a portion of our expected gasoline and distillate production on a rolling basis. Consistent with that
policy we, or MSCG at our request, may hedge some percentage of future crude supply or gasoline and distillate
production. We may enter into hedging arrangements with the intent to secure a minimum fixed cash flow stream
on the volume of products hedged during the hedge term and to protect against volatility in commodity prices.
Our hedging arrangements may fail to fully achieve these objectives for a variety of reasons, including our failure
to have adequate hedging arrangements, if any, in effect at any particular time and the failure of our hedging
arrangements to produce the anticipated results. We may not be able to procure adequate hedging arrangements
due to a variety of factors. Moreover, such transactions may limit our ability to benefit from favorable changes in
crude oil and refined product prices. In addition, our hedging activities may expose us to the risk of financial loss
in certain circumstances, including instances in which:
•
•
•
•
•
the volumes of our actual use of crude oil or production of the applicable refined products is less than
the volumes subject to the hedging arrangement;
accidents, interruptions in feedstock transportation, inclement weather or other events cause
unscheduled shutdowns or otherwise adversely affect our refineries, or those of our suppliers or
customers;
changes in commodity prices have a material impact on collateral and margin requirements under our
hedging arrangements, including resulting in our being subject to margin calls;
the counterparties to our futures contracts fail to perform under the contracts; or
a sudden, unexpected event materially impacts the commodity or crack spread subject to the hedging
arrangement.
As a result, the effectiveness of our hedging strategy could have material impact on our financial results.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Quantitative and Qualitative Disclosures About Market Risk.”
In addition, these hedging activities involve basis risk. Basis risk in a hedging arrangement occurs when the
price of the commodity we hedge is more or less variable than the index upon which the hedged commodity is
based, thereby making the hedge less effective. For example, a NYMEX index used for hedging certain volumes
of crude oil or refined products may have more or less variability than the cost or price for such crude oil or
refined products. We generally do not expect to hedge the basis risk inherent in our derivatives contracts.
Our commodity derivative activities could result in period-to-period earnings volatility.
We do not apply hedge accounting to all of our commodity derivative contracts and, as a result, unrealized
gains and losses will be charged to our earnings based on the increase or decrease in the market value of the
unsettled position. These gains and losses may be reflected in our income statement in periods that differ from
when the underlying hedged items (i.e., gross margins) are reflected in our income statement. Such derivative
gains or losses in earnings may produce significant period-to-period earnings volatility that is not necessarily
reflective of our underlying operational performance.
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The adoption of derivatives legislation by the United States Congress could have an adverse effect on our
ability to use derivatives contracts to reduce the effect of commodity price, interest rate and other risks
associated with our business.
The United States Congress in 2010 adopted the Dodd-Frank Wall Street Reform and Consumer Protection
Act, or the Dodd-Frank Act, which, among other things, established federal oversight and regulation of the over-
the-counter derivatives market and entities that participate in that market. In connection with the Dodd-Frank
Act, the Commodity Futures Trading Commission, or the CFTC, adopted regulations to set position limits for
certain futures and option contracts in the major energy markets. Although these regulations were recently
vacated by the U.S. District Court for the District of Columbia, the court remanded the matter to the CFTC and
the CFTC voted on November 15, 2012 to appeal the District Court’s decision. The legislation may also require
us to comply with margin requirements, and with certain clearing and trade-execution requirements if we do not
satisfy certain specific exceptions. The legislation may also require the counterparties to our derivatives contracts
to transfer or assign some of their derivatives contracts to a separate entity, which may not be as creditworthy as
the current counterparty. The legislation and any new regulations could significantly increase the cost of
derivatives contracts (including through requirements to post collateral), materially alter the terms of derivatives
contracts, reduce the availability of derivatives to protect against risks we encounter, reduce our ability to
monetize or restructure our existing derivatives contracts, and increase our exposure to less creditworthy
counterparties. If we reduce our use of derivatives as a result of the legislation and regulations, our results of
operations may become more volatile and our cash flows may be less predictable, which could adversely affect
our ability to plan for and fund capital expenditures. Any of these consequences could have a material adverse
effect on us, our financial condition and our results of operations.
Our operations could be disrupted if our information systems fail, causing increased expenses and loss of
sales.
Our business is highly dependent on financial, accounting and other data processing systems and other
communications and information systems, including our enterprise resource planning tools. We process a large
number of transactions on a daily basis and rely upon the proper functioning of computer systems. If a key system
was to fail or experience unscheduled downtime for any reason, even if only for a short period, our operations and
financial results could be affected adversely. Our systems could be damaged or interrupted by a security breach,
fire, flood, power loss, telecommunications failure or similar event. We have a formal disaster recovery plan in
place, but this plan may not prevent delays or other complications that could arise from an information systems
failure. Further, our business interruption insurance may not compensate us adequately for losses that may occur.
Product liability claims and litigation could adversely affect our business and results of operations.
Product liability is a significant commercial risk. Substantial damage awards have been made in certain
jurisdictions against manufacturers and resellers based upon claims for injuries and property damage caused by
the use of or exposure to various products. Failure of our products to meet required specifications or claims that a
product is inherently defective could result in product liability claims from our shippers and customers, and also
arise from contaminated or off-specification product in commingled pipelines and storage tanks and/or defective
fuels. Product liability claims against us could have a material adverse effect on our business or results of
operations.
We may incur significant liability under or costs and capital expenditures to comply with environmental,
product specification, health and safety regulations, which are complex and change frequently.
Our refinery and pipeline operations are subject to federal, state and local laws regulating, among other
things, the generation, storage, handling, use and transportation of petroleum and other regulated materials, the
emission and discharge of materials into the environment, waste management, remediation of contaminated sites,
characteristics and composition of gasoline and distillates and other matters otherwise relating to the protection
of the environment. Our operations are also subject to various laws and regulations relating to occupational
health and safety.
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Compliance with the complex array of federal, state and local laws relating to the protection of the
environment, product specification, health and safety is difficult. We may not be able to operate in compliance
with all environmental, product specification, health and safety requirements at all times. Violations of applicable
requirements could result in substantial fines and penalties, criminal sanctions, permit revocations, injunctions
and/or facility shutdowns, or claims for alleged personal injury, property damage or damage to natural resources.
Moreover, our business is subject to accidental spills, discharges or other releases of petroleum or other regulated
materials into the environment including at neighboring areas or third party storage, treatment or disposal
facilities. Certain environmental laws impose strict, and in certain circumstances, joint and several, liability for
costs of investigation and cleanup of such spills, discharges or releases on owners and operators of, as well as
persons who arrange for treatment or disposal of regulated materials at, contaminated sites. Under these laws, we
may be required to pay more than our fair share of any required investigation or cleanup of such sites.
We cannot predict what additional environmental, product specification, health and safety legislation or
regulations will be adopted in the future, or how existing or future laws or regulations will be administered or
interpreted with respect to our operations. Many of these laws and regulations are becoming increasingly
stringent, and the cost of compliance with these requirements can be expected to increase over time. For
example, in 2010 New York State adopted a Low-Sulfur Heating Oil mandate that beginning July 1, 2012
requires all heating oil sold in New York State to contain no more than 15 PPM sulfur. Not all of the heating oil
we produce meets this specification. In addition, on June 1, 2012, the EPA issued final amendments to the New
Source Performance Standards (“NSPS”) for petroleum refineries, including standards for emissions of nitrogen
oxides from process heaters and work practice standards and monitoring requirements for flares. We continue to
evaluate the regulation and amended standards, as may be applicable to the flare, process heaters and operations
at our refineries. We cannot currently predict the costs that we may have to incur, if any, to comply by July 1,
2015 with the amended NSPS, but these costs could be material. Furthermore, the EPA has announced that it
plans to propose new “Tier 3” motor vehicle emission and fuel standards. It has been reported that these new Tier
3 regulations may, among other things, lower the maximum average sulfur content of gasoline from 30 PPM to
10 PPM. If the Tier 3 regulations are eventually implemented and lower the maximum allowable content of
sulfur or other constituents in fuels that we produce, we may at some point in the future be required to make
significant capital expenditures and/or incur materially increased operating costs to comply with the new
standards. Expenditures or costs for environmental, product specification, health and safety compliance could
have a material adverse effect on our results of operations, financial condition and profitability.
We may also incur liability or be required to pay penalties for past contamination, and third parties may
assert claims against us for damages allegedly arising out of any past or future contamination. The potential
penalties and clean-up costs for past or future releases or spills, the failure of prior owners of our facilities to
complete their clean-up obligations, the liability to third parties for damage to their property, or the need to
address newly-discovered information or conditions that may require a response could be significant, and the
payment of these amounts could have a material adverse effect on our business, financial condition and results of
operations.
Furthermore, we operate in environmentally sensitive coastal waters where tanker, pipeline and refined
product transportation operations are closely regulated by federal, state and local agencies and monitored by
environmental interest groups.
Finally, transportation of crude oil and refined products over water involves inherent risk and subjects us to
the provisions of the Federal Oil Pollution Act of 1990 and the laws of various states. Among other things, these
laws require us to demonstrate in some situations our capacity to respond to a “worst case discharge” to the
maximum extent possible. There may be accidents involving tankers transporting crude oil or refined products,
and response service companies that we have contracted with, in the areas in which we transport crude oil and
refined products, may not respond to a “worst case discharge” in a manner that will adequately contain that
discharge, and we may be subject to liability in connection with a discharge.
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Environmental clean-up and remediation costs of our sites and environmental litigation could decrease our
net cash flow, reduce our results of operations and impair our financial condition.
We are subject to liability for the investigation and clean-up of environmental contamination at each of the
properties that we own or operate and at off-site locations where we arrange for the treatment or disposal of
regulated materials. We may become involved in future litigation or other proceedings. If we were to be held
responsible for damages in any litigation or proceedings, such costs may not be covered by insurance and may be
material. Historical soil and groundwater contamination has been identified at each of our refineries. Currently
remediation projects are underway in accordance with regulatory requirements at the Paulsboro and Delaware
City refineries. In connection with the acquisitions of our refineries, the prior owners have retained certain
liabilities or indemnified us for certain liabilities, including those relating to pre-acquisition soil and groundwater
conditions, and in some instances we have assumed certain liabilities and environmental obligations, including
certain remediation obligations at the Paulsboro refinery. If the prior owners fail to satisfy their obligations for
any reason, or if significant liabilities arise in the areas in which we assumed liability, we may become
responsible for remediation expenses and other environmental liabilities, which could have a material adverse
effect on our financial condition. As a result, in addition to making capital expenditures or incurring other costs
to comply with environmental laws, we also may be liable for significant environmental litigation or for
investigation and remediation costs and other liabilities arising from the ownership or operation of these assets by
prior owners, which could materially adversely affect our financial condition, results of operations and cash flow.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Contractual Obligations and Commitments” and “Item 1. Business—Environmental, Health and
Safety Matters.”
We may also face liability arising from current or future claims alleging personal injury or property damage
due to exposure to chemicals or other regulated materials, such as asbestos, benzene, MTBE and petroleum
hydrocarbons, at or from our facilities. We may also face liability for personal injury, property damage, natural
resource damage or clean-up costs for the alleged migration of contamination from our properties. A significant
increase in the number or success of these claims could materially adversely affect our financial condition,
results of operations and cash flow.
Regulation of emissions of greenhouse gases could force us to incur increased capital and operating costs and
could have a material adverse effect on our results of operations and financial condition.
Both houses of Congress have actively considered legislation to reduce emissions of GHGs, such as carbon
dioxide and methane, including proposals to: (i) establish a cap and trade system, (ii) create a federal renewable
energy or “clean” energy standard requiring electric utilities to provide a certain percentage of power from such
sources, and (iii) create enhanced incentives for use of renewable energy and increased efficiency in energy
supply and use. In addition, the EPA is taking steps to regulate GHGs under the existing federal Clean Air Act, or
CAA. The EPA has already adopted regulations limiting emissions of GHGs from motor vehicles, addressing the
permitting of GHG emissions from stationary sources, and requiring the reporting of GHG emissions from
specified large GHG emission sources, including refineries. These and similar regulations could require us to
incur costs to monitor and report GHG emissions or reduce emissions of GHGs associated with our operations. In
addition, various states, individually as well as in some cases on a regional basis, have taken steps to control
GHG emissions, including adoption of GHG reporting requirements, cap and trade systems and renewable
portfolio standards. Efforts have also been undertaken to delay, limit or prohibit EPA and possibly state action to
regulate GHG emissions, and it is not possible at this time to predict the ultimate form, timing or extent of federal
or state regulation. In the event we do incur increased costs as a result of increased efforts to control GHG
emissions, we may not be able to pass on any of these costs to our customers. Such requirements also could
adversely affect demand for the refined petroleum products that we produce. Any increased costs or reduced
demand could materially and adversely affect our business and results of operation.
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Renewable fuels mandates may reduce demand for the refined fuels we produce, which could have a material
adverse effect on our results of operations and financial condition.
Pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, the EPA
has issued Renewable Fuel Standards, or RFS, implementing mandates to blend renewable fuels into the
petroleum fuels produced and sold in the United States. Under RFS, the volume of renewable fuels that obligated
refineries must blend into their finished petroleum fuels increases annually over time until 2022. In addition,
certain states have passed legislation that requires minimum biodiesel blending in finished distillates. On
October 13, 2010, the EPA raised the maximum amount of ethanol allowed under federal law from 10% to 15%
for cars and light trucks manufactured since 2007. The maximum amount allowed under federal law currently
remains at 10% ethanol for all other vehicles. Existing laws and regulations could change, and the minimum
volumes of renewable fuels that must be blended with refined petroleum fuels may increase. Because we do not
produce renewable fuels, increasing the volume of renewable fuels that must be blended into our products
displaces an increasing volume of our refinery’s product pool, potentially resulting in lower earnings and
profitability. In addition, in order to meet certain of these and future EPA requirements, we must purchase
credits, known as “RINS,” which have fluctuating costs.
Our pipelines are subject to federal and/or state regulations, which could reduce the amount of cash we
generate.
Our transportation activities are subject to regulation by multiple governmental agencies. The regulatory
burden on the industry increases the cost of doing business and affects profitability. Additional proposals and
proceedings that affect the oil industry are regularly considered by Congress, the states, the Federal Energy
Regulatory Commission, the United States Department of Transportation, and the courts. We cannot predict
when or whether any such proposals may become effective or what impact such proposals may have. Projected
operating costs related to our pipelines reflect the recurring costs resulting from compliance with these
regulations, and these costs may increase due to future acquisitions, changes in regulation, changes in use, or
discovery of existing but unknown compliance issues.
We are subject to strict laws and regulations regarding employee and process safety, and failure to comply
with these laws and regulations could have a material adverse effect on our results of operations, financial
condition and profitability.
We are subject to the requirements of the Occupational Safety & Health Administration, or OSHA, and
comparable state statutes that regulate the protection of the health and safety of workers. In addition, OSHA
requires that we maintain information about hazardous materials used or produced in our operations and that we
provide this information to employees, state and local governmental authorities, and local residents. Failure to
comply with OSHA requirements, including general industry standards, process safety standards and control of
occupational exposure to regulated substances, could have a material adverse effect on our results of operations,
financial condition and the cash flows of the business if we are subjected to significant fines or compliance costs.
Compliance with and changes in tax laws could adversely affect our performance.
We are subject to extensive tax liabilities, including federal, state, local and foreign taxes such as income,
excise, sales/use, payroll, franchise, property, gross receipts, withholding and ad valorem taxes. New tax laws
and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that
could result in increased expenditures for tax liabilities in the future. These liabilities are subject to periodic
audits by the respective taxing authorities, which could increase our tax liabilities. Subsequent changes to our tax
liabilities as a result of these audits may also subject us to interest and penalties. There can be no certainty that
our federal, state, local or foreign taxes could be passed on to our customers.
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Our rapid growth may strain our resources and divert management’s attention.
We were a development stage enterprise prior to our acquisition of Paulsboro on December 17, 2010. With the
further acquisition of Toledo and the re-start of Delaware City, we have experienced rapid growth in a short period
of time. Continued expansion may strain our resources and force management to focus attention from other business
concerns to the development of incremental internal controls and procedures, which could harm our business and
operating results. We may also need to hire more employees, which will increase our costs and expenses.
We rely on Statoil and MSCG, over whom we may have limited control, to provide us with certain volumetric
and pricing data used in our inventory valuations.
We rely on Statoil and MSCG to provide us with certain volumetric and pricing data used in our inventory
valuations. Our limited control over the accuracy and the timing of the receipt of this data could materially and
adversely affect our ability to produce financial statements in a timely manner.
Changes in our credit profile could adversely affect our business.
Changes in our credit profile could affect the way crude oil suppliers view our ability to make payments and
induce them to shorten the payment terms for our purchases or require us to post security or letters of credit prior
to payment. Due to the large dollar amounts and volume of our crude oil and other feedstock purchases, any
imposition by our suppliers of more burdensome payment terms on us may have a material adverse effect on our
liquidity and our ability to make payments to our suppliers. This, in turn, could cause us to be unable to operate
one or more of our refineries at full capacity.
We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary
permits and authorizations.
Our operations require numerous permits and authorizations under various laws and regulations, including
environmental and health and safety laws and regulations. These authorizations and permits are subject to
revocation, renewal or modification and can require operational changes, which may involve significant costs, to
limit impacts or potential impacts on the environment and/or health and safety. A violation of these
authorizations or permit conditions or other legal or regulatory requirements could result in substantial fines,
criminal sanctions, permit revocations, injunctions and/or refinery shutdowns. In addition, major modifications of
our operations could require changes to our existing permits or expensive upgrades to our existing pollution
control equipment, which could have a material adverse effect on our business, financial condition or results of
operations.
Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our
obligations under our indebtedness.
Our substantial indebtedness may significantly affect our financial flexibility in the future. As of
December 31, 2012, we have total long-term debt including the Delaware Economic Development Authority
Loan, of $730.0 million, all of which is secured, and we could have incurred an additional $599.2 million of
senior secured indebtedness under our existing debt agreements. We may incur additional indebtedness in the
future. Our strategy includes executing future refinery acquisitions. Any significant acquisition would likely
require us to incur additional indebtedness in order to finance all or a portion of such acquisition. The level of our
indebtedness has several important consequences for our future operations, including that:
•
•
a significant portion of our cash flow from operations will be dedicated to the payment of principal of,
and interest on, our indebtedness and will not be available for other purposes;
covenants contained in our existing debt arrangements limit our ability to borrow additional funds,
dispose of assets and make certain investments;
30
•
•
these covenants also require us to meet or maintain certain financial tests, which may affect our
flexibility in planning for, and reacting to, changes in our industry, such as being able to take advantage
of acquisition opportunities when they arise;
our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general
corporate and other purposes may be limited; and
• we may be at a competitive disadvantage to those of our competitors that are less leveraged; and we
may be more vulnerable to adverse economic and industry conditions.
Our substantial indebtedness increases the risk that we may default on our debt obligations, certain of which
contain cross-default and/or cross-acceleration provisions. We have significant principal payments due under our
debt instruments. Our subsidiaries’ ability to meet their principal obligations will be dependent upon our future
performance, which in turn will be subject to general economic conditions, industry cycles and financial,
business and other factors affecting our operations, many of which are beyond our control. Our business may not
continue to generate sufficient cash flow from operations to repay our substantial indebtedness. If we are unable
to generate sufficient cash flow from operations, we may be required to sell assets, to refinance all or a portion of
our indebtedness or to obtain additional financing. Refinancing may not be possible and additional financing may
not be available on commercially acceptable terms, or at all.
Despite our level of indebtedness, we and our subsidiaries may be able to incur substantially more debt, which
could exacerbate the risks described above.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future including
additional secured debt. Although our debt instruments and financing arrangements contain restrictions on the
incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions,
and the indebtedness incurred in compliance with these restrictions could be substantial. To the extent new debt
is added to our currently anticipated debt levels, the substantial leverage risks described above would increase.
Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness.
Restrictive covenants in our debt instruments may limit our ability to undertake certain types of transactions.
Various covenants in our debt instruments and other financing arrangements may restrict our and our
subsidiaries’ financial flexibility in a number of ways. Our indebtedness subjects us to significant financial and
other restrictive covenants, including restrictions on our ability to incur additional indebtedness, place liens upon
assets, pay dividends or make certain other restricted payments and investments, consummate certain asset sales
or asset swaps, conduct businesses other than our current businesses, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of our assets. Some of these debt instruments also require our
subsidiaries to satisfy or maintain certain financial condition tests in certain circumstances. Our subsidiaries’
ability to meet these financial condition tests can be affected by events beyond our control and they may not meet
such tests.
Provisions in our indenture could discourage an acquisition of us by a third party.
Certain provisions of our indenture could make it more difficult or more expensive for a third party to
acquire us. Upon the occurrence of certain transactions constituting a “change in control” as defined in the
indenture, holders of our notes could require us to repurchase all outstanding notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
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Risks Related to Our Organizational Structure and Our Class A Common Stock
Our only material asset is our interest in PBF LLC. Accordingly, we depend upon distributions from PBF
LLC and its subsidiaries to pay our taxes, meet our other obligations and/or pay dividends in the future.
We are a holding company and all of our operations are conducted through subsidiaries of PBF Holding. We
have no independent means of generating revenue and no material assets other than our ownership interest in
PBF LLC. Therefore, we depend on the earnings and cash flow of our subsidiaries to meet our obligations,
including our indebtedness, tax liabilities and obligations to make payments under the tax receivable agreement.
If we or PBF LLC do not receive such cash distributions, dividends or other payments from our subsidiaries, we
and PBF LLC may be unable to meet our obligations and/or pay dividends.
We intend to cause PBF LLC to make distributions to its members in an amount sufficient to enable us to
cover all applicable taxes at assumed tax rates, make payments owed by us under the tax receivable agreement,
and to pay other obligations and dividends, if any, declared by us. To the extent we need funds and PBF LLC or
any of its subsidiaries is restricted from making such distributions under applicable law or regulation or under the
terms of our financing or other contractual arrangements, or is otherwise unable to provide such funds, such
restrictions could materially adversely affect our liquidity and financial condition.
Our ABL Revolving Credit Facility, senior secured notes and certain of our other outstanding debt
arrangements include a restricted payment covenant, which restricts the ability of PBF Holding to make
distributions to us, and we anticipate our future debt will contain a similar restriction. In addition, there may be
restrictions on payments by our subsidiaries under applicable laws, including laws that require companies to
maintain minimum amounts of capital and to make payments to stockholders only from profits. For example,
PBF Holding is generally prohibited under Delaware law from making a distribution to a member to the extent
that, at the time of the distribution, after giving effect to the distribution, liabilities of the limited liability
company (with certain exceptions) exceed the fair value of its assets. As a result, we may be unable to obtain that
cash to satisfy our obligations and make payments to our stockholders, if any.
We are a “controlled company” within the meaning of the NYSE rules. As a result, we qualify for, and rely on,
exemptions from certain corporate governance requirements.
Blackstone and First Reserve control a majority of the combined voting power of all classes of our voting
stock. As a result, we are a “controlled company” within the meaning of the NYSE corporate governance
standards. Under the NYSE rules, a company of which more than 50% of the voting power is held by another
company is a “controlled company” and may elect not to comply with certain NYSE corporate governance
requirements, including (1) the requirement that a majority of the board of directors consist of independent
directors, (2) the requirement that we have a corporate governance committee that is composed entirely of
independent directors with a written charter addressing the committee’s purpose and responsibilities, (3) the
requirement that we have a compensation committee that is composed entirely of independent directors with a
written charter addressing the committee’s purpose and responsibilities and (4) the requirement that there be an
annual performance evaluation of the corporate governance and compensation committees. We utilize certain of
these exemptions. Accordingly, our stockholders do not have the same protections afforded to stockholders of
companies that are subject to all of the corporate governance requirements of the NYSE.
The requirements of being a public company may strain our resources and distract our management.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended, and requirements of the Sarbanes-Oxley Act of 2002. These requirements may place a strain on our
systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect
to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure
controls and procedures and internal controls over financial reporting. We are implementing additional
procedures and processes for the purpose of addressing the standards and requirements applicable to public
32
companies. In addition, sustaining our growth also will require us to commit additional management, operational
and financial resources to identify new professionals to join our firm and to maintain appropriate operational and
financial systems to adequately support expansion. These activities may divert management’s attention from
other business concerns, which could have a material adverse effect on our business, financial condition, results
of operations and cash flows. We expect to incur significant additional annual expenses related to these steps and
other public company expenses.
Our internal controls over financial reporting have not been audited and may not meet all of the standards
contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal
controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a
material adverse effect on our business and Class A common stock price.
Beginning with the year ending December 31, 2013, pursuant to Section 404 of the Sarbanes-Oxley Act, we
will be required to furnish a report by our management on our internal control over financial reporting, and our
auditors will be required to deliver an attestation report on the operating effectiveness of our internal control over
financial reporting. The report by our management must contain, among other things, an assessment of the
effectiveness of our internal control over financial reporting as of the end of our fiscal year. This assessment
must include disclosure of any material weaknesses in our internal control over financial reporting identified by
management.
As an organization that recently exited the development stage and has grown rapidly through the acquisition of
significant operations, we are currently in the process of developing our internal controls over financial reporting
and establishing formal policies, processes and practices related to financial reporting and to the identification of
key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and
activities within our organization. Our internal controls over financial reporting have not been audited and we may
not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be
required to meet.
In connection with the preparation of our financial statements during 2012, we identified significant
deficiencies regarding the design and implementation of certain commercial transaction controls and
management review controls as part of our financial closing process. Management continues to take steps to
remediate these issues. We retained a nationally recognized certified public accounting firm to assist us with
designing, documenting and implementing our internal control procedures to satisfy the requirements of Section
404 of the Sarbanes-Oxley Act. In addition, we intend to hire a Director of Internal Audit and continue to invest
in information technology systems in order to support and enhance our internal control environment.
We may not be able to successfully remediate these matters on or before December 31, 2013, the date by
which we must comply with Section 404 of the Sarbanes-Oxley Act, and we may have additional deficiencies or
material weaknesses in the future. We have not yet determined the costs directly associated with these
remediation activities, but they could be substantial.
If we are not able to complete our initial assessment of our internal controls and otherwise implement the
requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance,
management may not be able to certify as to the adequacy of our internal controls over financial reporting.
Matters impacting our internal controls may cause us to be unable to report our financial information on a timely
basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of
applicable stock exchange listing rules, and result in a breach of the covenants under our debt agreements. There
also could be a negative reaction in the financial markets due to a loss of investor confidence in us and the
reliability of our financial statements. Confidence in the reliability of our financial statements also could suffer if
our independent registered public accounting firm were to report a material weakness in our internal controls
over financial reporting in the future. This could materially adversely affect us and lead to a decline in our
Class A common stock price.
33
We are controlled by Blackstone and First Reserve through their ownership of units of PBF LLC, and their
interests may differ from those of our public stockholders.
We are controlled by Blackstone and First Reserve, who collectively beneficially own in the aggregate
approximately 70.2% of the combined voting power of our common stock. As a result, Blackstone and First
Reserve have the ability to elect all of our directors and thereby control our policies and operations, including the
appointment of management, future issuances of securities, the incurrence of debt by us, amendments to our
organizational documents and the entering into of extraordinary transactions, and their interests may not in all
cases be aligned with our Class A common stockholders’ interests.
For example, the pre-IPO owners of PBF LLC may have different tax positions which could influence their
decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing
indebtedness, especially in light of the existence of the tax receivable agreement described below. In addition, the
structuring of future transactions may take into consideration these tax or other considerations even where no
similar benefit would accrue to our Class A common stockholders or us. See “Item 13. Certain Relationships and
Related Transactions, and Director Independence.”
Blackstone and First Reserve may have an interest in pursuing acquisitions, divestitures and other
transactions that, in their judgment, could enhance their equity investment, even though such transactions might
involve risks to our Class A common stockholders. For example, they could cause us to make acquisitions that
increase our indebtedness or to sell revenue-generating assets. So long as they continue to beneficially own a
majority of the combined voting power of us and PBF LLC, they will have the ability to control the vote in any
election of directors. In addition, pursuant to the stockholders agreement we entered into with Blackstone and
First Reserve, Blackstone and First Reserve have the ability to nominate a number of our directors, including a
majority of our directors, so long as certain ownership thresholds are maintained. See “Item 13. Certain
Relationships and Related Transactions, and Director Independence.” This concentration of ownership may have
the effect of delaying, preventing or deterring a change of control of our company. Lastly, Blackstone and First
Reserve are in the business of making investments in companies and may from time to time acquire and hold
interests in businesses that compete directly or indirectly with us. Our certificate of incorporation contains a
provision renouncing our interest and expectancy in certain corporate opportunities identified by Blackstone or
First Reserve. They may also pursue acquisition opportunities that are complementary to our business and, as a
result, those acquisition opportunities may not be available to us.
We will be required to pay the holders of PBF LLC Series A Units for certain tax benefits we may claim
arising in connection with our initial public offering and future exchanges of PBF LLC Series A Units for
shares of our Class A Common Stock and related transactions, and the amounts we may pay could be
significant.
In connection with our initial public offering, we entered into a tax receivable agreement that provides for
the payment from time to time by PBF Energy to the holders of PBF LLC Series A Units of 85% of the benefits,
if any, that PBF Energy is deemed to realize as a result of (i) the increases in tax basis resulting from its
acquisitions of PBF LLC Series A Units in connection with our initial public offering or in the future and
(ii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits
attributable to payments under the tax receivable agreement. See “Item 13. Certain Relationships and Related
Transactions, and Director Independence.”
We expect that the payments that we may make under the tax receivable agreement will be substantial.
Assuming no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all
tax benefits that are subject to the tax receivable agreement, we expect future payments under the tax receivable
agreement relating to the purchase by PBF Energy of PBF LLC Series A Units as part of our initial public
offering to aggregate approximately $160.0 million and to range over the next 5 years from approximately $1.0
million to $18.1 million per year and decline thereafter. Future payments by us in respect of subsequent
34
exchanges of PBF LLC Series A Units would be in addition to these amounts and are expected to be substantial
as well. The foregoing numbers are merely estimates based on assumptions that are subject to change due to
various factors, including, among other factors, the timing when the pre-IPO owners of PBF LLC exchange their
PBF LLC Series A Units for shares of PBF Energy’s Class A common stock as contemplated by the tax
receivable agreement, the price of PBF Energy’s Class A common stock at the time of such exchanges, the extent
to which such exchanges are taxable, and the amount and timing of PBF Energy’s income. The actual payments
could differ materially. It is possible that future transactions or events could increase or decrease the actual tax
benefits realized and the corresponding tax receivable agreement payments. There may be a material negative
effect on our liquidity if, as a result of timing discrepancies or otherwise, (i) the payments under the tax
receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax
receivable agreement, and/or (ii) distributions to PBF Energy by PBF LLC are not sufficient to permit PBF
Energy to make payments under the tax receivable agreement after it has paid its taxes and other obligations. The
payments under the tax receivable agreement are not conditioned upon any recipient’s continued ownership of
us.
In certain cases, payments by us under the tax receivable agreement may be accelerated and/or significantly
exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement.
These provisions may deter a change in control of our Company.
The tax receivable agreement provides that upon certain changes of control, or if, at any time, PBF Energy
elects an early termination of the tax receivable agreement, PBF Energy’s (or its successor’s) obligations with
respect to exchanged or acquired PBF LLC Series A Units (whether exchanged or acquired before or after such
transaction) would be based on certain assumptions, including (i) that PBF Energy would have sufficient taxable
income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits
related to entering into the tax receivable agreement and (ii) that the subsidiaries of PBF LLC will sell certain
nonamortizable assets (and realize certain related tax benefits) no later than a specified date. Moreover, in each
of these instances, we would be required to make an immediate payment equal to the present value (at a discount
rate equal to LIBOR plus 100 basis points) of the anticipated future tax benefits (based on the foregoing
assumptions). Accordingly, payments under the tax receivable agreement may be made years in advance of the
actual realization, if any, of the anticipated future tax benefits and may be significantly greater than the actual
benefits we realize in respect of the tax attributes subject to the tax receivable agreement. Assuming that the
market value of a share of our Class A common stock equals $29.05 per share of Class A common stock (the
closing price on December 31, 2012) and that LIBOR were to be 1.85%, we estimate as of December 31, 2012
that the aggregate amount of these accelerated payments would have been approximately $716.0 million if
triggered immediately on such date. In these situations, our obligations under the tax receivable agreement could
have a substantial negative impact on our liquidity. We may not be able to finance our obligations under the tax
receivable agreement and our existing indebtedness may limit our subsidiaries’ ability to make distributions to us
to pay these obligations. These provisions may deter a potential sale of our Company to a third party and may
otherwise make it less likely a third party would enter into a change of control transaction with us.
Moreover, payments under the tax receivable agreement will be based on the tax reporting positions that we
determine in accordance with the tax receivable agreement. We will not be reimbursed for any payments
previously made under the tax receivable agreement if the Internal Revenue Service subsequently disallows part
or all of the tax benefits that gave rise to such prior payments. As a result, in certain circumstances, payments
could be made under the tax receivable agreement that are significantly in excess of the benefits that we actually
realize in respect of (i) the increases in tax basis resulting from our purchases or exchanges of PBF LLC Series A
Units and (ii) certain other tax benefits related to our entering into the tax receivable agreement, including tax
benefits attributable to payments under the tax receivable agreement.
35
We cannot assure you that we will continue to declare dividends or have the available cash to make dividend
payments.
Although we currently intend to pay quarterly cash dividends on our Class A common stock, the
declaration, amount and payment of any dividends will be at the sole discretion of our board of directors. We are
not obligated under any applicable laws, our governing documents or any contractual agreements with our
existing owners or otherwise to declare or pay any dividends or other distributions (other than the obligations of
PBF LLC to make tax distributions to its members). Our board of directors may take into account, among other
things, general economic conditions, our financial condition and operating results, our available cash and current
and anticipated cash needs, capital requirements, plans for expansion, tax, legal, regulatory and contractual
restrictions and implications, including under our outstanding debt documents, and such other factors as our
board of directors may deem relevant in determining whether to declare or pay any dividend. Because PBF
Energy is a holding company with no material assets (other than the equity interests of its direct subsidiary), its
cash flow and ability to pay dividends is dependent upon the financial results and cash flows of its direct
subsidiary PBF Holding and its operating subsidiaries and the distribution or other payment of cash to it in the
form of dividends or otherwise. The direct and indirect subsidiaries of PBF Energy are separate and distinct legal
entities and have no obligation to make any funds available to it. As a result, if we do not declare or pay
dividends you may not receive any return on an investment in our Class A common stock unless you sell our
Class A common stock for a price greater than that which you paid for it.
Anti-takeover and certain other provisions in our certificate of incorporation and bylaws and Delaware law
may discourage or delay a change in control.
Our certificate of incorporation and bylaws contain provisions which could make it more difficult for
stockholders to effect certain corporate actions. Among other things, these provisions:
•
•
•
•
•
authorize the issuance of undesignated preferred stock, the terms of which may be established and the
shares of which may be issued without stockholder approval;
prohibit stockholder action by written consent after the date on which Blackstone and First Reserve
collectively cease to beneficially own at least a majority of all of the outstanding shares of our capital
stock entitled to vote;
restrict certain business combinations with stockholders who obtain beneficial ownership of a certain
percentage of our outstanding common stock after the date Blackstone and First Reserve and their
affiliates collectively cease to beneficially own at least 5% of all of the outstanding shares of our
capital stock entitled to vote;
provide that special meetings of stockholders may be called only by the chairman of the board of
directors, the chief executive officer or the board of directors, or Blackstone or First Reserve, for so
long as Blackstone or First Reserve, in its individual capacity as the party calling the meeting,
continues to beneficially own at least 25% of the total voting power of all the then outstanding shares
of our capital stock, and establish advance notice procedures for the nomination of candidates for
election as directors or for proposing matters that can be acted upon at stockholder meetings; and
provide that on and after the date Blackstone and First Reserve collectively cease to beneficially own a
majority of all of the outstanding shares of our capital stock entitled to vote, our stockholders may only
amend our bylaws with the approval of 75% or more of all of the outstanding shares of our capital
stock entitled to vote.
These anti-takeover provisions and other provisions of Delaware law may have the effect of delaying or
deterring a change of control of our company. Certain provisions could also discourage proxy contests and make
it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other
corporate actions you desire. These provisions could limit the price that certain investors might be willing to pay
in the future for shares of our Class A common stock.
36
In addition, in connection with our initial public offering, we entered into a stockholders agreement with
Blackstone and First Reserve pursuant to which they will each be entitled to nominate a number of directors so
long as certain ownership thresholds are maintained.
The market price of our Class A common stock may be volatile, which could cause the value of your
investment to decline.
The market price of our Class A common stock may be highly volatile and could be subject to wide
fluctuations due to a number of factors including:
•
•
variations in actual or anticipated operating results or dividends, if any, to stockholders;
changes in, or failure to meet, earnings estimates of securities analysts;
• market conditions in the oil refining industry;
•
•
•
•
litigation and government investigations;
changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof
affecting our business or industry;
general economic and stock market conditions; and
the availability for sale, or sales, of a significant number of shares of our Class A common stock in the
public market.
These and other factors may cause the market price of our Class A common stock to decrease significantly,
which in turn would adversely affect the value of your investment.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have
often instituted class action securities litigation against those companies. Such litigation, if instituted, could result
in substantial costs and a diversion of management’s attention and resources, which could significantly harm our
profitability and reputation.
If securities or industry analysts do not publish research or reports about our business, or if they downgrade
their recommendations regarding our Class A common stock, our stock price and trading volume could
decline.
The trading market for our Class A common stock is influenced by the research and reports that industry or
securities analysts publish about us or our business. If any of the analysts who cover us downgrade our Class A
common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price
may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which in turn could cause our Class A common stock price or trading volume to decline
and our Class A common stock to be less liquid.
Shares of our Class A common stock price may decline due to the large number of shares of Class A common
stock eligible for future sale and future issuance and for exchange.
The market price of shares of our Class A common stock could decline as a result of sales of a large number
of shares of Class A common stock in the market or the perception that such sales could occur. These sales, or
the possibility that these sales may occur, also might make it more difficult for us to sell shares of Class A
common stock in the future at a time and at a price that we deem appropriate. In addition, any shares of Class A
common stock that we issue, including under any equity incentive plans, would dilute the percentage ownership
of the holders of our Class A common stock.
In connection with our initial public offering, we, our executive officers and directors and Blackstone and
First Reserve agreed with the underwriters, subject to certain exceptions, not to sell, dispose of or hedge any of
37
our Class A common stock or securities convertible into or exchangeable for shares of Class A common stock
until May 2013, except with the prior written consent of the underwriters. We are required to register the
issuance and resale of the shares of Class A common stock that may be issued to our existing owners pursuant to
the exchange agreement after the expiration of the lock-up period (or any earlier waiver by the underwriters).
These shares also may be sold under Rule 144 under the Securities Act of 1933, as amended, depending on the
holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates. As
restrictions on resale end or if we register additional shares, the market price of our stock could decline if the
holders of restricted shares sell them or are perceived by the market as intending to sell them.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. Properties
See Item 1. “Business”.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings that, if determined adversely against us, individually
or in the aggregate, would have a material adverse effect on our financial position, results of operations or cash
flows. Our subsidiary, Paulsboro Refining, formerly known as Valero Refining Company—New Jersey, is party
to certain legal proceedings that arose prior to our acquisition of the entity, for which we are indemnified by
Valero.
ITEM 4. MINE SAFETY DISCLOSURES
None.
38
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A common stock trades on the New York Stock Exchange under the symbol “PBF.” Our Class B
common stock is not publicly traded.
As of February 25, 2013 there were 5 holders of record of our Class A common stock and 41 holders of
record of our Class B common stock.
The following table sets forth, for the period indicated, the high and low sales prices of our Class A common
stock as reported by the New York Stock Exchange from December 13, 2012, the first day of trading following
our initial public offering, through December 31, 2012. The initial public offering price of our Class A common
stock was $26.00 per share.
2012:
December 13 to December 31, 2012 . . . . . . . . . . .
$29.05
$26.00
$0.00
Sales Prices of the
Common Stock
High
Low
Dividends
Per
Common Share
Dividend Policy
We declared a quarterly dividend of $0.30 per share on our outstanding Class A common stock. The
dividend is payable on March 15, 2013 to holders of record of our Class A common stock at the close of business
on March 5, 2013.
The declaration, amount and payment of this and any other future dividends on shares of Class A common
stock will be at the sole discretion of our board of directors, and we are not obligated under any applicable laws,
our governing documents or any contractual agreements with our existing owners or otherwise to declare or pay
any dividends or other distributions (other than the obligations of PBF LLC to make tax distributions to its
members). Our board of directors may take into account, among other things, general economic conditions, our
financial condition and operating results, our available cash and current and anticipated cash needs, capital
requirements, plans for expansion, tax, legal, regulatory and contractual restrictions and implications, including
under our outstanding debt documents, and such other factors as our board of directors may deem relevant in
determining whether to declare or pay any dividend. In addition, we expect that to the extent we declare a
dividend for a particular quarter, our cash flow from operations for that quarter will substantially exceed any
dividend payment for such period. Because any future declaration or payment of dividends will be at the sole
discretion of our board of directors, we do not expect that any such dividend payments will have a material
adverse impact on our liquidity or otherwise limit our ability to fund capital expenditures or otherwise pursue our
business strategy over the long-term. Although we have the ability to borrow funds and sell assets to pay future
dividends (subject to certain limitations in our ABL Revolving Credit Facility and the PBF Holding Senior
Secured Notes), we intend to fund any future dividends out of our cash flow from operations and, as a result, we
do not expect to incur any indebtedness or to use the proceeds from equity offerings to fund such payments.
We are a holding company and have no material assets other than our ownership interests of PBF LLC. In
order for us to pay any dividends, we will need to cause PBF LLC to make distributions to us and the holders of
PBF LLC Series A Units, and PBF LLC will need to cause PBF Holding to make distributions to it, in an amount
sufficient to cover cash dividends, if any, declared by us. PBF Holding is generally prohibited under Delaware
law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to
the distribution, liabilities of the limited liability company (with certain exceptions) exceed the fair value of its
39
assets. As a result, PBF LLC may be unable to obtain cash from PBF Holding to satisfy our obligations and make
payments to our stockholders, if any. If PBF LLC makes such distributions to us, the holders of PBF LLC Series
A Units will also be entitled to receive distributions pro rata in accordance with the number of units held by them
and us.
The ability of PBF Holding to pay dividends and make distributions to PBF LLC is and in the future may be
limited by covenants in our ABL Revolving Credit Facility, the PBF Holding Senior Secured Notes and other
debt instruments, which are dependent on a number of factors outside of our control. As a result, we cannot
assure that we will be able to declare dividends as contemplated herein. See “Item 1A. Risk Factors-Risks
Related to Our Organizational Structure and our Class A Common Stock—We cannot assure you that we will
continue to declare dividends or have the available cash to make dividend payments.”
We did not pay any dividends on our Class A common stock during 2012. PBF LLC made pre-IPO cash
distributions to its members in the amount of $161.0 million during 2012. Immediately prior to the payment on
March 15, 2013 of our dividend on our Class A common stock, we intend to cause PBF LLC to make
distributions to the pre-IPO owners of PBF LLC and to us in an amount equal to $0.30 per unit on its outstanding
PBF LLC Series A Units and PBF LLC Series C Units, or $29.0 million in the aggregate. PBF LLC will, in turn,
cause PBF Holding to make an equivalent distribution to it. These distributions will be taken into account in
determining any future tax distributions made by PBF LLC.
40
Stock Performance Graph
In accordance with SEC rules, the information contained in the Stock Performance Graph below shall not
be deemed to be “soliciting material,” or to be “filed” with the SEC, or subject to the SEC’s Regulation 14A or
14C, other than as provided under Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended, except to the extent that we specifically request that the
information be treated as soliciting material or specifically incorporate it by reference into a document filed
under the Securities Act of 1933, as amended.
This performance graph and the related textual information are based on historical data and are not
indicative of future performance. The following line graph compares the cumulative total return on an investment
in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peer
companies (that we selected) for the period commencing December 13, 2012 and ending December 31, 2012.
Our peer group consists of the following companies that are engaged in refining operations in the U.S.: Alon
USA Energy, Inc.; CVR Energy Inc.; Delek US Holdings, Inc.; HollyFrontier Corporation; Marathon Petroleum
Corporation; Phillips 66; Tesoro Corporation; Valero Energy Corporation; and Western Refining, Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN1
Among PBF Energy Inc., the S&P 500 Index, and a Peer Group
$112
$110
$108
$106
$104
$102
$100
$98
$96
$94
12/13/12
12/31/12
PBF Energy Inc.
S&P 500
Peer Group
PBF Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$100.00
100.00
100.00
$110.67
100.91
103.11
12/13/2012
12/31/2012
1
Assumes that an investment in PBF Class A common stock and each index was $100 on December 13,
2012, the first day of trading of our Class A common stock on the NYSE. “Cumulative total return” is based
on share price appreciation plus reinvestment of dividends from December 13, 2012 through December 31,
2012.
41
Recent Sales of Unregistered Securities—Exchange of PBF LLC Series A Units to Class A Common Stock
On December 18, 2012, we completed our initial public offering by issuing 23,567,686 shares of our Class
A common stock at a price to the public of $26.00 per share. The proceeds to us from this offering, before
deducting underwriting discounts, were approximately $612.8 million, of which we used approximately
$571.2 million to purchase 21,967,686 PBF LLC Series A Units from Blackstone and First Reserve. We used all
of the remaining proceeds from this offering, or $41.6 million, to purchase newly-issued PBF LLC Series C
Units from PBF LLC. We then caused PBF LLC to use all of these proceeds to pay the expenses of the offering,
including aggregate underwriting discounts of $33.7 million and other offering expenses.
In connection with our initial public offering, we entered into an exchange agreement with PBF LLC and
the pre-IPO owners of PBF LLC, pursuant to which the pre-IPO owners of PBF LLC may from time to time
(subject to the terms of the exchange agreement), cause PBF LLC to exchange their remaining PBF LLC Series
A Units for shares of our Class A common stock on a one-for-one basis, subject to equitable adjustments for
stock splits, stock dividends and reclassifications, and further subject to the rights of the holders of PBF LLC
Series B Units to share in a portion of the profits realized by Blackstone and First Reserve upon the sale of the
shares of Class A common stock received by them upon such exchange.
In December 2012, a total of 3,535 PBF LLC Series A Units were exchanged for 3,535 shares of our
Class A common stock in transactions exempt from registration under Section 4(2) of the Securities Act. We
received no other consideration in connection with these exchanges. No exchanges were made by any of our
directors, executive officers or entities affiliated with Blackstone or First Reserve.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information about the securities authorized for issuance under our equity
compensation plans as of December 31, 2012. The information regarding equity compensation plans approved by
security holders represents our 2012 Equity Incentive Plan.
Equity Compensation Plan Information
(A)
(B)
(C)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-average
exercise price of
outstanding
options, warrants,
and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A))
Plan Category
Equity compensation plans
approved by security holders . . .
682,500
Equity compensation plans not
approved by security holders . . .
—
Total . . . . . . . . . . . . . . . . . . . . . . . .
682,500
$26.00
—
$26.00
4,317,500
—
4,317,500
42
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical consolidated financial and other data. The selected historical
consolidated financial data as of December 31, 2012 and 2011 and for each of the three years in the period ended
December 31, 2012 have been derived from our audited financial statements, included in “Item 8. Financial
Statements and Supplementary Data.” The selected historical consolidated financial data as of December 31,
2010, 2009 and 2008 and for the year ended December 31, 2009 and the period from March 1, 2008 (date of
inception) through December 31, 2008 have been derived from the audited financials of PBF LLC not included
in this Annual Report on Form 10-K. As a result of the Paulsboro and Toledo acquisitions, the historical
consolidated financial results of PBF LLC only include the results of operations for Paulsboro and Toledo from
December 17, 2010 and March 1, 2011 forward, respectively.
The historical consolidated financial data and other statistical data presented below should be read in
conjunction with our consolidated financial statements and the related notes thereto, included in “Item 8.
Financial Statements and Supplementary Data” and “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
The historical financial information for all periods prior to our initial public offering included in this report
were derived from the consolidated financial statements of PBF LLC and does not reflect what our financial
position, results of operations, and cash flows would have been had we been a separate, stand-alone public
company during those periods. We were not operated as a separate, stand-alone public company for historical
periods presented prior to our initial public offering. The consolidated financial information may not be
indicative of our future financial condition, results of operations or cash flows.
43
The following data are in thousands of dollars, except for per share amounts:
Year Ended December 31,
2012
2011
2010
2009 (3)
Period From
March 1,
2008 (Date of
Inception)
through
December 31,
2008 (3)
Statement of operations data:
Revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses:
Cost of sales, excluding depreciation . . . . . . . . . . . .
Operating expenses, excluding depreciation . . . . . . .
General and administrative expenses . . . . . . . . . . . .
Gain on sale of asset . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related expenses (2) . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . .
$20,138,687 $14,960,338 $ 210,671 $
228
$
134
18,269,079
738,824
120,443
(2,329)
—
92,238
13,855,163
658,831
86,183
—
728
53,743
19,218,254
14,654,648
203,971
25,140
15,859
—
6,051
1,402
252,423
—
—
6,294
—
—
44
6,338
—
—
6,378
—
—
18
6,396
Income (loss) from operations . . . . . . . . . . . . . . . . . . . .
920,433
305,690
(41,752)
(6,110)
(6,262)
Other (expense) income:
Change in fair value of catalyst lease obligation . . .
Change in fair value of contingent consideration . . .
Interest income (expense), net . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,768)
(3,724)
(108,629)
805,312
(1,275)
7,316
(5,215)
(65,120)
242,671
—
(1,217)
—
(1,388)
—
—
10
—
—
198
(44,357)
—
(6,100)
—
(6,064)
—
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
804,037 $
242,671 $ (44,357) $ (6,100)
$ (6,064)
Less: net income attributable to noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
802,081
Net income attributable to PBF Energy Inc.
. . . . . . . .
$
1,956
Weighted-average shares of Class A common stock
outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,570,240
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,230,904
Net income available to Class A common stock per
share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
.08
.08
Balance sheet data (at end of period) :
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt (4) . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,253,702 $ 3,621,109 $1,274,393 $19,150
729,980
1,723,545
804,865
1,110,918
325,064
458,661
—
18,694
$25,040
—
24,810
Other financial data :
Capital expenditures (5) . . . . . . . . . . . . . . . . . . . . . .
$
222,688 $
574,883 $
72,118 $
70
$
118
(1) Consulting services income provided to a related party was $10, $221, and $98 for the years ended December 31, 2010
and 2009, and for the period from March 1, 2008 (date of inception) to December 31, 2008, respectively. No consulting
services income was earned subsequent to 2010.
(2) Acquisition related expenses consist of consulting and legal expenses related to the Paulsboro and Toledo acquisition as
well as non-consummated acquisitions.
(3) December 31, 2009 and 2008 balance sheet data is that of PBF Investments LLC. See footnote 1, “Organization and
Basis of Presentation” in the PBF Energy Inc. consolidated financial statements, “Item 8. Financial Statements and
Supplementary Data.”
(4) Total long-term debt includes current maturities and our Delaware Economic Development Authority Loan.
(5)
Includes expenditures for construction in progress, property, plant and equipment, deferred turnaround costs and other
assets.
44
Selected Historical Financial Data of Paulsboro, PBF LLC’s Predecessor
The following table presents Paulsboro’s selected historical financial data. We refer to Paulsboro as PBF
LLC’s “Predecessor” or “Predecessor Paulsboro,” as prior to its acquisition PBF LLC generated substantially no
revenues and prior to the acquisition of Paulsboro and the Delaware City assets, was a new company formed to
pursue acquisitions of crude oil refineries and downstream assets in North America. At the time of its acquisition,
Paulsboro represented the major portion of PBF LLC’s business and assets.
The financial information of Predecessor Paulsboro, are presented as of, and for the years ended,
December 31, 2009 and 2008 and for the period from January 1, 2010 through December 16, 2010 and as of
December 16, 2010, periods prior to PBF LLC’s acquisition. These financial statements were prepared by the
former management of Predecessor Paulsboro and audited by Predecessor Paulsboro’s independent registered
public accounting firm. The financial information of Predecessor Paulsboro presented herein may not be
representative of the operations of PBF going forward for the following reasons, among others:
• Both PBF LLC’s financial statements and Paulsboro’s financial statements contain items which require
management to make considerable judgments and estimates. There can be no assurance that the
judgments and estimates made by PBF LLC’s management will be identical or even similar to the
historical judgments and estimates made by Paulsboro’s former management.
• The financial statements of Paulsboro contain allocations of certain general and administrative
expenses and income taxes specific to Valero.
• The financial statements of Paulsboro reflect depreciation and amortization expense and asset
impairment losses based on Valero’s historical cost basis for the applicable assets. PBF LLC’s cost
basis in such assets is different.
The historical financial data and other statistical data presented below should be read in conjunction with
Paulsboro’s financial statements and the related notes thereto for the period from January 1, 2010 through
December 16, 2010 and as of December 16, 2010, included elsewhere in this Annual Report on Form 10-K, and
the section entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations.” The historical financial data for Paulsboro as of and for the years ended
December 31, 2009 and 2008 has been derived from audited financial statements not included in this Annual
Report on Form 10-K.
45
PAULSBORO REFINING BUSINESS—PBF LLC’S PREDECESSOR
Period from
January 1,
2010 through
December 16,
2010
Year Ended December 31,
2009
2008
(in thousands)
Statement of operations data:
Operating revenues (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,708,989
$3,549,517
$6,448,379
Cost and expenses:
Cost of sales (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses (3) . . . . . . . . . . . . . . . . . . . . .
Asset impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . .
4,487,825
259,768
14,606
895,642
66,361
3,419,460
266,319
15,594
8,478
65,103
5,718,685
317,093
15,619
705
56,634
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,724,202
3,774,954
6,108,736
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income and expense, net . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income tax expense (benefit) . . . . . . . . . . . . . . . . .
Income tax expense (benefit) (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,015,213)
500
(1,014,713)
(322,962)
(225,437)
1,249
(224,188)
(86,586)
339,643
551
340,194
131,445
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (691,751) $ (137,602) $ 208,749
Balance sheet data (at end of period):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net parent investment
$
510,205
42,582
467,623
$1,440,557
357,289
1,083,268
$1,434,980
392,099
1,042,881
Selected financial data:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
20,122
$
96,754
$ 198,647
(1) Operating revenues consist of refined products sold from Paulsboro to Valero that were recorded at
intercompany transfer prices, which were market prices adjusted by quality, location, and other
differentials on the date of the sale.
(2) Cost of sales consist of the cost of feedstock acquired for processing, including transportation costs to
deliver the feedstock to Paulsboro. Purchases of feedstock by Paulsboro from Valero were recorded at
the cost paid to independent third parties by Valero.
(3) General and administrative expenses include allocations and estimates of general and administrative
costs of Valero that were attributable to the operations of Paulsboro.
(4) The income tax provision represented the current and deferred income taxes that would have resulted if
Paulsboro were a stand-alone taxable entity filing its own income tax returns. Accordingly, the
calculations of current and deferred income tax provision require certain assumptions, allocations, and
estimates that Paulsboro management believed were reasonable to reflect the tax reporting for
Paulsboro as a stand-alone taxpayer.
46
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following review of our results of operations and financial condition should be read in conjunction with
Items 1, 1A, and 2, “Business, Risk Factors, and Properties,” Item 6, “Selected Financial Data,” and Item 8,
“Financial Statements and Supplementary Data,” respectively, included in this Annual Report on Form 10-K.
CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K contains certain “forward-looking statements”, as defined in the Private
Securities Litigation Reform Act of 1995, of expected future developments. You can identify forward-looking
statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,”
“approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our
strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins,
costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry
trends are forward-looking statements. In addition, we, through our senior management, from time to time make
forward-looking public statements concerning our expected future operations and performance and other
developments. These forward-looking statements are subject to risks and uncertainties that may change at any
time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our
forward-looking statements from our operating budgets and forecasts, which are based upon many detailed
assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict
the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our
actual results.
Important factors that could cause actual results to differ materially from our expectations, which we refer to
as “cautionary statements,” are disclosed under “Item 1A. Risk Factors” and elsewhere in this Annual Report on
Form 10-K, including, without limitation, in conjunction with the forward-looking statements included in this
Annual Report on Form 10-K. All forward-looking information in this Annual Report on Form 10-K and
subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are
expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect
our results include:
•
•
•
•
•
•
•
•
•
•
•
supply, demand, prices and other market conditions for our services;
the effects of competition in our markets;
changes in currency exchange rates, interest rates and capital costs;
adverse developments in our relationship with both our key employees and unionized employees;
our ability to operate our businesses efficiently, manage capital expenditures and costs (including
general and administrative expenses) tightly and generate earnings and cash flow;
our substantial indebtedness described in this Annual Report on Form 10-K;
restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
our assumptions regarding payments arising under the tax receivable agreement and other
arrangements relating to our initial public offering;
our expectations with respect to our acquisition activity;
our ability to retain key employees; and
the costs of being a public company, including Sarbanes-Oxley Act compliance.
We caution you that the foregoing list of important factors may not contain all of the material factors that
are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-
looking statements contained in this Annual Report on Form 10-K may not in fact occur. Accordingly, investors
should not place undue reliance on those statements.
47
Our forward-looking statements also include estimates of the total amount of payments, including annual
payments, under the tax receivable agreement. These estimates are based on assumptions that are subject to
change due to various factors, including, among other factors, the timing when the pre-IPO owners of PBF LLC
exchange their PBF LLC Series A Units for shares of PBF Energy’s Class A common stock as contemplated by
the tax receivable agreement, the price of PBF Energy’s Class A common stock at the time of such exchanges,
the extent to which such exchanges are taxable, and the amount and timing of PBF Energy’s income. See “Risk
Factors—Risks Related to Our Organizational Structure and Our Class A Common Stock—We will be required
to pay the holders of PBF LLC Series A Units and PBF LLC Series B Units for certain tax benefits we may claim
arising in connection with our IPO and future exchanges of PBF LLC Series A Units for shares of our Class A
Common Stock and related transactions, and the amounts we may pay could be significant” and “Item 1A. Risk
Factors—Risks Related to Our Organizational Structure and Our Class A Common Stock—In certain cases,
payments by us under the tax receivable agreement may be accelerated and/or significantly exceed the actual
benefits we realize in respect of the tax attributes subject to the tax receivable agreement. These provisions may
deter a change in control of our Company.”
Our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or as of the
date as of which they are made. Except as required by applicable law, including the securities laws of the United
States, we do not intend to update or revise any forward-looking statements. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their
entirety by the foregoing.
Executive Summary
Our business operations are conducted by PBF LLC and its subsidiaries. We were formed in March 2008 to
pursue the acquisitions of crude oil refineries and downstream assets in North America. We currently own and
operate three domestic oil refineries and related assets located in Delaware City, Delaware, Paulsboro, New
Jersey, and Toledo, Ohio, which we acquired in 2010 and 2011. Our refineries have a combined processing
capacity, known as throughput, of approximately 540,000 bpd, and a weighted average Nelson Complexity Index
of 11.3.
The following table summarizes our history and key events:
March 1, 2008 . . . . . . . . . . . .
PBF wasformed.
June 1, 2010 . . . . . . . . . . . . . Theidle Delaware City refinery and its related assets were acquired
from affiliates of Valero Energy Corporation (“Valero”) for
approximately $220.0 million.
December 17, 2010 . . . . . . . . ThePaulsboro refinery and its related assets were acquired from
affiliates of Valero for approximately $357.7 million, excluding
working capital.
March 1, 2011 . . . . . . . . . . . . TheToledo refinery and its related assets were acquired from Sunoco
for approximately $400.0 million, excluding working capital.
October 2011 . . . . . . . . . . . . . Delaware City became fully operational.
February 2012 . . . . . . . . . . . . Oursubsidiary, PBF Holding, issued $675.5 million aggregate
principal amount of 8.25% Senior Secured Notes due 2020.
December 2012 . . . . . . . . . . .
PBF Energy completed the initial public offering of its common
equity selling a total of 23,567,686 Class A common shares. In
connection with the initial public offering, PBF Energy became the
sole managing member of PBF LLC.
48
Throughout this Annual Report on Form 10-K we include financial statements and other financial and
operating data for the Paulsboro Refining Business for periods prior to its acquisition date of December 17, 2010.
We refer to Paulsboro as PBF LLC’s “Predecessor” or “Predecessor Paulsboro,” because we generated
substantially no revenues and prior to our acquisition of Paulsboro and the Delaware City assets, we were a new
company formed to pursue acquisitions of crude oil refineries and downstream assets in North America. At the
time of its acquisition, Paulsboro represented the major portion of our business and assets.
Factors Affecting Comparability
Our results over the past three years have been affected by the following events, which must be understood
in order to assess the comparability of our period to period financial performance and financial condition.
Acquisition Delaware City Refinery
Through our subsidiaries, Delaware City Refining and Delaware Pipeline Company LLC, we acquired the
idle Delaware City refinery and its related assets, including a petroleum product terminal, a petroleum products
pipeline and an electric generation facility, on June 1, 2010 from affiliates of Valero for approximately
$220.0 million in cash funded entirely by equity. We also incurred approximately $4.3 million in acquisition
costs. The acquisition of the Delaware City refinery and its related assets was accounted for as an acquisition of
assets. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated
fair value. The results of operations have been included in our consolidated financial statements since June 1,
2010. For the period from June 1, 2010 until June 2011, when we began re-starting refinery operations, our
results of operations included only certain minor terminal operations and substantial capital improvement
activities to prepare the refinery and power plant for re-start. The refinery became fully operational in October
2011 and the results of operations prior to restart and during the re-start period may not be indicative of our
future performance.
The prior owner shut down the Delaware City refinery in the fourth quarter of 2009 due to, among other
reasons, financial losses caused by one of the worst recessions in recent history. We were therefore able to
acquire the refinery at what we believe to be an attractive price, obtain economic support from the State of
Delaware to re-start the refinery, and enter into a new contract with the relevant union at the refinery.
On June 1, 2010, we hired 63 employees of the prior owner to assist us with implementing our refinery
turnaround/reconfiguration plan and to conduct terminal operations at the refinery. These employees primarily held
positions as engineers, refinery operators, terminal operators, dockworkers, maintenance workers and administrative
staff prior to our acquisition of the refinery assets. In connection with our acquisition, we were able to negotiate a
new contract with the union including: (1) reopening of the refinery with approximately 470 employees, compared
to approximately 700 prior to shutdown by Valero; (2) flexibility with respect to which workers are hired (i.e., no
seniority clause); (3) different benefits packages; and (4) more flexible work rules.
Since our acquisition through December 31, 2012, we have invested more than $500.0 million in turnaround
and re-start projects, as well as in the recent strategic development of a crude rail unloading facility. The re-start
process included the decommissioning of the gasifier unit located on the property which allowed us to decrease
emissions and improve the reliability of the refinery. In addition, we have completed a cogeneration project to
convert the electric generation units at the refinery to use natural gas as a fuel and a hydrocracker corrosion
control project aimed at increasing throughput at the hydrocracker. We made significant operating improvements
in the first year of operations by modifying the crude slate and product yield, changing operations of the
conversion units and re-starting certain units. Through these capital investments and by restructuring certain
operations, we have lowered the annual operating expenses of the Delaware City refinery relative to its pre-
acquisition operating expense. In 2012, we spent approximately $49.7 million to expand and upgrade the existing
on-site rail infrastructure, including the expansion of the crude rail unloading facilities that will be capable of
discharging approximately 110,000 bpd.
49
In connection with our re-start of the refinery, we received a $20.0 million loan from the State of Delaware
which converts to a grant contingent upon our continued operation of the refinery and certain other conditions.
The State of Delaware also agreed to reimburse us $12.0 million in the aggregate for the dredging of the
Delaware River near the refinery over the next six years, granted us $1.5 million to fund employee training
programs, and granted us $10.0 million towards the conversion of the gas turbines at the refinery to run on
natural gas and reduce emissions. As of December 31, 2012, the State of Delaware has funded us $6.0 million in
dredging cost reimbursements, $1.4 million to fund employee training programs, and $10.0 million for the
turbine natural gas conversion at the refinery.
We also obtained a new operating agreement for the Delaware City refinery that defers the construction of
previously scheduled cooling water towers that the prior owner planned to spend in excess of $100.0 million to
install. The deferral allows us to evaluate the cost effectiveness of closed loop cooling water systems and propose
alternatives to be implemented in the next permitting cycle, which is at least five years away. The permits issued
pursuant to the new operating agreement provide a plant-wide limit for certain emissions rather than source
specific limits. Based on our shutdown of the gasifier unit and the resulting reduction of certain emissions by
converting the combustion turbines to natural gas, we avoided additional controls on specific sources that the
prior owner anticipated spending approximately $200.0 million to install. As a result of these negotiations, we
believe we now have the operational flexibility to manage our emissions in a cost effective manner.
The Delaware City refinery has a throughput capacity of 190,000 bpd and a Nelson Complexity Index of
11.3. It is located on a 5,000-acre site, with access to waterborne cargoes and an extensive distribution network
of pipelines, barges and tankers, truck and rail. Delaware City is a fully integrated operation that receives crude
via ship or barge at its docks located on the Delaware River. The crude and other feedstocks are transported, via
pipes, to an extensive tank farm where they are stored until processing. In addition, there is a 17-bay, 50,000 bpd
capacity truck loading rack located adjacent to the refinery, and a 23-mile interstate pipeline that is used to
distribute clean products.
Acquisition of Paulsboro Refinery
We acquired the entities that owned the Paulsboro refinery (including an associated natural gas pipeline) on
December 17, 2010, from Valero for approximately $357.7 million, excluding working capital. We paid the
purchase price with cash funded from equity and a $160.0 million seller note (the “Paulsboro Promissory Note”),
which we repaid in February 2012 with proceeds received through the issuance of PBF Holding Senior Secured
Notes. The purchase price excludes inventory purchased on our behalf by MSCG and Statoil. The acquisition
was accounted for using the acquisition method of accounting. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values. The results of operations of the Paulsboro
refinery have been included in our combined and consolidated financial statements as of December 17, 2010. We
invested approximately $60.0 million in capital in early 2011 to complete a scheduled turnaround at the refinery.
Paulsboro has a throughput capacity of 180,000 bpd and a Nelson Complexity Index of 13.2. The Paulsboro
refinery is located on approximately 950 acres on the Delaware River in Paulsboro, New Jersey, just south of
Philadelphia, and approximately 30 miles away from Delaware City. The refinery generally processes a variety
of medium and heavy, sour crude oils.
Acquisition of Toledo Refinery
Through our subsidiary, Toledo Refining, we acquired the Toledo refinery on March 1, 2011, from Sunoco
for approximately $400.0 million, excluding working capital. We paid the purchase price with cash funded from
equity and a $200.0 million seller note (the “Toledo Promissory Note”), which we repaid in February 2012 with
proceeds received through the issuance of PBF Holding Senior Secured Notes. We also purchased refined and
certain intermediate products in inventory for approximately $299.6 million with the proceeds from a note
provided by Sunoco that we subsequently repaid on May 31, 2011 with proceeds from our ABL Revolving Credit
50
Facility, and MSCG purchased the refinery’s crude oil inventory on our behalf. Additionally, included in the
terms of the sale is a five-year participation payment of up to $125.0 million payable to Sunoco based upon post-
acquisition earnings of the refinery, of which $103.0 million was paid in 2012. We currently anticipate paying
the balance of the participation payment in April 2013.
The acquisition was accounted for using the acquisition method of accounting with the preliminary purchase
price allocated to the assets acquired and liabilities assumed based on their estimated fair values. The results of
operations of the Toledo refinery have been included in our consolidated financial statements as of March 1, 2011.
Toledo has a throughput capacity of 170,000 bpd and a Nelson Complexity Index of 9.2. Toledo processes a
slate of light, sweet crudes from Canada, the Midcontinent, the Bakken region and the U.S. Gulf Coast. The
Toledo refinery is located on a 282-acre site near Toledo, Ohio, approximately 60 miles from Detroit.
Amended and Restated ABL Revolving Credit Facility
On May 31, 2011, we amended the terms of our ABL Revolving Credit Facility to increase its size to
$500.0 million and included certain inventory and accounts receivable of the Toledo refinery in the borrowing
base. In addition, the interest rate was changed to the Adjusted LIBOR Rate plus 2.00% to 2.50%, depending on
the excess availability, as defined, and the maturity date was extended to May 31, 2016. On an ongoing basis, the
ABL Revolving Credit Facility is available to be used for working capital and other general corporate purposes.
In March, August, and September 2012, we amended the ABL Revolving Credit Facility again to increase the
aggregate size from $500.0 million to $750.0 million, $950.0 million, and $965.0 million, respectively. In
addition, the ABL Revolving Credit Facility was amended and restated on October 26, 2012 to increase the
maximum availability to $1.375 billion, extend the maturity date to October 26, 2017 and amend the borrowing
base to include non-U.S. inventory, and was further amended on December 28, 2012 to increase the maximum
availability to $1.575 billion. The amended and restated ABL Revolving Credit facility includes an accordion
feature which allows for commitments of up to $1.8 billion.
Letter of Credit Facility
On January 25, 2011, we entered into a short-term letter of credit facility, which was subsequently amended
on April 26, 2011 and April 24, 2012, under which we could obtain letters of credit up to $750.0 million
composed of a committed maximum amount of $500.0 million and an uncommitted maximum amount of
$250.0 million to support certain of our crude oil purchases. As a result of the increased size of the amended and
restated ABL Revolving Credit Facility, we terminated the letter of credit facility in December 2012.
Senior Secured Notes Offering
On February 9, 2012, PBF Holding and PBF Finance Corporation issued $675.5 million aggregate principal
amount of 8.25% Senior Secured Notes, due 2020 (which we refer to as the “senior secured notes offering”). The
net proceeds from the offering of approximately $665.8 million were used to repay our Paulsboro Promissory
Note in the amount of $160.0 million, our Term Loan in the amount of $123.8 million, our Toledo Promissory
Note in the amount of $181.7 million, and to reduce indebtedness under the ABL Revolving Credit Facility.
PBF Energy Inc. Initial Public Offering
On December 12, 2012, PBF Energy completed an initial public offering of 23,567,686 shares of its Class A
common stock at a public offering price of $26.00 per share. The initial public offering subsequently closed on
December 18, 2012. PBF Energy used the net proceeds of the offering to acquire approximately 24.4% of the
membership interests in PBF LLC. As a result of the initial public offering and related reorganization
transactions, PBF Energy became the sole managing member of PBF LLC with a controlling voting interest in
PBF LLC and its subsidiaries. Effective with completion of the initial public offering, PBF Energy consolidates
the financial results of PBF LLC and its subsidiaries and records a noncontrolling interest in its consolidated
51
financial statements representing the economic interests of noncontrolling PBF LLC units holders. PBF LLC is
PBF Energy’s predecessor for accounting purposes. The financial statements and results of operations for periods
prior to the completion of PBF Energy’s initial public offering and the related reorganization transactions are
those of PBF LLC.
Tax Receivable Agreement
In connection with our initial public offering, we entered into a tax receivable agreement pursuant to which
we are required to pay the pre-IPO owners of PBF LLC, who exchange their units for PBF Energy Class A
common stock or whose units we purchase, approximately 85% of the cash savings in income taxes that we
realize as a result of the increase in the tax basis of our interest in PBF LLC, including tax benefits attributable to
payments made under the tax receivable agreement. We have recognized a liability for the tax receivable
agreement of $160.0 million reflecting our estimate of the undiscounted amounts that we expect to pay under the
agreement due to exchanges in connection with our initial public offering. Our estimate of the tax agreement
liability is based on forecasts of future taxable income over the anticipated life of our future business operations,
assuming no material changes in the relevant tax law. Periodically, we may adjust the liability based on an
updated estimate of the amounts that we expect to pay, using assumptions consistent with those used in our
concurrent estimate of the deferred tax asset valuation allowance. For example, we must adjust the estimated tax
receivable agreement liability each time we purchase PBF LLC Series A Units or upon an exchange of PBF LLC
Series A Units for our Class A common stock. These periodic adjustments to the tax receivable liability, if any,
may result in adjustments to our income tax expense and deferred tax assets and liabilities.
Factors Affecting Operating Results
Overview
Our earnings and cash flows from operations are primarily affected by the relationship between refined
product prices and the prices for crude oil and other feedstocks. The cost to acquire crude oil and other
feedstocks and the price of refined petroleum products ultimately sold depend on numerous factors beyond our
control, including the supply of, and demand for, crude oil, gasoline, diesel and other refined petroleum products,
which, in turn, depend on, among other factors, changes in global and regional economies, weather conditions,
global and regional political affairs, production levels, the availability of imports, the marketing of competitive
fuels, pipeline capacity, prevailing exchange rates and the extent of government regulation. Our revenue and
operating income fluctuate significantly with movements in industry refined petroleum product prices, our
materials cost fluctuate significantly with movements in crude oil prices and our other operating expenses
fluctuate with movements in the price of energy to meet the power needs of our refineries. In addition, the effect
of changes in crude oil prices on our operating results is influenced by how the prices of refined products adjust
to reflect such changes.
Crude oil and other feedstock costs and the prices of refined petroleum products have historically been
subject to wide fluctuation. Expansion and upgrading of existing facilities and installation of additional refinery
distillation or conversion capacity, price volatility, international political and economic developments and other
factors beyond our control are likely to continue to play an important role in refining industry economics. These
factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a
reduction or increase in product margins. Moreover, the industry typically experiences seasonal fluctuations in
demand for refined petroleum products, such as for gasoline and diesel, during the summer driving season and
for home heating oil during the winter.
Benchmark Refining Margins
In assessing our operating performance, we compare the refining margins (revenue less materials cost) of
each of our refineries against a specific benchmark industry refining margin based on a crack spread. Benchmark
refining margins take into account both crude and refined petroleum product prices. When these prices are
combined in a formula they provide a single value—a gross margin per barrel—that, when multiplied by a
throughput number, provides an approximation of the gross margin generated by refining activities.
52
The performance of our East Coast refineries follows the currently published Dated Brent (NYH) 2-1-1
benchmark refining margins. For our Toledo refinery, we utilize a composite benchmark refining margin, the
WTI (Chicago) 4-3-1 that is based on publicly available pricing information for products trading in the Chicago
and United States Gulf Coast markets.
While the benchmark refinery margins presented below under “Results of Operations—Market Indicators”
are representative of the results of our refineries, each refinery’s realized gross margin on a per barrel basis will
differ from the benchmark due to a variety of factors affecting the performance of the relevant refinery to its
corresponding benchmark. These factors include the refinery’s actual type of crude oil throughput, product yield
differentials and any other factors not reflected in the benchmark refining margins, such as transportation costs,
storage costs, credit fees, fuel consumed during production and any product premiums or discounts, as well as
inventory fluctuations, timing of crude oil and other feedstock purchases, a rising or declining crude and product
pricing environment and commodity price management activities. As discussed in more detail below, each of our
refineries, depending on market conditions, has certain feedstock-cost and product-value advantages and
disadvantages as compared to the refinery’s relevant benchmark.
Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to us. Our exposure to credit risk is reflected in the carrying amount of the receivables that are
presented in our balance sheet. To minimize credit risk, all customers are subject to extensive credit verification
procedures and extensions of credit above defined thresholds are to be approved by the senior management. Our
intention is to trade only with recognized creditworthy third parties. In addition, receivable balances are
monitored on an ongoing basis. We also limit the risk of bad debts by obtaining security such as guarantees or
letters of credit.
Other Factors
We currently source our crude oil for Paulsboro and Delaware City on a global basis through a combination
of market purchases and short-term purchase contracts, mainly through our crude supply agreements. Our crude
supply agreement with Statoil for Paulsboro will terminate effective March 31, 2013, at which time we plan to
source Paulsboro’s crude oil and feedstocks internally. Our crude supply agreement with Statoil for Delaware
City has been extended by Statoil through December 31, 2015 and we have recently entered into certain
amendments to that agreement that are effective through the extended term. In addition, we have a long-term
contract with the Saudi Arabian Oil Company (“Saudi Aramco”) to purchase crude oil, and also purchase on the
spot market from Saudi Aramco when strategic opportunities arise. We have been purchasing up to
approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at Paulsboro. Our Toledo refinery
sources domestic and Canadian crude oil through similar market purchases through our crude supply contract
with MSCG. We believe purchases based on market pricing has given us flexibility in obtaining crude oil at
lower prices and on a more accurate “as needed” basis. Since our Paulsboro and Delaware City refineries access
their crude slates from the Delaware River via ship or barge and through our rail facilities at Delaware City, these
refineries have the flexibility to purchase crude oils from the Midcontinent and Western Canada, as well as a
number of different countries.
In February 2013, we completed a second crude unloading facility at the refinery that increased our rail
crude unloading capacity at Delaware City from 40,000 barrels bpd to 110,000 bpd, comprised of 40,000 bpd of
heavy crude oil and 70,000 bpd of light crude oil. Also in February 2013, our board of directors approved a
project to add an additional 40,000 bpd of heavy crude rail unloading capability at the refinery. The project is
expected to cost approximately $50 million and to be completed in the fourth quarter of 2013. Completion of the
project will increase our discharge capacity of heavy crude oil from 40,000 bpd to 80,000 bpd and bring the total
rail crude unloading capability up to 150,000 bpd. During 2012 and January 2013, we entered into agreements to
lease or purchase a total of 3,600 coiled and insulated rails cars, which are capable of transporting Canadian
heavy crude oils, and 1,300 general purpose cars, which we intend to use to transport lighter crude oils.
53
Our operating cost structure is also important to our profitability. Major operating costs include costs
relating to employees and contract labor, energy, maintenance and environmental compliance. The predominant
variable cost is energy, in particular, the price of utilities, natural gas and chemicals.
Our operating results are also affected by the reliability of our refinery operations. Unplanned downtime of
our refinery assets generally results in lost margin opportunity and increased maintenance expense. The financial
impact of planned downtime, such as major turnaround maintenance, is managed through a planning process that
considers such things as the margin environment, the availability of resources to perform the needed maintenance
and feedstock logistics, whereas unplanned downtime does not afford us this opportunity.
Refinery-Specific Information
The following section includes refinery-specific information related to crude differentials, ancillary costs,
and local premiums and discounts.
Delaware City Refinery. The benchmark refining margin for the Delaware City refinery is calculated by
assuming that two barrels of the benchmark Dated Brent crude oil are converted into one barrel of gasoline and
one barrel of heating oil. We calculate this refining margin using the New York Harbor market value of gasoline
and heating oil against the market value of Dated Brent crude oil and refer to the benchmark as the Dated Brent
(NYH) 2-1-1 benchmark refining margin. Our Delaware City refinery has a product slate of approximately
52.5% gasoline, 35% distillate (split evenly between ULSD and heating oil), 1.5% high-value petrochemicals,
with the remaining portion of the product slate comprised of lower-value products (5% petroleum coke, 5%
LPGs and 1% other). For this reason, we believe the Dated Brent (NYH) 2-1-1 is an appropriate benchmark
industry refining margin. The majority of Delaware City revenues are generated off NYH-based market prices.
The Delaware City refinery’s realized gross margin on a per barrel basis has historically differed from the
Dated Brent (NYH) 2-1-1 benchmark refining margin due to the following factors:
•
•
the Delaware City refinery processes a slate of primarily medium and heavy, and sour crude oil, which has
constituted approximately 70% to 80% of total throughput. The remaining throughput consists of sweet
crude oil and other feedstocks and blendstocks. In addition, we are currently processing a significant volume
of price-advantaged crude. Our total throughput costs have historically priced at a discount to Dated Brent;
and
as a result of the heavy, sour crude slate processed at Delaware City, we produce low value products
including sulfur and petroleum coke. These products are priced at a significant discount to gasoline, ULSD
and heating oil and represent approximately 5% of our total production volume.
Paulsboro Refinery. The benchmark refining margin for the Paulsboro refinery is calculated by assuming
that two barrels of the benchmark Dated Brent crude oil are converted into one barrel of gasoline and one barrel
of heating oil. We calculate this refining margin using the New York Harbor market value of gasoline and
heating oil against the market value of Dated Brent crude oil and refer to the benchmark as the Dated Brent
(NYH) 2-1-1 benchmark refining margin. Our Paulsboro refinery has a product slate of approximately
37.5% gasoline, 40.5% distillate (comprised of approximately one-third jet fuel and two-thirds heating oil),
5.5% high-value Group I lubricants, with the remaining portion of the product slate comprised of lower-value
products (4% petroleum coke, 3% LPGs, 3% fuel oil, 5% asphalt and 1.5% other). For this reason, we believe the
Dated Brent (NYH) 2-1-1 is an appropriate benchmark industry refining margin. The majority of Paulsboro
revenues are generated off NYH based market prices.
The Paulsboro refinery’s realized gross margin on a per barrel basis has historically differed from the Dated
Brent (NYH) 2-1-1 benchmark refining margin due to the following factors:
•
the Paulsboro refinery has generally processed a slate of primarily medium and heavy, and sour crude oil,
which has historically constituted approximately 70% to 80% of total throughput. The remaining throughput
54
consists of sweet crude oil and other feedstocks and blendstocks. We are now also running a significant
volume of price advantaged domestic crudes. These feedstocks historically have priced at a discount to
Dated Brent;
•
•
as a result of the heavy, sour crude slate processed at Paulsboro, we produce low value products including
sulfur, petroleum coke and fuel oil. These products are priced at a significant discount to gasoline and
heating oil and represent approximately 8% to 9.5% of our total production volume; and
the Paulsboro refinery produces Group I lubricants which, through an extensive production process, has a
low volume yield which limits the volume expansion on crude inputs.
Toledo Refinery. The benchmark refining margin for the Toledo refinery is calculated by assuming that four
barrels of benchmark WTI crude oil are converted into three barrels of gasoline, one-half barrel of ULSD and
one-half barrel of jet fuel. We calculate this refining margin using the Chicago market values of gasoline and
ULSD and the United States Gulf Coast value of jet fuel against the market value of WTI crude oil and refer to
this benchmark as the WTI (Chicago) 4-3-1 benchmark refining margin. Our Toledo refinery has a product slate
of approximately 51% gasoline, 35% distillate (comprised of approximately 45% jet fuel and 55% ULSD), 5%
high-value petrochemicals (including nonene, tetramer, benzene, xylene and toluene) with the remaining portion
of the product slate comprised of lower-value products (6% LPGs, 2.5% fuel oil and 0.5% other). For this reason,
we believe the WTI (Chicago) 4-3-1 is an appropriate benchmark industry refining margin. The majority of
Toledo revenues are generated off Chicago-based market prices.
The Toledo refinery’s realized gross margin on a per barrel basis has historically differed from the WTI
(Chicago) 4-3-1 benchmark refining margin due to the following factors:
•
•
•
the Toledo refinery processes a slate of domestic sweet and Canadian synthetic crude oil. Historically,
Toledo’s blended average crude costs have been higher than the market value of WTI crude oil;
the Toledo refinery is connected to its distribution network through a variety of third party product
pipelines. While lower in cost when compared to barge or rail transportation, the inclusion of transportation
costs increases our overall cost relative to the 4-3-1 benchmark refining margin; and
the Toledo refinery generates a pricing benefit on some of its products, primarily its petrochemicals.
55
Results of Operations
The tables below summarize certain information relating to our operating results derived from our audited
consolidated financial data for years ended December 31, 2012, 2011 and 2010 (amounts in thousands, except
per share data). This data should be read in conjunction with our audited consolidated financial statements and
the notes thereto.
Year Ended December 31,
2012
2011
2010
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales, excluding depreciation . . . . . . . . . . .
Non-GAAP gross margin (1) . . . . . . . . . . . . . . . . .
$20,138,687
18,269,078
1,869,609
$14,960,338
13,855,163
1,105,175
$210,671
203,971
6,700
Operating expenses, excluding
depreciation . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . .
Gain on sale of asset . . . . . . . . . . . . . . . . . . . .
Acquisition-related expenses . . . . . . . . . . . . .
Depreciation and amortization expense . . . . .
Income (loss) from operations . . . . . . . . . . . .
Change in fair value of contingent
consideration . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of catalyst leases . . . . . .
Interest income (expense), net . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
738,824
120,443
(2,329)
—
92,238
949,176
920,433
(2,768)
(3,724)
(108,629)
805,312
(1,275)
804,037
658,831
86,183
—
728
53,743
799,485
305,690
25,140
15,859
—
6,051
1,402
48,452
(41,752)
(5,215)
7,316
(65,120)
242,671
—
242,671
—
(1,217)
(1,388)
(44,357)
—
$ (44,357)
$
Less: net income attributable to
noncontrolling interest . . . . . . . . . . . . . . . .
. . . . .
Net income attributable to PBF Energy Inc.
802,081
1,956
$
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to Class A common stock
per share:
$ 1,046,598
$
417,962
$ (4,895)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
.08
.08
(1) See Non-GAAP Financial Measures below.
56
The table below summarizes certain market indicators relating to our operating results as reported by Platts.
(dollars per barrel, except as noted)
Dated Brent Crude . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Texas Intermediate (WTI) crude oil . . . . . . . . . .
Crack Spreads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dated Brent (NYH) 2-1-1 . . . . . . . . . . . . . . . . . .
WTI (Chicago) 4-3-1 . . . . . . . . . . . . . . . . . . . . . .
Crude Oil Differentials . . . . . . . . . . . . . . . . . . . . . . . .
Dated Brent (foreign) less WTI . . . . . . . . . . . . . .
. . . . . . . . .
Dated Brent less Maya (heavy, sour)
Dated Brent less WTS (sour)
. . . . . . . . . . . . . . .
Dated Brent less ASCI (sour) . . . . . . . . . . . . . . .
WTI less WCS (heavy, sour) . . . . . . . . . . . . . . . .
WTI less Bakken (light, sweet) . . . . . . . . . . . . . .
WTI less Syncrude (light, sweet) . . . . . . . . . . . .
Natural gas (dollars per MMBTU) . . . . . . . . . . . . . . .
Key Operating Information
Production (barrels per day in thousands) . . . . . . . . . .
Crude oil and feedstocks throughput (barrels per day
Year Ended December 31,
2012
2011
2010 (a)
$111.67
$ 94.13
$ 14.29
$ 27.13
$ 17.54
$ 12.04
$ 22.95
$
4.97
$ 21.80
5.77
$
0.96
$
2.83
$
$111.26
$ 95.04
$
9.93
$ 24.14
$ 16.22
$ 12.63
$ 18.28
$
3.82
$ 15.63
$ (3.31)
$ (9.79)
4.00
$
$92.77
$90.03
$10.41
$10.30
$ 2.74
$13.19
$ 5.22
$ 2.55
$18.25
$ 2.96
$ 1.43
$ 4.17
464.4
427.9
146.5
in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
463.2
429.4
143.8
Total crude oil and feedstocks throughput (millions
of barrels)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169.5
128.7
2.2
(a) Data is for the period from December 17, 2010 to December 31, 2010
2012 Compared to 2011
Overview—Net income was $804.0 million for the year ended December 31, 2012 compared to $242.7 for
the year ended December 31, 2011. Net income attributable to PBF Energy shareholders was $2.0 million, or
$.08 per share, for the year ended December 31, 2012. The net income attributable to PBF Energy shareholders
represents PBF Energy’s approximately 24.4% equity interest in PBF LLC’s pre-tax income, less applicable
income taxes, for the period from December 18, 2012, the date of the closing of its initial public offering,
through December 31, 2012. During the 2011 period, our results reflect twelve months of operations of our
Paulsboro refinery, ten months of operations of our Toledo refinery, which was acquired on March 1, 2011, and
three months of operations of our Delaware City refinery as it was fully operational in October 2011. Prior to
October 2011, we performed activities to turnaround, reconfigure and re-start our Delaware City Refinery. We
began restarting our Delaware City refinery in June 2011 and it was fully operational in October 2011.
During the year ended December 31, 2012, all three of our refineries were operating, although the Toledo
refinery was impacted by a thirty day turnaround of its hydrocracker, reformer and UDEX units which
commenced on March 9, 2012. Our results for the year ended December 31, 2012 were favorably impacted by
improved crack spreads despite the narrowing of the light/heavy crude differential which impacted our Paulsboro
and Delaware City refineries.
Revenues—Revenues totaled $20.1 billion for the year ended December 31, 2012 compared to $15.0 billion
for the year ended December 31, 2011, an increase of $5.2 billion, or 34.6%. The revenue increase primarily
relates to twelve months of operations of the Toledo refinery in 2012 compared to ten months in 2011 as a result
of its acquisition on March 1, 2011, and twelve months of operations of our Delaware City refinery in 2012,
57
which was being reconfigured and prepared for restart in 2011. For the year ended December 31, 2012, the total
throughput rates at our Paulsboro, Toledo, and Delaware City refineries averaged approximately 152,000 bpd,
147,200 bpd, and 164,000 bpd, respectively. For the year ended December 31, 2011, the total throughput rates at
our Paulsboro, Toledo and Delaware City refineries averaged approximately 151,400 bpd, 151,400 bpd, and
126,600 bpd, respectively. For the year ended December 31, 2012, the total barrels sold at our Paulsboro, Toledo,
and Delaware City refineries averaged approximately 149,800 bpd, 159,000 bpd, and 162,100 bpd, respectively.
For the year ended December 31, 2011, the total barrels sold at our Paulsboro, Toledo, and Delaware City
refineries averaged approximately 151,700 bpd, 160,800 bpd, and 116,200 bpd, respectively.
The throughput rate and barrels sold for our Toledo and Delaware City refineries for the year ended
December 31, 2011 reflect the period from March 1 to December 31 and June 1 to December 31, respectively.
Total barrels sold during the year ended December 31, 2012 were approximately 172.3 million barrels at an
average price of $116.83 per barrel, compared to 129.4 million barrels at an average price of $115.83 per barrel
during the 2011 period.
Gross Margin—Non-GAAP gross margin totaled $1,869.6 million, or $11.03 per barrel of throughput, for
the year ended December 31, 2012 compared to $1,105.2 million, or $8.59 per barrel of throughput during the
year ended December 31, 2011, an increase of $764.4 million. Gross margin totaled $1,046.6 million, or
$6.17 per barrel of throughput, for the year ended December 31, 2012 compared to $418.0 million, or $3.25 per
barrel of throughput, for the year ended December 31, 2011, an increase of $628.6 million. The increase in both
non-GAAP gross margin and gross margin was primarily due to a full twelve months of operations at the Toledo
and Delaware City refineries in 2012 and higher crack spreads.
Average industry refining margins in the U.S. Mid-Continent were generally stronger during the year ended
December 31, 2012 as compared to the same period in 2011. The WTI (Chicago) 4-3-1 industry crack spread was
approximately $2.99 per barrel or 12.0% higher in the year ended December 31, 2012 as compared to the same
period in 2011. During the year ended December 31, 2012, we believe the strong industry refining margins and
crude oil price differentials reflect limitations on takeaway capacity of WTI crude stored at Cushing, Oklahoma
and the increase in domestically available supply which decreased the price of WTI versus Dated Brent and other
crudes. The WTI-Syncrude differential improved by $10.75 per barrel during the year ended December 31, 2012
compared to the same period in 2011. As the WTI-Syncrude premium increases, it has a positive impact on our
Toledo refinery’s gross margin because Syncrude represents a significant portion of its crude slate.
While the Dated Brent (NYH) 2-1-1 industry crack spread was approximately $4.36 per barrel, or 43.9%,
higher in the year ended December 31, 2012 as compared to the same period in 2011, the Dated Brent/Maya
differential was approximately $0.59 per barrel, or approximately 4.7%, lower in 2012 than in 2011. A reduction
in the Dated Brent/Maya crude differential, our proxy for the light/heavy crude differential, has a negative impact
on Paulsboro and Delaware City as both refineries process a large slate of medium and heavy, sour crude oil that
is priced at a discount to light, sweet crude oil.
The increase in our non-GAAP gross margin per barrel to $11.03 per barrel for the year ended
December 31, 2012 from $8.59 per barrel during the same period in 2011 was primarily driven by improved
crack spreads and lower cost of crude at our Toledo refinery, partially offset by an unfavorable increase in the
landed cost of crude at our East Coast refineries due to the narrowing of the light/heavy crude differential. In
addition, the results of our Paulsboro and Delaware City refineries is compounded by their significant production
of low value products such as sulfur, petroleum coke and fuel oils as these products price at a substantial discount
to light products. As a result, we were not able to fully benefit from the increase in gasoline and distillates prices
during the twelve month period.
Operating Expenses—Operating expenses totaled $738.8 million, or $4.36 per barrel of throughput, for the
year ended December 31, 2012 compared to $658.8 million, or $5.12 per barrel of throughput, for the year ended
December 31, 2011, an increase of $80.0 million, or 12.1%. The increase in operating expenses primarily relates
58
to having Toledo for a full twelve months in the 2012 period versus ten months in 2011, and the restart of the
Delaware City refinery. During the first nine months of the 2011 period, our Delaware City refinery was
undergoing a turnaround and reconfiguration. It was fully operational during the full year ended December 31,
2012. The decrease in operating expenses per barrel of throughput is mainly attributable to a reduction in energy
and utilities costs, primarily driven by lower natural gas prices, and the increase in throughput barrels. Our
operating expenses principally consist of salaries and employee benefits, maintenance, energy and catalyst and
chemicals costs.
General and Administrative Expenses—General and administrative expenses totaled $120.4 million for the
year ended December 31, 2012 compared to $86.2 million for the year ended December 31, 2011, an increase of
$34.3 million or 40.0%. The increase in general and administrative expenses primarily relates to higher
information technology expenses for the implementation of accounting and commercial software in 2012 and
higher compensation expense related to headcount increases in 2012. Our general and administrative expenses
are comprised of the personnel, facilities and other infrastructure costs necessary to support our refineries.
Acquisition-related Expenses—Acquisition-related expenses for the year ended December 31, 2011 were
$0.7 million and related to our acquisition of Toledo.
Gain on Sale of Assets—Gain on sale of assets for the year ended December 31, 2012 was $2.3 million and
related to sales of certain equipment at Paulsboro and Delaware City.
Depreciation and Amortization Expense—Depreciation and amortization expense totaled $92.2 million for
the year ended December 31, 2012 compared to $53.7 million for the year ended December 31, 2011, an increase
of $38.5 million. The increase was principally due to the acquisition of Toledo in March 2011, commencement of
depreciation in July 2011 related to the restart of Delaware City, and capital expenditure and turnaround activity.
Change in Fair Value of Catalyst Leases—Change in the fair value of catalyst leases represented a loss of
$3.7 million for the year ended December 31, 2012 compared to a gain of $7.3 million for the year ended
December 31, 2011. This gain or loss relates to the change in value of the precious metals underlying the sale and
leaseback of our refineries’ precious metals catalyst, which we are obligated to repurchase at fair market value
lease termination dates.
Change in Fair Value of Contingent Consideration—Change in the fair value of contingent consideration
was an expense of $2.8 million for the year ended December 31, 2012, compared to $5.2 million for the 2011
period. This change represents the increase in the estimated fair value of the total contingent consideration we
expect to pay in connection with our acquisition of the Toledo refinery.
Interest (Expense) Income—Interest expense totaled $108.6 million for the year ended December 31, 2012
compared to $65.1 million for the year ended December 31, 2011, an increase of $43.5 million. Interest expense
includes interest on long-term debt, costs related to the sale and leaseback of our precious metals catalyst, interest
expense incurred in connection with our crude and feedstock supply agreements with Statoil and MSCG, letter of
credit fees associated with the purchase of certain crude oils, and the amortization of deferred financing fees. The
increase in interest expense primarily relates to an increase in letter of credit fees attributable to all refineries
operating for the full year in 2012, financing costs associated with the expanded capacity under the ABL
Revolver, interest expense associated with the Statoil agreement related to the Delaware City restart and the write
off of $4.4 million in deferred financing costs on debt that was repaid from the proceeds of our senior secured
notes offering.
Income Tax Expense—As a limited liability company, the members of PBF LLC are required to include
their proportionate share of PBF LLC’s taxable income or loss on their respective tax returns. Accordingly, our
consolidated financial statements do not include a benefit or provision for income taxes for periods prior to the
completion of our initial public offering on December 18, 2012. However, we generally made distributions to our
59
members, per the terms of the PBF LLC limited liability agreement, related to such taxes. Effective with the
completion of the initial public offering of PBF Energy, we recognize an income tax expense or benefit in our
consolidated financial statements based on our allocable share of PBF LLC’s pre-tax income (loss), which was
approximately 24.4% for the period from December 18, 2012 to December 31, 2012. We do not recognize any
income tax expense or benefit related to the noncontrolling interest in PBF LLC.
Noncontrolling Interest—As a result of our initial public offering and the related reorganization transactions,
PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing
member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its
subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, and records a
noncontrolling interest for the economic interest in PBF Energy held by the noncontrolling PBF LLC Series A
Unit holders. Noncontrolling interest on the consolidated statement of operations represents the portion of
earnings or loss attributable to the economic interest in PBF LLC held by the pre-IPO owners of PBF LLC,
which was approximately 75.6% for the period from the completion of our initial public offering, or
December 18, 2012, to December 31, 2012 and all earnings prior to the IPO. Noncontrolling interest on the
balance sheet represents the portion of net assets of PBF Energy attributable to the pre-IPO owners of PBF LLC,
based on the number of PBF LLC Series A units held by such holders. The noncontrolling interest ownership
percentage as of December 18, 2012 and December 31, 2012 was approximately 75.6%. The carrying amount of
the noncontrolling interest on our consolidated balance sheet attributable to the noncontrolling interest is not
equal to 75.6% due to the effect of income taxes and related agreements that pertain solely to PBF Energy.
2011 Compared to 2010
Overview—Net income was $242.7 million for the year ended December 31, 2011 compared to a net loss of
$44.4 million for the year ended December 31, 2010. During most of 2010, we were a development stage
company focused on the acquisition of oil refineries and other downstream assets in North America and activities
to turnaround, reconfigure and re-start our Delaware City refinery. Our net loss in 2010 was related to those
activities, plus the results of operations of our Paulsboro refinery for the period from December 17, 2010 to
December 31, 2010. Our 2011 net income primarily reflects a full year’s operation of our Paulsboro refinery, the
results of our Toledo refinery, which we acquired on March 1, 2011, and the results of our Delaware City
refinery, which we began re-starting in June 2011 and which was fully operational in October 2011.
Revenues—Revenues totaled $15.0 billion for the year ended December 31, 2011 compared to
$210.7 million in the year ended December 31, 2010. The revenue increase was primarily due to the operations
of our Paulsboro and Toledo refineries, and the commencement of refining operations at our Delaware City
refinery, which became operational in October 2011. The total throughput rate and barrels sold rate at our
Paulsboro refinery averaged 151,400 bpd and 151,700 bpd, respectively, during the year ended December 31,
2011. The total throughput rate and barrels sold rate at our Toledo refinery averaged 151,400 bpd and
160,800 bpd, respectively, during the period from March 1, 2011 to December 31, 2011. We began re-starting
our Delaware City refinery during June 2011 and it became operational in October 2011. Its throughput rate and
barrels sold rate averaged approximately 126,600 bpd and 116,200 bpd, respectively, for the period from June
2011 through December 31, 2011. Our 2010 revenues were primarily related to consulting services that we
provided to third parties, minor terminaling operations at our Delaware City refinery beginning June 1, 2010, and
revenue from our Paulsboro refinery from December 17, 2010 to December 31, 2010. During this period, the
refinery had an average throughput rate of approximately 143,800 bpd.
Gross Margin—Non-GAAP gross margin totaled $1,105.2 million, or $8.59 per barrel of throughput, for the
year ended December 31, 2011 compared to $6.7 million, or $3.05 per barrel of throughput for the year ended
December 31, 2010, an increase of $1,098.5 million. Gross margin totaled $418.0 million, or $3.25 per barrel of
throughput, for the year ended December 31, 2011 compared to a loss of $4.9 million, or $2.27 per barrel of
throughput, for the year ended December 31, 2010, an increase of $422.9 million. The increase in non-GAAP
60
gross margin and gross margin in 2011 was due to the acquisition of the Toledo refinery, a full year of operations
at the Paulsboro refinery, and the re-start of the Delaware City refinery during the year. Additionally, the increase
in non-GAAP gross margin and gross margin was also driven by strong margins for most of the products we
produce and wider crude oil price differentials.
Average industry refining margins and crude oil price differentials were stronger in 2011 as compared to
2010. The WTI (Chicago) 4-3-1 industry crack spread was approximately 169.1% higher in 2011 compared to
2010. The Dated Brent/WTI differential and Dated Brent/Maya differentials were $16.17 per barrel and $3.36 per
barrel higher, respectively, in 2011 than in 2010. In 2011, we believe these industry refining margins and crude
oil price differentials were impacted by supply limitations of WTI crude stored at Cushing, Oklahoma which
depressed the price of WTI. In addition, the demand for crude oil increased which, in turn, increased prices for
non-WTI crude worldwide. As a result, the differential between light and heavy barrels widened. A strong Dated
Brent/WTI crude differential has a significant positive impact on Toledo’s gross margin because its primary
feedstock is mainly WTI and WTI based light, sweet crude oil. A wide Dated Brent/Maya crude differential, our
proxy for the light/heavy differential, has a positive impact on Paulsboro and Delaware City as both refineries
process a large slate of medium and heavy, sour crude oil that is priced at a discount to light, sweet crude oil.
Demand for transportation fuels has generally been higher in the spring and summer months than during the
fall and winter months. As a result, we expect our operating results for the second and third quarters will
generally be higher than for the first and fourth quarters.
Operating Expenses—Operating expenses totaled $658.8 million, or $5.12 per barrel of throughput, for the
year ended December 31, 2011 compared to $25.1 million for the year ended December 31, 2010, an increase of
$633.7 million. Our operating expenses principally consist of salaries and employee benefits, maintenance,
energy and catalyst and chemicals. Operating expenses for 2011 include our Paulsboro refinery for the entire year
and our Toledo refinery from March 1, 2011 through December 31, 2011. During 2011, our Delaware City
refinery was undergoing a turnaround and reconfiguration and we began re-starting the refinery in June 2011. It
was fully operational in October 2011. During 2010, our operating expenses included expenses associated with
the Delaware City turnaround and reconfiguration projects, minor terminaling operations, and the operating
expenses of our Paulsboro refinery from December 17, 2010 to December 31, 2010. Our consolidated operating
expense per barrel of $5.12 for the year ended December 31, 2011 may not be indicative of our future
performance, primarily because it included the operating expenses of Delaware City prior to the period we began
re-starting the refinery and during the re-start period which began in June 2011.
General and Administrative Expenses—General and administrative expenses totaled $86.2 million for the
year ended December 31, 2011 compared to $15.9 million for the year ended December 31, 2010, an increase of
$70.3 million or 443.4%. The increase is primarily attributable to increased personnel, facilities and other
infrastructure costs necessary to support our three operating oil refineries in 2011. During 2010, we were
primarily focused on completing the acquisitions of our three refineries and starting the process of building out
our infrastructure to support our transition from a development stage company to an operating entity.
Acquisition-related Expenses —Acquisition-related expenses totaled $0.7 million for the year ended
December 31, 2011 compared to $6.1 million for the year ended December 31, 2010, a decrease of $5.4 million
or 88.0%. Acquisition related expense in 2010 represented consulting and legal expenses related to the Paulsboro
and Toledo acquisitions and other pending or non-consummated acquisitions. In addition, we capitalized
$4.3 million in acquisition related costs associated with our acquisition of the Delaware City assets. Our
acquisition related expenses in 2011 were primarily related to Toledo.
Depreciation and Amortization Expense—Depreciation and amortization expense totaled $53.7 million for
the year ended December 31, 2011 compared to $1.4 million for the year ended December 31, 2010, an increase
of $52.3 million. The increase was principally due to a year of Paulsboro activity, the acquisition of Toledo in
March 2011, commencement of depreciation in July 2011 related to the beginning of re-start activity for
61
Delaware City, and capital expenditure activity. In the comparable period in 2010, depreciation expense related
primarily to our Paulsboro refinery for the period from December 17, 2010 to December 31, 2010.
Change in Fair Value of Catalyst Leases—Change in the fair value of catalyst leases represented a gain of
$7.3 million for the year ended December 31, 2011 compared to a loss of $1.2 million for the year ended
December 31, 2010. This gain or loss relates to the change in value of the precious metals underlying the sale
leaseback of the Delaware City refinery and Toledo refinery precious metals catalyst, which we are obligated to
repurchase at fair market value at the lease termination date.
Change in Fair Value of Contingent Consideration—Change in the fair value of contingent consideration
was $5.2 million for the year ended December 31, 2011, compared to zero in 2010. This change represents the
increase in the estimated fair value of the contingent consideration we expect to pay in connection with our
acquisition of the Toledo refinery.
Interest (Expense) Income—Interest expense totaled $65.1 million for the year ended December 31, 2011
compared to $1.4 million for the year ended December 31, 2010. We incurred long-term debt in connection with
our acquisitions of Delaware City, Paulsboro and Toledo, giving rise to interest expense. We also incurred
interest expense in connection with our crude and feedstock supply agreements with Statoil and MSCG and letter
of credit fees associated with the purchase of certain crude oils.
Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance that are calculated and
presented on the basis of methodologies other than in accordance with U.S. GAAP. These measures should not
be considered a substitute for, or superior to, measures of financial performance prepared in accordance with
U.S. GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other
companies.
Adjusted Pro forma Net Income (Loss)
We utilize results presented on an Adjusted Pro Forma basis that exclude certain items relating to our initial
public offering and also reflects an assumed exchange of all PBF LLC Series A Units for shares of Class A
common stock of PBF Energy. We believe that these Adjusted Pro Forma measures, when presented in
conjunction with comparable U.S. GAAP measures, are useful to investors to compare our results across
different periods and to facilitate an understanding of our operating results. The differences between Adjusted
Pro Forma and U.S. GAAP results are as follows:
1.
2.
Assumed Exchange of PBF LLC Series A Units for shares of PBF Energy Class A common stock. As a
result of the assumed exchange of PBF LLC Series A Units, the noncontrolling interest related to these
units is converted to controlling interest. Management believes that it is useful to provide the per-share
effect associated with the assumed exchange of all PBF LLC Series A Units.
Income Taxes. Prior to the initial public offering we were organized as a limited liability company
treated as a “flow-through” entity for income tax purposes, and even after our IPO, not all of our
earnings are subject to corporate-level income taxes. Adjustments have been made to the Adjusted Pro
Forma tax provisions and earnings to assume that we had adopted our post-IPO corporate tax structure
for all periods presented and are taxed as a C corporation in the U.S. at the prevailing corporate rates.
These assumptions are consistent with the assumption in clause 1 above that all PBF LLC Series A
Units are exchanged for shares of PBF Energy Class A common stock, as the assumed exchange would
change the amount of our earnings that is subject to corporate income tax.
3.
Elimination of Certain Initial Public Offering-Related Expenses. Adjusted Pro Forma results for 2012,
also exclude one-time charges relating to our initial public offering. Management believes that this
adjustment results in a more meaningful comparison with prior and succeeding period results.
62
The following table reconciles our Adjusted Pro Forma results with our results presented in accordance with
U.S. GAAP for the years ended December 31, 2012, 2011 and 2010:
Net income (loss) attributable to PBF Energy Inc.
Add: IPO-related expenses(1)
Add: Net income (loss) attributable to the noncontrolling
interest(2)
Less: Income tax (expense) benefit(3)
Adjusted pro forma net income (loss)
Year Ended
December 31,
2012
2011
2010
$
$
1,956
8,187
— $
—
—
—
802,081
(319,732)
242,671
(95,758)
(44,357)
17,503
$
492,492
$
146,913
$
(26,854)
Pro forma shares outstanding—diluted(4)
97,230,904
97,230,904
97,230,904
Adjusted pro forma net income (loss) per fully exchanged, fully
diluted shares outstanding
$
5.07
$
1.51
$
(0.28)
(1) Represents the elimination of one-time charges associated with our initial public offering.
(2) Represents the elimination of the noncontrolling interest associated with the ownership of existing
holders PBF LLC Series A Units, as if the holders had fully exchanged their Series A Units for shares
of our Class A common stock.
(3) Represents an adjustment to reflect the Company’s current effective corporate tax rate of
approximately 39.5% applied to all periods presented. The adjustment assumes the full exchange of
existing PBF LLC Series A Units as described in (2) above.
(4) Represents the weighted-average fully diluted shares outstanding assuming the exchange of all PBF
LLC Series A Units and common stock equivalents for shares of our Class A common stock.
Non-GAAP Gross Margin
Non-GAAP gross margin is defined as gross margin excluding depreciation expense related to the refineries.
We believe non-GAAP gross margin is an important measure of operating performance and provides useful
information to investors because it is a better metric comparison for the industry refining margin benchmarks, as
the refining margin benchmarks do not include a charge for depreciation expense. In order to assess our operating
performance, we compare our Non-GAAP gross margin (revenue less cost of sales) to industry refining margin
benchmarks and crude oil prices as defined in the table below.
Non-GAAP gross margin should not be considered an alternative to gross margin, operating income, net
cash flows from operating activities or any other measure of financial performance or liquidity presented in
accordance with GAAP. Non-GAAP gross margin presented by other companies may not be comparable to our
presentation, since each company may define this term differently. The following table presents a reconciliation
of Non-GAAP gross margin to the most directly comparable GAAP financial measure, gross margin, on a
historical basis, as applicable, for each of the periods indicated:
Reconciliation of gross margin to Non-GAAP gross margin:
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add:
Year Ended December 31,
2012
2011
2010
(in thousands)
$1,046,598
$ 417,962
($ 4,895)
Refinery operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refinery depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
738,824
84,187
635,517
51,696
11,052
543
Non-GAAP gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,869,609
$1,105,175
$ 6,700
63
Paulsboro Refining Business—PBF LLC’s Predecessor
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales, excluding depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP gross margin (1)
Operating expenses, excluding depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income tax expense (benefit)
Income tax expense (benefit)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period from
January 1, 2010
through
December 16, 2010
(in thousands)
$ 4,708,989
4,487,825
221,164
259,768
14,606
895,642
66,361
(1,015,213)
500
(1,014,713)
(322,962)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (691,751)
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(90,704)
(1) Non-GAAP gross margin is defined as gross margin excluding direct operating expenses and
depreciation expense related to the refineries. We believe non-GAAP gross margin is an important
measure of operating performance and provides useful information to investors because it is a better
metric comparison for the industry refining margin benchmarks, as the refining margin benchmark do
not contemplate a charge for operating expenses and depreciation expense. In order to assess our
operating performance, we compare our non-GAAP gross margin (revenue less cost of sales) to
industry refining margin benchmarks and crude oil prices as shown in the table below.
Non-GAAP gross margin should not be considered an alternative to gross margin, operating income,
net cash flows from operating activities or any other measure of financial performance or liquidity
presented in accordance with GAAP. Non-GAAP gross margin presented by other companies may not
be comparable to our presentation, since each company may define this term differently. The following
table presents a reconciliation of non-GAAP gross margin to the most directly comparable GAAP
financial measure, gross margin, on a historical basis, as applicable, for each of the periods indicated:
Reconciliation of gross margin to Non-GAAP gross margin:
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add:
Period from
January 1, 2010
through
December 16, 2010
(in thousands)
$ (90,704)
Refinery operating expenses . . . . . . . . . . . . . . . . . . . . . . . .
Refinery depreciation expense . . . . . . . . . . . . . . . . . . . . . .
259,768
52,100
Non-GAAP gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$221,164
64
Period from
January 1, 2010
through
December 16, 2010
Market Indicators (a)
(dollars per barrel, except as noted)
Dated Brent crude oil
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
West Texas Intermediate (WTI) crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crack Spreads
Dated Brent (NYH) 2-1-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WTI (Chicago) 4-3-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crude Oil Differentials
Dated Brent (foreign) less WTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dated Brent less Maya (heavy, sour)
Dated Brent less WTS (sour) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dated Brent less ASCI (sour) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WTI less WCS (heavy, sour) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WTI less Bakken (light, sweet) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
WTI less Syncrude (light, sweet)
Natural gas (dollars per MMBTU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Operating Information
Production (barrels per day in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crude oil and feedstocks throughput (barrels per day in thousands) . . . . . . . . . . . . . . . . . . . . . .
Total crude oil and feedstocks throughput (millions of barrels) . . . . . . . . . . . . . . . . . . . . . . . . . .
$79.01
$79.01
$ 9.40
$ 8.92
$ 0.00
$ 9.20
$ 2.13
$ 1.59
$13.61
$ 3.13
$ (0.17)
$ 4.39
153.0
154.0
53.9
(a) As reported by Platts.
Period from January 1, 2010 through December 16, 2010
Overview—Net loss was $691.8 million in the period from January 1, 2010 through December 16, 2010,
driven primarily by the $895.6 million impairment charge discussed below. Excluding the charge, the pretax loss
would have been $119.1 million. The operating loss resulted from narrow margins on refined products and high
operating costs to maintain the refinery.
Operating Revenues—Operating revenues totaled $4.7 billion in the 2010 period based on an average
throughput rate of 154,000 bpd and average revenue of $87.37 per barrel.
Cost of Sales—Cost of sales totaled $4.5 billion in the 2010 period. Gross margin per barrel averaged $4.10
in 2010.
Expenses—Operating expenses totaled $259.8 million or $4.82 per barrel. General and administrative
expenses totaled $14.6 million in the 2010 period.
Asset impairment Loss—Asset impairment loss totaled $895.6 million due to the write-down of assets to
their fair value in connection with the sale of the refinery to PBF.
Depreciation and Amortization Expense—Depreciation and amortization expense totaled $66.4 million in
the 2010 period.
Interest and Other Income and expense—Interest and other income totaled $0.5 million in the 2010 period
mainly attributable to the reversal of tax related accruals that were reversed upon expiration of the statutory audit
period in 2010.
Income Tax Expense (Benefit)—Income tax benefit totaled $323.0 million in the 2010 period due to the pre-
tax loss in 2010.
65
Liquidity and Capital Resources
Overview
Our primary source of liquidity is our cash flows from operations and borrowing availability under our
credit facilities, as more fully described below. We believe that our cash flows from operations and available
capital resources will be sufficient to meet our capital expenditure, working capital, dividend payments and debt
service requirements for the next twelve months. However, our ability to generate sufficient cash flow from
operations depends, in part, on oil market pricing and general economic, political and other factors beyond our
control. We believe we could, during periods of economic downturn, access the capital markets and/or other
available financial resources or reduce our capital and discretionary expenditure plans to strengthen our financial
position.
Cash Flow Analysis
Cash Flows from Operating Activities
Net cash provided by operating activities was $812.4 million for the year ended December 31, 2012
compared to net cash provided by operating activities of $249.3 million for the year ended December 31, 2011.
During the 2011 period, our cash flows reflect only ten months of operations of our Toledo refinery, which was
acquired on March 1, 2011, and limited operations at our Delaware City refinery, which was not fully operational
until October 2011. Our operating cash flows for the year ended December 31, 2012 included our net income of
$804.0 million, plus net non-cash charges relating to depreciation and amortization of $97.7 million, pension and
other post retirement benefits of $12.7 million, changes in the fair value of our catalyst lease and Toledo
contingent consideration obligations of $6.4 million, change in the fair value of our inventory repurchase
obligations of $4.6 million, the write-off of unamortized deferred financing fees related to retired debt of
$4.4 million and stock-based compensation of $2.9 million, partially offset by a gain on asset sales of
$2.3 million. In addition, net changes in working capital used $118.0 million in cash driven by increases in
hydrocarbon purchases and sales volumes and their associated impact on inventory, accounts receivable, and
hydrocarbon-related liabilities. Our operating cash flows for the year ended December 31, 2011 included our net
income of $242.7 million, plus net non-cash charges relating to depreciation and amortization of $56.9 million,
pension and other post retirement benefits of $9.8 million, change in the fair value of the Toledo contingent
consideration of $5.2 million and stock-based compensation of $2.5 million, change in the fair value of our
inventory repurchase obligations of $25.3 million, partially offset by changes in the fair value of our catalyst
lease obligations of $7.3 million, and net cash used in working capital of $85.8 million.
Net cash provided by operating activities was $249.3 million for the year ended December 31, 2011
compared to net cash used in operating activities of $1.2 million for the year ended December 31, 2010. During
2011, our operations were comprised primarily of a full year of operations of our Paulsboro refinery, ten months
of operations of our Toledo refinery, which was acquired on March 1, 2011, and activities to turnaround,
reconfigure and re-start our Delaware City refinery. We began re-starting our Delaware City refinery in June
2011 and it was fully operational in October 2011. During most of 2010, we were a development stage company
focused on the acquisition of oil refineries and other downstream assets in North America and activities to
turnaround, reconfigure and re-start our Delaware City refinery. Our cash flow in 2010 was related to those
activities, plus the results of operations of our Paulsboro refinery for the period from December 17, 2010 to
December 31, 2010.
Cash Flows from Investing Activities
Net cash used in investing activities was $219.3 million for the year ended December 31, 2012 compared to
net cash used in investing activities of $739.2 million for the year ended December 31, 2011. The net cash flows
used in investing activities in the 2012 period was comprised of capital expenditures totaling $175.9 million,
expenditures for turnarounds of $38.6 million, primarily at our Toledo refinery, and expenditures for other assets
of $8.2 million, partially offset by $3.4 million in proceeds from the sale of assets. Net cash used in investing
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activities for the year ended December 31, 2011 consisted primarily of the acquisition of the Toledo refinery of
$168.2 million, capital expenditures totaling $488.7 million, primarily related to the reconfiguration and re-start
of our Delaware City refinery, expenditures for a turnaround at our Paulsboro refinery of $62.8 million and
expenditures for other assets of $23.3 million slightly offset by $4.7 million in proceeds from the sale of assets.
Net cash used in investing activities was $739.2 million for the year ended December 31, 2011 compared to
net cash used in investing activities of $501.3 million for the year ended December 31, 2010. Net cash used in
investing activities for the year ended December 31, 2010 were comprised of cash paid for the acquisition of
Delaware City for $224.3 million, cash paid for the acquisition of the Paulsboro refinery of $204.9 million, $69.1
million in expenditures primarily for the reconfiguration and re-start of the Delaware City refinery, and $3.0
million for other capital expenditures.
Cash Flows from Financing Activities
Net cash used in financing activities was $357.4 million for the year ended December 31, 2012 compared to
net cash provided by financing activities of $384.6 million for the year ended December 31, 2011. For the 2012
period, net cash used in financing activities consisted primarily of purchases of PBF LLC Series A units from
existing unit holders of $571.2 million, repayments of $484.6 million of long-term debt, net repayments on the
ABL credit facility of $270.0 million, a contingent consideration payment related to the Toledo acquisition of
$103.6 million, cash distributions to PBF LLC’s members of $161.0 million, $26.1 million for deferred financing
costs, and $8.4 million for payments related to initial public offering costs, partially offset by net proceeds from
the senior secured notes offering of $665.8 million, net proceeds from the sale of shares of Class A common
stock in our initial public offering of $579.1 million, proceeds of $9.5 million from the Paulsboro catalyst lease
and proceeds of $13.1 million from the exercise of PBF LLC warrants and options. For the year ended
December 31, 2011, cash provided by financing activities consisted primarily of capital contributions from
members of PBF LLC of $408.4 million, proceeds from the issuance of long-term debt of $488.9 million and
proceeds from catalyst leases of $18.6 million, partially offset by principal repayments of $299.6 million on a
seller note for inventory, repayments of long-term debt of $220.4 million and $11.2 million for deferred
financing and other costs.
Net cash provided by financing activities was $384.6 million for the year ended December 31, 2011
compared to $639.2 million for the year ended December 31, 2010. Net cash provided by financing activities was
$639.2 million for the year ended December 31, 2010. Cash provided by financing activities consisted of capital
contributions from members of PBF LLC of $483.1 million; proceeds from the Delaware Economic
Development Authority Loan in connection with the Delaware City acquisition of $20.0 million; proceeds from
the Delaware City catalyst sale and leaseback of $17.7 million; proceeds from a term loan of $125.0 million; less
the payment of deferred financing fees totaling $6.6 million.
Senior Secured Notes
On February 9, 2012, PBF Holding and its wholly-owned subsidiary, PBF Finance Corp., issued $675.5
million aggregate principal amount of 8.25% Senior Secured Notes due 2020. The net proceeds from the offering
of approximately $665.8 million were used to repay our Paulsboro Promissory Note in the amount of $150.6
million, our Term Loan Facility in the amount of $123.8 million, our Toledo Promissory Note in the amount of
$181.7 million, and to reduce indebtedness under the ABL Revolving Credit Facility. Our Executive Chairman of
the Board of Directors, and certain of our other executives, purchased $25.5 million aggregate principal amount
of the senior secured notes.
The Senior Secured Notes are secured on a first-priority basis by substantially all of the present and future
assets of PBF Holding and its subsidiaries (other than assets securing the ABL Revolving Credit Facility). As of
December 31, 2012, payment of the Senior Secured Notes is jointly and severally guaranteed by all of PBF
Holding’s subsidiaries. PBF Holding has optional redemption rights to repurchase all or a portion of the Senior
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Secured Notes at varying prices equal to no less than 100% of the principal amounts of the notes plus accrued
and unpaid interest. The holders of the Senior Secured Notes have repurchase options exercisable only upon a
change in control, certain asset sale transactions, or in event of a default as defined in the indenture agreement. In
addition, the Senior Secured Notes contain covenant restrictions limiting certain types of additional debt, equity
issuances, and payments. PBF Holding is in compliance with the covenants as of December 31, 2012.
Credit Facilities
ABL Revolving Credit Facility
On May 31, 2011, PBF Holding amended its ABL Revolving Credit Facility with UBS AG, Stamford
Branch, as administrative agent and co-collateral agent and certain other lenders to increase its size to $500.0
million by including certain inventory and accounts receivable of the Toledo refinery in the borrowing base. A
portion of the proceeds of the ABL Revolving Credit Facility was used on the closing date thereof to repay in full
all amounts then outstanding under and to terminate the Products and Intermediates Inventory Promissory Note,
dated as of March 1, 2011, in an aggregate principal amount equal to $299.6 million, issued by Toledo Refining
in favor of Sunoco. In March, August, and September 2012, we amended the ABL Revolving Credit Facility
again to increase the aggregate size to $965.0 million. The ABL Revolving Credit Facility was amended and
restated on October 26, 2012 to increase the maximum availability to $1.375 billion, extend the maturity date to
October 26, 2017, and amend the borrowing base to include non-U.S. inventory, and was further amended on
December 28, 2012 to increase the maximum availability to $1.575 billion. The amended and restated ABL
Revolving Credit facility includes an accordion feature which allows for commitments of up to $1.8 billion. On
an ongoing basis, the ABL Revolving Credit Facility is available to PBF Holding and its subsidiaries for working
capital and other general corporate purposes.
The ABL Revolving Credit Facility contains customary covenants and restrictions on the activities of PBF
Holding and its subsidiaries, including, but not limited to, limitations on the incurrence of additional
indebtedness; liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions and
prepayment of other debt; distributions, dividends and the repurchase of capital stock; transactions with affiliates;
the ability to change the nature of our business or our fiscal year; the ability to amend the terms of the senior
secured notes facility documents; and sale and leaseback transactions. As of December 31, 2012, we were in
compliance with these covenants.
As of December 31, 2012, the ABL Revolving Credit Facility provided for revolving loans of up to an
aggregate of $1.575 billion, a portion of which was available in the form of letters of credit. The amount
available for borrowings and letters of credit under the ABL Revolving Credit Facility is calculated according to
a “borrowing base” formula based on (1) 90% of the book value of eligible accounts receivable with respect to
investment grade obligors plus (2) 85% of the book value of eligible accounts receivable with respect to non-
investment grade obligors plus (3) 80% of the cost of eligible hydrocarbon inventory plus (4) 100% of cash and
cash equivalents in deposit accounts subject to a control agreement. The borrowing base is subject to customary
reserves and eligibility criteria and in any event cannot exceed $1.575 billion. As of December 31, 2012, there
were no outstanding borrowings under the ABL Revolving Credit Facility. Additionally, we had $449.7 million
in standby letters of credit issued and outstanding as of that date.
All obligations under the ABL Revolving Credit Facility are guaranteed (solely on a limited recourse basis)
to the extent required to support the lien described in clause (y) below by PBF LLC, PBF Finance, and each of
our domestic operating subsidiaries and secured by a lien on (y) PBF LLC’s equity interests in PBF Holding and
(z) substantially all of the assets of the borrowers and the subsidiary guarantors (subject to certain exceptions).
The lien of the ABL Revolving Credit Facility lenders ranks first in priority with respect to the following: all
deposit accounts (other than zero balance accounts, cash collateral accounts, trust accounts and/or payroll
accounts, all of which are excluded from the collateral); all accounts receivables; all hydrocarbon inventory
(other than the Saudi crude oil pledged under the letter of credit facility); to the extent evidencing, governing,
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securing or otherwise related to the foregoing, all general intangibles, chattel paper, instruments, documents,
letter of credit rights and supporting obligations; and all products and proceeds of the foregoing, (collectively, the
“Revolving Loan Priority Collateral”). As a result of the payment in full of the Term Loan Facility, the Paulsboro
Promissory Note and the Toledo Promissory Note with the net cash proceeds of the senior secured notes offering
in February 2012, the ABL Revolving Credit Facility is now secured solely by the Revolving Loan Priority
Collateral and the lien on the other assets previously part of the ABL Revolving Credit Facility collateral was
released.
Letter of Credit Facility
PBF Holding, Paulsboro Refining and Delaware City Refining were party to a letter of credit facility with
BNP Paribas (Suisse) SA, or BNP. The letter of credit facility was terminated in December 2012.
Cash Balances
As of December 31, 2012, our cash and cash equivalents totaled $285.9 million. We also had $12.1 million
in restricted cash, which was included within deferred charges and other assets, net on our balance sheet. The
restricted cash represents a trust fund we acquired in connection with the Paulsboro refinery acquisition and
represents the estimated cost of environmental remediation obligations assumed.
Liquidity
As of December 31, 2012, our total liquidity, which is the sum of our cash and cash equivalents plus the
amount of availability under the ABL Revolving Credit Facility, totaled approximately $599.2 million.
Working Capital
Working capital at December 31, 2012 was $704.8 million, consisting of $2,307.9 million in total current
assets and $1,603.1 million in total current liabilities. Working capital at December 31, 2011 was $286.4 million,
consisting of $1,946.5 million in total current assets and $1,660.1 million in total current liabilities. Our working
capital for financial reporting purposes is significantly impacted by the way we account for our crude and
feedstock and product offtake agreements as more fully described below.
Crude and Feedstock Supply Agreements
We acquire crude oil for our Paulsboro and Delaware City refineries under supply agreements whereby
Statoil generally purchases the crude oil requirements for each refinery on our behalf and under our direction.
Our agreement with Statoil for Paulsboro will terminate effective March 31, 2013, at which time we plan to
source Paulsboro’s crude oil and feedstocks internally. We amended our agreement with Statoil for Delaware
City in 2012 and the term was extended by Statoil through December 31, 2015. Statoil generally provides
transportation and logistics services, risk management services and holds title to the crude oil until we purchase it
as it enters the refinery process units. For our purchases of Saudi crude oil, we post letters of credit and arrange
for shipment. We pay for the crude when we are invoiced and the letter of credit is lifted. Under the Statoil
agreements, the amount of crude oil we own and the time we are exposed to market fluctuations is substantially
reduced. Under generally accepted accounting principles we record the inventory owned by Statoil on our behalf
as inventory with a corresponding accrued liability on our balance sheet because we have risk of loss while the
Statoil inventory is in our storage tanks and because we have an obligation to repurchase Statoil’s inventory upon
termination of the agreements at the then market value.
We have a similar agreement with MSCG to supply the crude oil requirements for our Toledo refinery,
under which we take title to MSCG’s crude oil at certain interstate pipeline delivery locations. Payment for the
crude oil under the Toledo agreement is due three days after it is processed by us or sold to third parties. We do
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not have to post letters of credit for these purchases and the Toledo agreement allows us to price and pay for our
crude oil as it is processed, which reduces the time we are exposed to market fluctuations. We record an accrued
liability at each period-end for the amount we owe MSCG for the crude oil that we own but have not processed.
The accrued liability is based on the period-end market value, as it represents our best estimate of what we will
pay for the crude oil.
In connection with the crude and feedstock supply agreements for our Paulsboro and Delaware City
refineries, Statoil also purchases the refineries’ production of certain feedstocks or purchases feedstocks from
third parties on the refineries’ behalf. Legal title to the feedstocks is held by Statoil and stored in the refineries’
storage tanks until they are needed for further use in the refining process. At that time, the feedstocks are drawn
out of the storage tanks and purchased by the refineries. These purchases and sales are netted at cost and reported
within cost of sales. The feedstock inventory owned by Statoil remains on our balance sheet with a corresponding
accrued liability.
At December 31, 2012, the LIFO value of crude oil and feedstocks owned by Statoil included within
inventory on our balance sheet was $257.9 million. The corresponding accrued liability for such crude oil and
feedstocks was $266.2 million at that date.
Product Offtake Agreements
Our Paulsboro and Delaware City refineries sell their light finished products, certain intermediates and lube
base oils to MSCG under a products offtake agreement. Legal title transfers to MSCG as the products leave the
process units and enter the refinery storage facilities. On a daily basis MSCG, under a payment direction
agreement, pays the purchase price of certain finished products directly to Statoil, the counterparty to our crude
oil and feedstocks supply agreements, effectively netting our liability for crude and feedstock purchases. The
payment direction agreement for Paulsboro will terminate effective March 31, 2013. Any shortfall or overage in
the netting process is trued up between us and Statoil. Under generally accepted accounting principles, we defer
the revenue on finished product sales and retain the inventory owned by MSCG on our balance sheet until MSCG
ships the products out of our refinery storage facilities, which typically occurs within an average of six days.
In addition, MSCG purchases the daily production of certain intermediates and lube products. When needed
for additional blending or sales to third parties, the Paulsboro and Delaware City refineries repurchase the
intermediates or lubes from MSCG. These purchases and sales occur at the daily market price for the related
products and are netted in cost of sales at cost. The inventory of intermediates and lubes owned by MSCG remain
in inventory on our balance sheet and the net cash receipts result in a liability that is recorded at market price for the
volumes held in storage with any change in the market price being recorded in cost of sales. In December 2012, we
issued notices terminating the MSCG agreements for Paulsboro and Delaware City effective June 30, 2013.
At December 31, 2012, the LIFO value of light finished products, intermediates and lubes owned by MSCG
included within inventory on our balance sheet was $417.9 million. The corresponding deferred revenue for light
finished products and accrued liability for intermediates and lubes was $210.5 million and $270.4 million,
respectively.
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Contractual Obligations and Commitments
The following table summarizes our material contractual payment obligations as of December 31, 2012:
Long-term debt (a) . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payments on debt facilities (a)
. . . . . . . . .
Delaware Economic Development Authority
Loan (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Leases (c) . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations (d):
Crude Supply and Offtake Agreement . . . . . .
Other Supply and Capacity Agreements . . . .
Construction obligations . . . . . . . . . . . . . . . . . . . .
Refinery contingent consideration (e) . . . . . . . . . .
. . . . . . . . . . . . . . . .
Environmental obligations (f)
. . . . .
Pension and post-retirement obligations (g)
Tax receivable agreement obligations (h) . . . . . . .
Total contractual cash obligations . . . . . . . . . . . . .
Payments due by period
Total
Less than
1 year
1-3 Years
3-5 Years
More than
5 years
$ 718,942
442,853
$ 26,741
67,239
$ 16,701
130,921
$ — $ 675,500
116,188
128,505
—
190,687
—
43,683
—
61,445
—
45,205
—
40,354
536,594
507,830
16,481
21,358
15,287
70,332
160,011
$2,680,375
536,594
66,405
16,481
21,358
2,677
3,029
1,007
$785,214
—
97,619
—
—
1,635
5,801
29,200
$343,322
—
88,866
—
—
1,856
11,094
20,199
$295,725
—
254,940
—
—
9,119
50,408
109,605
$1,256,114
(a) Long-term Debt and Interest Payments on Debt Facilities
Long-term obligations represent (i) the repayment of indebtedness incurred in connection with the senior
secured notes offering; and (ii) the repayment of our catalyst lease obligations on their maturity dates.
Interest payments on debt facilities include cash interest payments on the senior secured notes, catalyst lease
obligation, plus cash payments for the commitment fee on the unused ABL Revolving Credit Facility and letter
of credit fees on the letters of credit outstanding at December 31, 2012. With the exception of our catalyst leases,
we have no long-term debt maturing before 2020 as of December 31, 2012.
(b) Delaware Economic Development Authority Loan
The Delaware Economic Development Authority Loan converts to a grant in tranches of $4.0 million
annually, starting at the one year anniversary of the Delaware City refinery’s “certified re-start date” provided we
meet certain criteria, all as defined in the loan agreement. We expect that we will meet the requirements to
convert the loan to a grant and that we will ultimately not be required to repay the $20.0 million loan. Our
Delaware Economic Development Authority Loan is further explained at the Delaware Economic Development
Authority Loan footnote in our consolidated financial statements, “Item 8. Financial Statements and
Supplementary Data.”
(c) Operating Leases
We enter into operating leases in the normal course of business, some of these leases provide us with the
option to renew the lease or purchase the leased item. Future operating lease obligations would change if we chose
to exercise renewal options and if we enter into additional operating lease agreements. Certain of our lease
obligations contain a fixed and variable component. The table above reflects the fixed component of our lease
obligations. The variable component could be significant. Our operating lease obligations are further explained in
the Commitments and Contingencies footnote to our financial statements, “Item 8. Financial Statements and
Supplementary Data.” During 2012, we entered into agreements to lease or purchase approximately 2,400 crude
railcars that will be utilized to transport crude by rail to our Delaware City refinery. Any such leases will commence
as the railcars are delivered. Railcar deliveries began in the fourth quarter of 2012. In addition, in January 2013 we
entered into an agreement to lease or purchase an additional 2,500 railcars that will also be utilized to transport
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crude by rail to our Delaware City refinery. We expect to begin taking delivery of these additional railcars in the
second quarter of 2013.
(d) Purchase Obligations
We have obligations to repurchase crude oil, feedstocks, certain intermediates and lube oils under various
crude supply and product offtake agreements with MSCG and Statoil as further explained at the Summary of
Significant Accounting Policies, Inventories and Accrued Expenses footnotes to our financial statements,
“Item 8. Financial Statements and Supplementary Data.”
Payments under Other Supply and Capacity Agreements include contracts for the supply of hydrogen,
steam, or natural gas to certain of our refineries, contracts for the treatment of wastewater, and contracts for
pipeline capacity. We enter into these contracts to ensure an adequate supply of energy or essential services to
support our refinery operations. Substantially all of these obligations are based on fixed prices. Certain
agreements include fixed or minimum volume requirements, while others are based on our actual usage. The
amounts included in this table are based on fixed or minimum quantities to be purchased and the fixed or
estimated costs based on market conditions as of December 31, 2012.
(e) Refinery Contingent Consideration
In connection with the Toledo acquisition, the seller will be paid an amount equal to 25% of the amount by
which the purchased assets’ EBITDA exceeds $125.0 million in a given calendar year through 2016, with a total
maximum payout of $125.0 million. The purchased assets’ EBITDA is calculated using calendar year earnings
we have earned solely from the purchase of Toledo including reasonable direct and allocated overhead expenses,
not to exceed a fixed amount in any calendar year, less interest expense, income tax expense and depreciation
and amortization expense as well as any significant extraordinary or non-recurring expenses, such as an asset
impairment loss and any fees or expenses incurred by us in connection with the Toledo acquisition. We paid
$103.6 million in April 2012 to Sunoco related to the amount of contingent consideration earned in 2011. The
remaining $21.4 million will be paid to Sunoco in April 2013.
(f) Environmental Obligations
In connection with the Paulsboro acquisition, we assumed certain environmental remediation obligations to
address existing soil and groundwater contamination at the site and acquired a trust fund established to meet the
state’s related financial assurance requirement, recorded as a liability in the amount of $12.1 million which
reflects the present value of the current estimated cost of the remediation obligations assumed based on
investigative work to-date. The undiscounted estimated costs related to these environmental remediation
obligations were $15.3 million as of December 31, 2012.
In connection with the acquisition of the Delaware City assets, the prior owners remain responsible, subject
to certain limitations, for certain pre-acquisition environmental obligations, including ongoing soil and
groundwater remediation at the site.
In connection with the Delaware City assets and Paulsboro refinery acquisitions, we, along with the seller,
purchased two individual ten year, $75.0 million environmental insurance policies to insure against unknown
environmental liabilities at each site.
In connection with the acquisition of Toledo, the seller initially retains, subject to certain limitations,
remediation obligations which will transition to us over a 20-year period.
In connection with the acquisition of all three of our refineries, we assumed certain environmental obligations
under regulatory orders unique to each site, including orders regulating air emissions from each facility.
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(g) Pension and Post-retirement Obligations
Pension and post-retirement obligations include only those amounts we expect to pay out in benefit
payments and are further explained at the Employee Benefit Plans footnote to our financial statements, “Item 8
Financial Statements and Supplementary Data.”
(h) Tax Receivable Agreement Obligations
We used a portion of the proceeds from our IPO to purchase PBF LLC Series A Units from the pre-IPO
owners of PBF LLC. In addition, the pre-IPO owners of PBF LLC may (subject to the terms of the exchange
agreement) exchange their PBF LLC Series A Units for shares of Class A common stock of PBF Energy on a
one-for-one basis. As a result of both the purchase of PBF LLC Series A Units and subsequent exchanges, PBF
Energy will become entitled to a proportionate share of the existing tax basis of the assets of PBF LLC. In addition,
the purchase of PBF LLC Series A Units and subsequent exchanges are expected to result in increases in the tax
basis of the assets of PBF LLC that otherwise would not have been available. Both this proportionate share and
these increases in tax basis may reduce the amount of tax that PBF Energy would otherwise be required to pay in
the future. These increases in tax basis may also decrease gains (or increase losses) on the future disposition of
certain capital assets to the extent tax basis is allocated to those capital assets. We have entered into a tax receivable
agreement with our pre-IPO owners of PBF LLC that provides for the payment by PBF Energy to our previous
owners of 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of (i) these
increases in tax basis and (ii) certain other tax benefits related to entering into the tax receivable agreement,
including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are
obligations of PBF Energy and not of PBF LLC or any of its subsidiaries.
PBF Energy expects to obtain funding for these payments by causing PBF Holding to make cash
distributions to PBF LLC, which, in turn, will distribute such amounts, generally as tax distributions, on a pro-
rata basis to its owners, which as of December 31, 2012 include the pre-IPO owners of PBF LLC holding a
75.6% interest and PBF Energy holding a 24.4% interest. The pre-IPO owners may reduce their ownership in
PBF LLC by exchanging their PBF LLC Series A Units for shares of PBF Energy Class A common stock. Such a
decrease in ownership would reduce subsequent pro-rata distributions, but may result in additional increases in
the tax basis of PBF Energy’s investment in PBF LLC and require PBF Energy to make increased payments
under the tax receivable agreement. Required payments under the tax receivable agreement also may increase or
become accelerated in certain circumstances, including certain changes of control. See “Item 1A. Risk Factors—
Risks Related to Our Organizational Structure and Our Class A Common Stock—In certain cases payments by us
under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize
in respect of the tax attributes subject to the tax receivable agreement. These provisions may deter a change in
control of our company.”
The table above reflects our estimated timing of payments under the tax receivable agreement assuming no
material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that
are subject to the tax receivable agreement.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of December 31, 2012, other than outstanding letters of
credit in the amount of approximately $449.7 million.
Critical Accounting Policies
The following summary provides further information about our critical accounting policies that involve
critical accounting estimates and should be read in conjunction with Note 2 to our financial statements, “Item 8.
Financial Statements and Supplementary Data.”
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Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported revenues and expenses. Actual results could differ from those estimates.
Revenue and Deferred Revenue
We sell various refined products and recognize revenue related to the sale of products when there is
persuasive evidence of an agreement, the sales prices are fixed or determinable, collectability is reasonably
assured and when products are shipped or delivered in accordance with their respective agreements. Revenue for
services is recorded when the services have been provided.
Our Paulsboro and Delaware City refineries sell their light finished products, certain intermediates and lube
base oils to MSCG under products offtake agreements. On a daily basis, MSCG purchases and pays for the
refineries’ production of these products as they are produced, delivered to the refineries’ storage tanks and legal
title passes to MSCG. The inventory associated with these sales remains on our balance sheet and the revenue is
deferred until the products are shipped out of our storage facilities by MSCG, which typically occurs within an
average of six days. As a result, gross margin on these product sales is deferred until shipment occurs. In
December 2012, we gave notice that we will terminate the offtake arrangements with MSCG effective June 30,
2013, at which time we intend to market and independently sell the products currently purchased by MSCG.
Under the offtake agreements, our Paulsboro and Delaware City refineries also enter into purchase and sale
transactions of certain of their intermediates and lube base oils whereby MSCG purchases and pays for the
refineries’ production of certain intermediates and lube products as they are produced and legal title passes to
MSCG. The intermediate products are held in the refineries’ storage tanks until they are needed for further use in
the refining process. The refineries have the right to repurchase lube products and do so to supply other third
parties with that product. When the refineries need intermediates or when they repurchase lube products, the
products are drawn out of their storage tanks, title passes back to the refineries and MSCG is paid for those
products. These transactions are considered to be made in contemplation of each other and, accordingly, do not
result in the recognition of a sale when title passes from the refineries to the counterparty. Inventory remains at
cost, valued on a LIFO basis and the net cash receipts result in a liability that is recorded at market price for the
volumes held in storage with any change in the market price being recorded in costs of sales. The liability
represents the amount we expect to pay to repurchase the volumes in storage. In December 2012, we gave notice
that we will terminate the offtake arrangements with MSCG effective June 30, 2013, at which time we intend to
purchase from MSCG the certain intermediate and lube products owned by them at that date.
Our Paulsboro and Delaware City refineries sell and purchase feedstocks under supply agreements primarily
with Statoil. Statoil purchases the refineries’ production of certain feedstocks or purchases feedstocks from third
parties on the refineries’ behalf. Legal title to the feedstocks is held by Statoil and the feedstocks are held in the
refineries’ storage tanks until they are needed for further use in the refining process. At that time the feedstocks
are drawn out of the storage tanks and purchased by us. These purchases and sales are settled monthly at the daily
market prices related to those feedstocks. These transactions are considered to be made in the contemplation of
each other and, accordingly, do not result in the recognition of a sale when title passes from the refineries to the
counterparty. Inventory remains at cost and the net cash receipts result in a liability. The Statoil crude supply
agreement with Paulsboro will terminate effective March 31, 2013, at which time we intend to purchase from
Statoil the feedstocks owned by them at that date.
Inventory
Inventories are carried at the lower of cost or market. The cost of crude oil, feedstocks, blendstocks and
refined products is determined under the LIFO method using the dollar value LIFO method with increments
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valued based on average cost during the year. The cost of supplies and other inventories is determined principally
on the weighted average cost method.
Our Paulsboro and Delaware City refineries acquire substantially all of their crude oil from Statoil under our
crude supply agreements whereby we take title to the crude oil as it is delivered to our processing units. We have
risk of loss while the Statoil inventory is in our storage tanks. We are obligated to purchase all the crude oil held
by Statoil on our behalf upon termination of the agreements. In addition, we are obligated to purchase a fixed
volume of the Paulsboro feedstocks from Statoil when the arrangement is terminated. As a result of the purchase
obligations, we record the inventory of crude oil and feedstocks in the refineries’ storage facilities. The purchase
obligations contain derivatives that change in value based on changes in commodity prices. Such changes are
included in our cost of sales. Our agreement with Statoil for Paulsboro will terminate effective March 31, 2013,
at which time we plan to source crude oil and feedstocks internally.
For the period from March 1, 2011 through May 31, 2011, our Toledo refinery acquired substantially all of
its crude oil from MSCG under a crude oil supply agreement whereby we took title to the crude oil as it was
delivered to the refinery processing units. We had custody and risk of loss for MSCG’s crude oil stored on the
refinery premises. As a result, we recorded the crude oil in the Toledo refinery’s storage facilities as inventory
with a corresponding accrued liability. Effective June 1, 2011 we entered into a new supply agreement with
MSCG under which we take legal title to the crude oil at certain interstate pipeline delivery locations. We record
an accrued liability at each period-end for the amount we owe MSCG for the crude oil that we own but have not
processed. The accrued liability is based on the period-end market value, as it represents our best estimate of
what we will pay for the crude oil.
Environmental Matters
Liabilities for future clean-up costs are recorded when environmental assessments and/or clean-up efforts are
probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these
accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan
of action. Environmental liabilities are based on best estimates of probable future costs using currently available
technology and applying current regulations, as well as our own internal environmental policies. The actual
settlement of our liability for environmental matters could materially differ from our estimates due to a number of
uncertainties such as the extent of contamination, changes in environmental laws and regulations, potential
improvements in remediation technologies and the participation of other responsible parties.
Long-Lived Assets and Definite-Lived Intangibles
We review our long and finite lived assets for impairment whenever events or changes in circumstances
indicate their carrying value may not be recoverable. Impairment is evaluated by comparing the carrying value of
the long and finite lived assets to the estimated undiscounted future cash flows expected to result from the use of
the assets and their ultimate disposition. If such analysis indicates that the carrying value of the long and finite
lived assets is not considered to be recoverable, the carrying value is reduced to the fair value.
Impairment assessments inherently involve judgment as to assumptions about expected future cash flows
and the impact of market conditions on those assumptions. Although management would utilize assumptions that
it believes are reasonable, future events and changing market conditions may impact management’s assumptions,
which could produce different results.
Indefinite-lived Assets
We consider precious metals catalyst and linefill to be indefinite-lived assets as they are not expected to
deteriorate in their prescribed functions. These assets are not depreciated, but are assessed for impairment.
75
Deferred Turnaround Costs
Refinery turnaround costs, which are incurred in connection with planned major maintenance activities at
our refineries are capitalized when incurred and amortized on a straight-line basis over the period of time
estimated until the next turnaround occurs (generally three to five years).
Derivative Instruments
We are exposed to market risk, primarily related to changes in commodity prices for the crude oil and
feedstocks we use in the refining process as well as the prices of the refined products we sell. The accounting
treatment for commodity contracts depends on the intended use of the particular contract and on whether or not
the contract meets the definition of a derivative. Non-derivative contracts are recorded at the time of delivery.
All derivative instruments that are not designated as normal purchase or sales are recorded in our balance
sheet as either assets or liabilities measured at their fair values. Changes in the fair value of derivative
instruments that either are not designated or do not qualify for hedge accounting treatment or normal purchase or
normal sale accounting are recognized in income. Contracts qualifying for the normal purchase and sales
exemption are accounted for upon settlement. Prior to June 30, 2011 we did not apply hedge accounting to any of
our derivative instruments. Effective July 1, 2011, we elected fair value hedge accounting for certain derivatives
associated with our inventory repurchase obligations.
Derivative accounting is complex and requires management judgment in the following respects:
identification of derivatives and embedded derivatives; determination of the fair value of derivatives;
identification of hedge relationships; assessment and measurement of hedge ineffectiveness; and election and
designation of the normal purchases and sales exception. All of these judgments, depending upon their timing
and effect, can have a significant impact on earnings.
Income Taxes and Tax Receivable Agreement
As PBF LLC is a limited liability company treated as a “flow-through” entity for income tax purposes, there
is no benefit or provision for federal or state income tax in the accompanying financial statements for periods
prior to the closing of our initial public offering on December 18, 2012. Effective with the completion of our
initial public offering, we recognize an income tax expense or benefit in our consolidated financial statements
based on our allocable share of PBF LLC’s pre-tax income (loss). We do not recognize any income tax expense
or benefit related to the noncontrolling interest in PBF LLC.
Effective upon the completion of our initial public offering, we provide for deferred income taxes for
temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities at
each balance sheet date, using enacted tax rates expected to be in effect when the related taxes are expected to be
paid or received. A deferred tax asset may be reduced by a valuation allowance when we, after assessing the
probability of future taxable income and evaluating alternative tax planning strategies, determine that it is more
likely than not that the future tax benefit may not be realized. If future taxable income differs from our estimates
or if expected tax planning strategies are not available as anticipated, adjustments to the valuation allowance may
be needed. Deferred tax assets and liabilities may be adjusted in the future for the effect of changes in tax laws or
rates on the date of enactment.
Pursuant to the tax receivable agreement we entered into at the time of our initial public offering, we are
required to pay PBF LLC Series A Unit holders, who exchange their units for PBF Energy stock or whose units
we purchase, approximately 85% of the cash savings in income taxes that we realize as a result of the increase in
the tax basis of our interest in PBF LLC, including tax benefits attributable to payments made under the tax
receivable agreement. We have recognized a liability for the tax receivable agreement reflecting our estimate of
the undiscounted amounts that we expect to pay under the agreement. Our estimate of the tax agreement liability
76
is based on forecasts of future taxable income over the anticipated life of our future business operations,
assuming no material changes in the relevant tax law. The assumptions used in the forecasts are subject to
substantial uncertainty about our future business operations and the actual payments that we are required to make
under the tax receivable agreement could differ materially from current estimate. We must adjust the estimated
tax receivable agreement liability each time we purchase PBF LLC Series A Units or upon an exchange of PBF
LLC Series A Units for our Class A common stock. Such adjustments will be based on forecasts of future taxable
income and our future business operations at the time of such purchases or exchanges. Periodically, we may
adjust the liability based on an updated estimate of the amounts that we expect to pay, using assumptions
consistent with those used in our concurrent estimate of the deferred tax asset valuation allowance. These
periodic adjustments to the tax receivable liability, if any, may result in adjustments to our income tax expense
and deferred tax assets and liabilities.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements requiring adoption subsequent to December 31,
2012 that would have a significant impact on our results of operations or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, including changes in commodity prices and interest rates. Our primary
commodity price risk is associated with the difference between the prices we sell our refined products and the
prices we pay for crude oil and other feedstocks. We may use derivative instruments to manage the risks from
changes in the prices of crude oil and refined products, interest rates, or to capture market opportunities.
Commodity Price Risk
In order to realize value from our processing capacity, we must achieve a positive spread between the cost
of raw materials and the value of finished products (i.e., refinery gross product margin or crack spread). The
physical commodities that comprise our raw materials and finished goods are typically bought and sold at a spot
or index price that can be highly variable.
The prices of crude oil, refined products and other commodities are subject to fluctuations in response to
changes in supply, demand, market uncertainty and a variety of additional factors that are beyond our control.
The crude and feedstock supply agreements for our Paulsboro and Delaware City refineries allow us to take title
to and price our crude oil at locations in close proximity to our refineries, as opposed to the crude oil origination
point, reducing the time we are exposed to market fluctuations before the finished refined products are sold. Our
offtake agreements with MSCG for our Paulsboro and Delaware City refineries allow us to sell our light finished
products and certain intermediates and lube base oils as they are produced.
We carry inventories of crude oil, intermediates and refined products (“hydrocarbon inventories”) on our
balance sheet, the values of which are subject to fluctuations in market prices. Our hydrocarbon inventories
totaled approximately 14.4 million barrels and 14.6 million barrels at December 31, 2012 and 2011, respectively.
The average cost of our hydrocarbon inventories was approximately $101.89 and $101.93 per barrel on a LIFO
basis at December 31, 2012 and 2011, respectively. If market prices decline to a level below the average cost, we
may be required to write down the carrying value of our hydrocarbon inventories to market.
Our predominant variable operating cost is energy, which is comprised primarily of natural gas and
electricity. We are therefore sensitive to movements in natural gas prices. Assuming normal operating conditions,
we annually consume a total of approximately 37 million MMBTUs of natural gas amongst our three refineries.
Accordingly, a $1.00 per MMBTU change in natural gas prices would increase or decrease our natural gas costs
by approximately $37 million.
We periodically use non-trading derivative instruments to manage exposure to commodity price risks
associated with the purchase or sale of crude oil, finished products and natural gas to fuel our refinery operations.
77
We may also use non-trading derivative instruments to manage price risks associated with inventories above or
below a baseline we set for our target levels of hydrocarbon inventories. We may engage in the purchase and sale
of physical commodities, derivatives, options, over-the-counter products and various exchange-traded
instruments. We mark-to-market our derivative instruments and recognize the changes in their fair value in our
statements of operations.
Interest Rate Risk
During 2012, we amended the terms of our ABL Revolving Credit Facility to increase the size of our asset-
based revolving credit facility from $500.0 million to $1.575 billion. Borrowings under our ABL Revolving
Credit Facility bear interest at the Adjusted LIBOR Rate plus 1.75% to 2.50%, depending on our debt rating. If
this facility were fully drawn, a one percent change in the interest rate would increase or decrease our interest
expense by $15.8 million annually.
We also have interest rate exposure in connection with our Statoil and MSCG crude oil and offtake
agreements under which we pay a time value of money charge based on LIBOR.
Credit Risk
We are subject to risk of losses resulting from nonpayment or nonperformance by our customers. We will
continue to closely monitor the creditworthiness of customers to whom we grant credit and establish credit limits
in accordance with our credit policy.
Concentration Risk
MSCG and Sunoco accounted for 57% and 10%, respectively, of our total sales for the year ended
December 31, 2012 and 52% and 12%, respectively, of our total sales for the year ended December 31, 2011.
Sunoco and Statoil accounted for 10% and 28%, respectively, of total trade accounts receivable as of
December 31, 2012 and 19% and 11%, respectively, of total trade accounts receivable as of December 31, 2011.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning on page F-1 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is designed to provide
reasonable assurance that information which is required to be disclosed is accumulated and communicated to
management in a timely manner. Under the supervision and with the participation of our management, including
the Company’s principal executive officer and the principal financial officer, we have evaluated the effectiveness
of our system of disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of
December 31, 2012. Based on that evaluation, the Company’s principal executive officer and the principal
financial officer have concluded that the Company’s disclosure controls and procedures are effective at the
reasonable assurance level.
78
Internal Control over Financial Reporting
Management has not identified any changes in our internal control over financial reporting that occurred
during the period from December 18, 2012 through December 31, 2012 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal
control over financial reporting or an attestation report of the Company’s independent registered public
accounting firm due to a transition period established by rules of the Securities and Exchange Commission for
newly public companies.
ITEM 9B. OTHER INFORMATION
None.
79
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this Item will be contained in our 2013 Proxy Statement, incorporated
herein by reference.
We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer,
principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics is available
on our website at www.pbfenergy.com under the heading “Investors”. Any amendments to the Code of Business
Conduct and Ethics or any grant of a waiver from the provisions of the Code of Business Conduct and Ethics
requiring disclosure under applicable Securities and Exchange Commission rules will be disclosed on the
Company’s website.
See also Executive Officers of the Registrant under “Item 1. Business” of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this Item will be contained in our 2013 Proxy Statement, incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchasers
of Equity Securities—Securities Authorized for Issuance Under Equity Compensation Plans.”
Additional information required by this Item will be contained in our 2013 Proxy Statement, incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required under this Item will be contained in our 2013 Proxy Statement, incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this Item will be contained in our 2013 Proxy Statement, incorporated
herein by reference.
80
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) 1. Financial Statements. The consolidated financial statements of PBF Energy Inc. and subsidiaries,
required by Part II, Item 8, are included in Part IV of this report. See Index to Consolidated Financial Statements
beginning on page F-1.
2. Financial Statement Schedules and Other Financial Information. No financial statement schedules
are submitted because either they are inapplicable or because the required information is included in the
consolidated financial statements or notes thereto.
3. Exhibits. Filed as part of this Annual Report on Form 10-K are the following exhibits:
Number
Description
3.1
3.2
4.1
4.2
10.1†
10.2†
10.2.1
10.3†
10.3.1
Amended and Restated Certificate of Incorporation of PBF Energy Inc. (Incorporated by reference to
Exhibit 3.1 filed with PBF Energy Inc.’s Amendment No. 4 to Registration Statement on Form S-1
(Registration No. 333-177933))
Amended and Restated Bylaws of PBF Energy Inc. (Incorporated by reference to Exhibit 3.2
filed with PBF Energy Inc.’s Amendment No. 4 to Registration Statement on Form S-1 (Registration
No. 333-177933))
Amended and Restated Registration Rights Agreement of PBF Energy Inc. dated as of December 12,
2012 (Incorporated by reference to Exhibit 4.1 filed with PBF Energy Inc.’s Current Report on
Form 8-K dated December 18, 2012 (File No. 001-35764))
Indenture, dated as of February 9, 2012, among PBF Holding Company LLC, PBF Finance
Corporation, the Guarantors party thereto, Wilmington Trust, National Association and Deutsche
Bank Trust Company Americas (Incorporated by reference to Exhibit 4.2 filed with PBF Energy
Inc.’s Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-177933))
Asset Sale and Purchase Agreement, dated as of December 2, 2010, by and between
Toledo Refining Company, LLC and Sunoco, Inc. (R&M), as amended as of January 18, 2011, February
15, 2011 and February 28, 2011 (Incorporated by reference to Exhibit 10.3 filed with PBF Energy Inc.’s
Amendment No. 1 to Registration Statement on Form S-1 (Registration No. 333-177933))
Offtake Agreement, dated as of March 1, 2011, by and between Toledo Refining Company LLC and
Sunoco, Inc. (R&M) (Incorporated by reference to Exhibit 10.4 filed with PBF Energy Inc.’s
Amendment No. 1 to Registration Statement on Form S-1 (Registration No. 333-177933))
Assignment and Assumption Agreement, dated as of March 1, 2012, by and between Toledo
Refining Company LLC, PBF Holding Company LLC, and Sunoco, Inc. (R&M) (Incorporated by
reference to Exhibit 10.4.1 filed with PBF Energy Inc.’s Amendment No. 2 to Registration
Statement on Form S-1 (Registration No. 333-177933))
Amended and Restated Products Offtake Agreement, dated as of August 30, 2012, between Morgan
Stanley Capital Group Inc., PBF Holding Company LLC and Paulsboro Refining Company LLC
(Incorporated by reference to Exhibit 10.25 filed with PBF Energy Inc.’s Amendment No. 3 to
Registration Statement on Form S-1 (Registration No. 333-177933))
First Amendment to Amended and Restated Products Offtake Agreement, dated as of October 11,
2012, between Morgan Stanley Capital Group Inc., PBF Holding Company LLC and Paulsboro
Refining Company LLC (Incorporated by reference to Exhibit 10.25.1 filed with PBF Energy Inc.’s
Amendment No. 4 to Registration Statement on Form S-1 (Registration No. 333-177933))
81
Number
10.4†
10.4.1
10.5†
10.5.1
10.5.2
10.6†
10.6.1
10.7†
10.7.1†
10.8
Description
Second Amended and Restated Products Offtake Agreement, dated as of July 30, 2012, between
Morgan Stanley Capital Group Inc., Transmontaigne Product Services Inc., Delaware City Refining
Company LLC and PBF Holding Company LLC, amended as of September 1, 2012 (Incorporated by
reference to Exhibit 10.24 filed with PBF Energy Inc.’s Amendment No. 3 to Registration Statement
on Form S-1 (Registration No. 333-177933))
Second Amendment to Second Amended and Restated Products Offtake Agreement, dated as of
October 11, 2012, between Morgan Stanley Capital Group Inc., Transmontaigne Product Services
Inc., Delaware City Refining Company LLC and PBF Holding Company LLC (Incorporated by
reference to Exhibit 10.24.1 filed with PBF Energy Inc.’s Amendment No. 4 to Registration
Statement on Form S-1 (Registration No. 333-177933))
Amended and Restated Crude Oil Acquisition Agreement, dated as of March 1, 2012, by and
between Morgan Stanley Capital Group Inc. and PBF Holding Company LLC (Incorporated by
reference to Exhibit 10.23 filed with PBF Energy Inc.’s Amendment No. 2 to Registration Statement
on Form S-1 (Registration No. 333-177933))
First Amendment to Amended and Restated Crude Oil Acquisition Agreement, dated as of June 28,
2012, by and between PBF Holding Company LLC and Morgan Stanley Capital Group Inc.
(Incorporated by reference to Exhibit 10.23.1 filed with PBF Energy Inc.’s Amendment No. 3 to
Registration Statement on Form S-1 (Registration No. 333-177933))
Second Amendment to Amended and Restated Crude Oil Acquisition Agreement, dated as of
October 11, 2012, by and between PBF Holding Company LLC and Morgan Stanley Capital Group
Inc. (Incorporated by reference to Exhibit 10.23.2 filed with PBF Energy Inc.’s Amendment No. 4 to
Registration Statement on Form S-1 (Registration No. 333-177933))
Crude Oil/Feedstock Supply/Delivery and Services Agreement, effective as of April 7, 2011, by and
between Statoil Marketing & Trading (US) Inc. and Delaware City Refining Company LLC, as
amended as of July 29, 2011 (Incorporated by reference to Exhibit 10.8 filed with PBF Energy Inc.’s
Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-177933))
Agreement on Modification to the DCR Crude Supply Agreement, effective as of October 31, 2012,
by and between Statoil Marketing & Trading (US) Inc. and Delaware City Refining Company LLC
(Incorporated by reference to Exhibit 10.8.1 filed with PBF Energy Inc.’s Amendment No. 4 to
Registration Statement on Form S-1 (Registration No. 333-177933))
Crude Oil/Feedstock Supply/Delivery and Services Agreement, effective as of December 16, 2010,
by and between Statoil Marketing & Trading (US) Inc. and PBF Holding Company LLC, as
amended as of January 7, 2011, April 26, 2011 and July 28, 2011 (Incorporated by reference to
Exhibit 10.9 filed with PBF Energy Inc.’s Amendment No. 2 to Registration Statement on Form S-1
(Registration No. 333-177933))
Fourth Amendment to Crude Oil/Feedstock Supply/Delivery and Services Agreement, entered into as of
August 2, 2012, by and among Statoil Marketing & Trading (US) Inc., Paulsboro Refining Company
LLC and PBF Holding Company LLC (Incorporated by reference to Exhibit 10.9.1 filed with PBF
Energy Inc.’s Amendment No. 3 to Registration Statement on Form S-1 (Registration No. 333-177933))
Second Amended and Restated Revolving Credit Agreement dated as of October 26, 2012, among
PBF Holding Company LLC, Delaware City Refining Company LLC, Paulsboro Refining Company
LLC and Toledo Refining Company LLC, the lenders party thereto in their capacities as lenders
thereunder, UBS AG, Stamford Branch, as Administrative Agent and Co-Collateral Agent, and Bank
of America, N.A. and Wells Fargo Bank, N.A., as Co-Collateral Agents (Incorporated by reference
to Exhibit 10.11 filed with PBF Energy Inc.’s Amendment No. 4 to Registration Statement on Form
S-1 (Registration No. 333-177933))
82
Number
10.8.1
10.9
10.10
10.11
10.12
10.13**
10.14**
10.15**
10.16**
10.17**
10.18**
10.19
10.20**
10.21**
Description
Amendment No. 1 and Increase Joinder Agreement to Second Amended and Restated Revolving
Credit Agreement, dated as of December 28, 2012, entered into by and among PBF Holding Company
LLC, Delaware City Refining Company LLC, Paulsboro Refining Company LLC and Toledo Refining
Company LLC, each other loan party thereto, the lenders party thereto and UBS AG, Stamford Branch,
as Administrative Agent (Incorporated by reference to Exhibit 10.10.1 filed with PBF Holding
Company LLC’s Registration Statement on Form S-4 (Registration No. 333-186007))
Amended and Restated Limited Liability Company Agreement of PBF Energy Company LLC
(Incorporated by reference to Exhibit 10.1 filed with PBF Energy Inc.’s Current Report on Form 8-K
dated December 18, 2012 (File No. 001-35764))
Exchange Agreement, dated as of December 12, 2012 (Incorporated by reference to Exhibit 10.3 filed
with PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Tax Receivable Agreement, dated as of December 12, 2012 (Incorporated by reference to
Exhibit 10.2 filed with PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012
(File No. 001-35764))
Stockholders’ Agreement of PBF Energy Inc. (Incorporated by reference to Exhibit 10.4 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Second Amended and Restated Employment Agreement dated as of December 17, 2012, between
PBF Investments LLC and Thomas D. O’Malley (Incorporated by reference to Exhibit 10.7 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Amended and Restated Employment Agreement dated as of December 17, 2012, between
PBF Investments LLC and Thomas J. Nimbley (Incorporated by reference to Exhibit 10.8 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Second Amended and Restated Employment Agreement, dated as of December 17, 2012, between
PBF Investments LLC and Matthew C. Lucey (Incorporated by reference to Exhibit 10.9 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Second Amended and Restated Employment Agreement, dated as of December 17, 2012, between
PBF Investments LLC and Donald F. Lucey (Incorporated by reference to Exhibit 10.10 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Amended and Restated Employment Agreement, dated as of December 17, 2012, between
PBF Investments LLC and Michael D. Gayda (Incorporated by reference to Exhibit 10.11 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Restated Warrant and Purchase Agreement between PBF Energy Company LLC and the officers
party thereto, as amended (Incorporated by reference to Exhibit 10.17 filed with PBF Energy Inc.’s
Amendment No. 4 to Registration Statement on Form S-1 (Registration No. 333-177933))
Form of Indemnification Agreement, dated December 12, 2012, between PBF Energy Inc. and each of
the executive officers and directors of PBF Energy Inc. (Incorporated by reference to Exhibit 10.5 filed
with PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
PBF Energy Inc. 2012 Equity Incentive Plan (Incorporated by reference to Exhibit 10.6 filed with
PBF Energy Inc.’s Current Report on Form 8-K dated December 18, 2012 (File No. 001-35764))
Form of Non-Qualified Stock Option Agreement under the PBF Energy Inc. 2012 Equity Incentive
Plan (Incorporated by reference to Exhibit 10.28 filed with PBF Energy Inc.’s Amendment No. 6 to
Registration Statement on Form S-1 (Registration No. 333-177933))
10.22*/** Form of Restricted Stock Award Agreement for Directors under the PBF Energy Inc. 2012 Equity
Incentive Plan
83
Number
21.1*
23.1*
23.2*
24.1*
31.1*
31.2*
32.1*(1)
32.2*(1)
Description
Subsidiaries of PBF Energy Inc.
Consent of Deloitte & Touche LLP
Consent of KPMG LLP
Power of Attorney (included on signature page)
Certification by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by 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 by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
*
**
†
Filed herewith.
Indicates management compensatory plan or arrangement.
Confidential treatment has been granted by the SEC as to certain portions, which portions have been omitted
and filed separately with the SEC.
(1) This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.
84
PBF ENERGY INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Combined and Consolidated Financial Statements of PBF Energy Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations For the Years Ended December 31, 2012, 2011 and 2010 . . .
Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2012,
2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity For the Years Ended December 31, 2012, 2011 and 2010 . . . . . . .
Consolidated Statements of Cash Flows For the Years Ended December 31, 2012, 2011 and 2010 . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-2
F-3
F-4
F-5
F-6
F-7
F-8
PBF Energy Inc. Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-51
Financial Statements of Paulsboro Refining Business (Predecessor)
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-52
Balance Sheet as of December 16, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-53
Statement of Income for the period from January 1, 2010 through December 16, 2010 . . . . . . . . . . . . F-54
Statement of Changes in Net Parent Investment for the period from January 1, 2010 through
December 16, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-55
Statement of Cash Flows for the period from January 1, 2010 through December 16, 2010 . . . . . . . . . F-56
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Stockholders and the Board of Directors of
PBF Energy Inc. and subsidiaries:
We have audited the accompanying combined and consolidated balance sheets of PBF Energy Inc. and
subsidiaries (combined and consolidated with PBF Energy Company LLC and subsidiaries) (the “Company”) as
of December 31, 2012 and 2011, and the related combined and consolidated statements of operations,
comprehensive income (loss), equity, and cash flows for each of the three years in the period ended
December 31, 2012. These combined and consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such combined and consolidated financial statements present fairly, in all material respects, the
financial position of PBF Energy Inc. and subsidiaries (combined and consolidated with PBF Energy Company
LLC and subsidiaries) as of December 31, 2012 and 2011, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2012, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 28, 2013
F-2
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31,
2012
2011
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred charges and other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 285,884
503,796
1,497,119
7,717
13,388
2,307,904
1,635,587
112,862
197,349
$
50,166
316,252
1,516,727
—
63,359
1,946,504
1,513,947
—
160,658
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,253,702
$3,621,109
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 360,057
1,032,474
—
210,543
$ 286,067
1,180,812
4,014
189,234
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delaware Economic Development Authority loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Payable to related parties pursuant to tax receivable agreement
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,603,074
20,000
709,980
159,004
38,099
1,660,127
20,000
780,851
—
49,213
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,530,157
2,510,191
Commitments and contingencies
Equity:
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized,
23,571,221 shares issued and outstanding at December 31, 2012, no shares
authorized or outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class B common stock, no par value, 1,000,000 shares authorized, 41 shares issued
and outstanding at December 31, 2012, no shares authorized or outstanding at
December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock, no par value, 100,000,000 shares authorized, no shares outstanding at
December 31, 2012, no shares authorized or outstanding at December 31, 2011 . . . .
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Former controlling interest equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
—
—
417,835
1,956
—
(61)
Total PBF Energy Inc. equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
419,754
1,303,791
—
—
—
—
—
1,113,294
(2,376)
1,110,918
—
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,723,545
1,110,918
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,253,702
$3,621,109
See notes to consolidated financial statements.
F-3
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses
Year ended December 31,
2012
2011
2010
$20,138,687
$14,960,338
$210,671
Cost of sales, excluding depreciation . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses, excluding depreciation . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . .
18,269,078
738,824
120,443
(2,329)
—
92,238
13,855,163
658,831
86,183
—
728
53,743
203,971
25,140
15,859
—
6,051
1,402
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense)
Change in fair value of contingent consideration . . . . . . . . . . . . . .
Change in fair value of catalyst leases . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,218,254
14,654,648
252,423
920,433
305,690
(41,752)
(2,768)
(3,724)
(108,629)
805,312
(1,275)
(5,215)
7,316
(65,120)
242,671
—
—
(1,217)
(1,388)
(44,357)
—
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
804,037
$
242,671
$ (44,357)
Less: net income attributable to noncontrolling interest and former
controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
802,081
Net income attributable to PBF Energy Inc. . . . . . . . . . . . . . . . . . . . .
$
1,956
Weighted-average shares of Class A common stock outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,570,240
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,230,904
Net income available to Class A common stock per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
.08
.08
See notes to consolidated financial statements.
F-4
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS)
Year ended December 31,
2012
2011
2010
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$804,037
$242,671
$(44,357)
Other comprehensive income (loss):
Unrealized gain on available for sale securities . . . . . . . . . . . . . . . . .
Amortization of defined benefit plans unrecognized net gain
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
5
3
(6,567)
(6,565)
(1,332)
(1,034)
(1,327)
(1,031)
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
797,472
$241,344
$(45,388)
Less: Comprehensive income attributable to noncontrolling interest and
former controlling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
795,577
Comprehensive income attributable to PBF Energy Inc. . . . . . . . . . . . . . . . . . .
$
1,895
See notes to consolidated financial statements.
F-5
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
PBF Energy Inc. Stockholders’ Equity
Class A
Common Stock
Class B
Common Stock
Shares
Amount Shares Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Former
Controlling
Interest
Equity
Noncontrolling
Interest
Total
Equity
Balance, December 31, 2009 . . . . . . . .
Comprehensive loss . . . . . . . . . . .
Equity reorganization . . . . . . . . . .
Member capital contributions . . . .
Stock based compensation . . . . . .
Balance, December 31, 2010 . . . . . . . .
Comprehensive income . . . . . . . . .
Member capital contributions . . . .
Stock based compensation . . . . . .
Balance, December 31, 2011 . . . . . . . .
Comprehensive income . . . . . . . . .
Exercise of PBF Energy Company
LLC warrants and options . . . . .
Distributions to former controlling
interest holders . . . . . . . . . . . . .
Stock based compensation . . . . . .
Issuance of Class B common
— $— — $— $
— — —
— — —
— — —
— — —
—
—
—
—
— — —
— — —
— — —
— — —
— — —
— — —
— — —
— — —
— — —
—
—
—
—
—
—
—
—
—
— $ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,956
—
—
—
—
88 —
stock . . . . . . . . . . . . . . . . . . . . .
— —
39 —
—
—
Sale of Class A common stock in
initial public offering, net of
$42,109 in issuance costs and
underwriters’ discount . . . . . . . . 23,567,686
24 —
—
570,627 —
— — —
— (570,650) —
— — —
—
(39,432) —
Purchase PBF Energy Company
LLC units from former
controlling interest holders . . . .
Record deferred tax assets and
liabilities and tax receivable
agreement obligation . . . . . . . . .
Record initial allocation of non-
controlling interest upon
completion of initial public
offering . . . . . . . . . . . . . . . . . . .
Exchange of PBF Energy
Company LLC Series A Units
for Class A common stock . . . .
Noncontrolling Interest . . . . . . . . .
$
(18)
(1,031)
—
—
—
(1,049)
(1,327)
—
—
(2,376)
(6,565)
$
(1,953) $
(44,357)
20,665
483,055
2,300
20,665 $
—
(20,665)
—
—
459,710
242,671
408,397
2,516
—
—
—
18,694
(45,388)
—
483,055
2,300
458,661
241,344
408,397
2,516
1,113,294
792,076
— 1,110,918
797,472
10,005
—
—
—
—
—
—
—
13,107
(160,965)
2,866
—
—
(510)
—
—
—
—
—
—
—
—
13,107
(160,965)
2,954
—
570,651
(571,160)
(39,432)
—
—
—
— — —
—
457,202 —
8,689
(1,759,868)
1,293,977
3,535 —
— — —
2 —
—
—
—
—
—
—
191
—
—
—
(191)
Balance, December 31, 2012 . . . . . . . . 23,571,221 $ 24
41
$— $ 417,835 $1,956
$
(61)
$
— $1,303,791 $1,723,545
See notes to consolidated financial statements.
F-6
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Year ended December 31,
2012
2011
2010
$
804,037
$ 242,671
$ (44,357)
Cash flows from operating activities
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of catalyst lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash change in inventory repurchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of unamortized deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other post retirement benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in current assets and current liabilities:
97,650
2,954
3,724
2,768
4,576
4,391
12,684
(2,329)
56,919
2,516
(7,316)
5,215
25,329
—
9,769
—
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assest and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(187,544)
(80,097)
49,971
73,990
35,892
21,309
(31,543)
(279,315)
(512,054)
(56,953)
249,765
395,093
122,895
(5,252)
Net cash provided by (used in) operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
812,433
249,282
Cash flows from investing activities
Acquisition of Toledo refinery, net of cash received from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Paulsboro refinery and pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Delaware City refinery assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for deferred turnarounds costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures for other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
(175,900)
(38,633)
(8,155)
3,381
—
(168,156)
—
—
(488,721)
(62,823)
(23,339)
4,700
(854)
1,530
2,300
1,217
—
2,043
—
372
56
(36,438)
14,126
(8,649)
23,294
40,474
3,000
(176)
(1,208)
—
(204,911)
(224,275)
(72,118)
—
—
—
(8)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(219,307)
(739,193)
(501,312)
Cash flows from financing activities
Proceeds from members’ capital contributions to PBF Energy Company LLC (former controlling
interest) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of Series A options and warrants of PBF Energy Company LLC . . . . . . . . . . . . .
Distribution to PBF Energy Company LLC members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of Class A common stock, net of underwriters’ discount of $33,702 . . . . . . . . . . . . .
Purchase of PBF Energy Company LLC Series A units from existing unit holders . . . . . . . . . . . . . . . . . .
Payment of costs associated with initial public offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from 8.25% Senior secured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Economic Development Authority loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from catalyst lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of seller note for inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt
Payment of contingent consideration related to acquisition of Toledo refinery . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs and other
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
13,107
(160,965)
579,058
(571,160)
(8,408)
665,806
430,000
—
9,452
—
(1,184,597)
(103,642)
(26,059)
(357,408)
235,718
50,166
408,397
—
—
—
—
—
—
488,894
—
18,624
(299,645)
(220,401)
—
(11,249)
384,620
(105,291)
155,457
483,055
—
—
—
—
—
—
125,000
20,000
17,740
—
—
—
(6,589)
639,206
136,686
18,771
Cash and equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
285,884
$ 50,166
$ 155,457
Supplemental cash flow disclosures
Non-cash activities:
Promissory note issued for Toledo refinery acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior secured seller note issued for Paulsboro refinery acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seller note issued for acquisition of inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of Toledo refinery contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash impact of inventory supply and offtake agreements on inventory and accrued expenses . . . . .
$
— $ 200,000
—
—
299,645
—
117,017
—
5,909
16,481
322,399
99,705
$
—
160,000
—
—
40,429
292,353
Cash paid during the year for:
Interest (including capitalized interest of $6,697 and $13,027 in 2012 and 2011) . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,233
—
67,020
—
—
—
See notes to consolidated financial statements.
F-7
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION
PBF Energy Inc. (“PBF Energy”) was formed as a Delaware corporation on November 7, 2011 for the purpose of
facilitating an initial public offering (“IPO”) of its common equity and to become the sole managing member of
PBF Energy Company LLC (“PBF LLC”). Prior to completion of its IPO and the reorganization transactions
described below under “IPO—Related Reorganization Transactions”, PBF Energy had not engaged in any
business or other activities except in connection with its formation and the IPO. On December 12, 2012, PBF
Energy completed an IPO of 23,567,686 shares of its Class A common stock at a public offering price of $26.00
per share. The IPO subsequently closed on December 18, 2012. PBF Energy used the net proceeds of the offering
to acquire approximately 24.4% of the membership interests in PBF LLC and to pay offering expenses. As a
result of the initial public offering and related reorganization transactions, PBF Energy became the sole
managing member of PBF LLC with a controlling voting interest in PBF LLC and its subsidiaries. PBF Energy
consolidates the financial results of PBF LLC and its subsidiaries and records a noncontrolling interest in its
consolidated financial statements representing the economic interests of PBF LLC Series A Unit holders. The
financial statements and results of operations for periods prior to the completion of PBF Energy’s IPO and the
related reorganization transactions are those of PBF LLC. Collectively, PBF Energy and PBF LLC are referred to
hereinafter as the “Company”.
Effective with the completion of the PBF Energy IPO and related reorganization transactions, PBF LLC is a
minority-owned, controlled and consolidated subsidiary of the PBF Energy. PBF LLC, a Delaware limited
liability company, together with its consolidated subsidiaries, owns and operates oil refineries and related
facilities in North America. Delaware City Refining Company LLC, Delaware Pipeline Company LLC, PBF
Power Marketing LLC, Paulsboro Refining Company LLC, Paulsboro Natural Gas Pipeline Company LLC and
Toledo Refining Company LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned
subsidiaries of PBF Holding Company LLC (“PBF Holding”), which is a wholly-owned subsidiary of PBF LLC.
Substantially all of the Company’s operations are in the United States. The Company’s three oil refineries are all
engaged in the refining of crude oil and other feedstocks into petroleum products, and have been aggregated to
form one reportable segment. To generate earnings and cash flows from operations, the Company is primarily
dependent upon processing crude oil and selling refined petroleum products at margins sufficient to cover fixed
and variable costs and other expenses. Crude oil and refined petroleum products are commodities and factors
largely out of the Company’s control can cause prices to vary over time. The potential margin volatility can have
a material effect on the Company’s financial position, earnings and cash flow.
2010 Reorganization
PBF Investments LLC (“PBFI”) was formed effective March 1, 2008 and served as the sole member of PBF GP
LLC (the “General Partner”) and owner of Class B Units in PBF Energy Partners LP (the “Partnership”). The
members of PBFI also owned Class A units of the Partnership, which was presented as a noncontrolling interest
by PBFI. The entities were formed to pursue acquisitions of crude oil refineries in North America. During 2010,
the entities were reorganized (the “2010 Reorganization”). In March 2010, PBF Holding was formed as a
subsidiary of the Partnership. Effective June 1, 2010, the Partnership was converted to a limited liability
company and renamed PBF Energy Company LLC. Also on June 1, 2010, the Partnership Class B Units owned
by the members of PBFI were contributed to PBF LLC and the Partnership Class B Units were cancelled. The
Partnership Class A Units were also cancelled and the members of PBFI received Series A Units in PBF LLC
equal to the value of their original Class A and B Units in the Partnership. PBFI was then contributed by PBF
LLC to PBF Holding and PBFI became a subsidiary of PBF Holding. The reorganization represents a series of
F-8
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION (Continued)
2010 Reorganization (Continued)
transactions among entities under common control of the members. Accordingly, the historical operations of
PBFI are combined with PBF LLC for all periods presented and the transactions that affected the reorganization
were reported at historical cost.
IPO-Related Reorganization Transactions
Concurrent with completion of the IPO, PBF LLC’s limited liability company agreement was amended and
restated, among other things, to designate PBF Energy as the sole managing member of PBF LLC and to
establish the PBF LLC Series C Units which are held solely by PBF Energy. The PBF LLC Series A Units
continue to be held by parties other than PBF Energy (“the pre-IPO owners of PBF LLC”). The PBF LLC Series
C Units rank on parity with the PBF LLC Series A Units as to distribution rights, voting rights and rights upon
liquidation, winding up or dissolution. Following the IPO, profits and losses of PBF LLC are allocated, and all
distributions generally will be made, pro rata to the holders of PBF LLC Series A Units and PBF LLC Series C
Units. In addition, the amended and restated limited liability company agreement of PBF LLC provides that any
PBF LLC Series A Units acquired by PBF Energy will automatically be reclassified as PBF LLC Series C Units
in connection with such acquisition.
As part of the IPO and reorganization transactions, each holder of PBF LLC Series A Units received one share of
PBF Energy Class B common stock. The holder of a share of Class B common stock receives no economic rights
but entitles the holder, without regard to the number of shares of Class B common stock held by such holder, to
one vote on matters presented to stockholders of PBF Energy for each PBF LLC Series A Unit held by such
holder. Holders of PBF Energy Class A common stock and Class B common stock vote together as a single class
on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable
law. In connection with the IPO and related reorganization transactions, PBF Energy, PBF LLC and PBF LLC
Series A Unit holders also entered into an exchange agreement pursuant to which each of the existing the pre-
IPO owners of PBF LLC and other holders who acquire PBF LLC Series A Units upon the exercise of certain
warrants and options, will have the right to cause PBF LLC to exchange their PBF LLC Series A Units for shares
of PBF Energy Class A common stock on a one-for-one basis, subject to equitable adjustments for stock splits,
stock dividends and reclassifications. As of December 31, 2012, there were 72,972,131 PBF LLC Series A Units
held by parties other than PBF Energy which upon exercise of the right to exchange would exchange for
72,972,131 shares of PBF Energy Class A common stock. In addition, as of that date, there were options and
warrants to acquire 1,253,144 PBF LLC Series A Units outstanding, that upon exercise, could be exchanged for
1,253,144 shares of PBF Energy Class A common stock.
Initial Public Offering
On December 12, 2012, a registration statement filed with the U.S. Securities and Exchange Commission relating
to shares of Class A common stock of PBF Energy to be offered and sold in an initial public offering was
declared effective. On December 12, 2012, PBF Energy completed an IPO of 23,567,686 shares of Class A
common stock at a public offering price of $26.00 per share. The IPO closed on December 18, 2012.
PBF Energy used proceeds from the offering in the amount of $571.2 million to purchase 21,967,686 PBF LLC Series
A Units from funds affiliated with The Blackstone Group L.P. and First Reserve Management, L.P., PBF LLC’s
F-9
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION (Continued)
Initial Public Offering (Continued)
financial sponsors, which were then reclassified as PBF LLC Series C Units. The remaining proceeds from the initial
public offering in the amount of $41.6 million were used to acquire 1,600,000 newly-issued PBF LLC Series C Units
from PBF LLC. PBF LLC used the proceeds from the sale of the PBF LLC Series C Units to pay the expenses of the
IPO. There was no change in carrying value of PBF LLC’s assets and liabilities as a result of the IPO or the IPO-
related reorganization transactions.
The following table summarizes the proceeds and use of proceeds from the IPO:
PBF Energy Inc.
Gross proceeds from 23,567,868 Class A common
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 612,760
Use of Proceeds:
Purchase PBF LLC Series A Units from
existing owners . . . . . . . . . . . . . . . . . . . . . . . . .
(571,160)
Purchase newly-issued PBF LLC
Series C Units . . . . . . . . . . . . . . . . . . . . . . . . . .
(41,600)
PBF Energy Inc.net proceeds . . . . . . . . . . . . . . . . . . . .
$
—
PBF Energy Company LLC
Gross proceeds from sale of PBF LLC Series C Units to
PBF Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,600
Use of Proceeds:
IPO related expenses, including aggregate
underwriting discounts of $33,700 . . . . . . . . . . .
(41,600)
PBF Energy Company LLC net proceeds . . . . . . . . . . . .
$
—
F-10
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION (Continued)
Noncontrolling Interest
As a result of the IPO and the related reorganization transactions, PBF Energy is the sole managing member of,
and has a controlling voting interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy
operates and controls all of the business and affairs of PBF LLC and its subsidiaries. PBF Energy consolidates
the financial results of PBF LLC and its subsidiaries, and records a noncontrolling interest for the economic
interest in PBF Energy held by the PBF LLC Series A Unit holders. Noncontrolling interest on the consolidated
statements of operations represents the portion of net income or loss attributable to the economic interest in PBF
Energy held by the PBF LLC Series A Unit holders. Noncontrolling interest on the consolidated balance sheets
represents the portion of net assets of PBF Energy attributable to the PBF LLC Series A Unit holders, based on
the number of PBF LLC Series A units held by such holders. The noncontrolling interest ownership percentage
as of December 18, 2012 and December 31, 2012 is calculated as follows:
Holders of
PBF LLC Series
A Units
PBF Energy
Outstanding
Class A
Common
Shares
Total *
December 18, 2012 . . . . . . . . . . . . . . . . . . . . .
72,974,072
23,567,686
96,541,758
December 31, 2012 . . . . . . . . . . . . . . . . . . . . .
72,972,131
23,571,221
96,543,352
75.6%
24.4%
100%
75.6%
24.4%
100%
* Assumes all of the holders of PBF LLC Series A Units exchange their PBF LLC Series A Units for shares of
the PBF Energy’s Class A common stock on a one-for-one basis.
The noncontrolling interest associated with the initial investment by PBF Energy in PBF LLC is calculated as
follows:
PBF LLC equity balance as of December 31, 2012 . . . . . .
PBF LLC Series B temporary equity as of December 31,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: PBF LLC accumulated other comprehensive
income from December 18, 2012 through
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Less: PBF LLC net income from December 18, 2012
through December 31, 2012 . . . . . . . . . . . . . . . . . .
Total PBF LLC equity at IPO . . . . . . . . . . . . . . . . . . . . . . .
PBF Energy equity adjustments at IPO (1) . . . . . . . . . .
Less: PBF Energy investment in PBF LLC . . . . . . . .
PBF Energy equity at IPO . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Noncontrolling ownership interest
$1,759,584
4,580
252
(13,236)
1,751,180
531,306
(570,650)
1,711,836
75.6%
Balance of non controlling interest as of December 18,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,293,977
F-11
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION (Continued)
Noncontrolling Interest (Continued)
(1)
Includes the net impact to equity of the issuance of PBF Energy Class A common stock in the IPO, net
of issuance costs and underwriters’ discount and adjustments for the recognition of deferred tax assets
and liabilities and the tax receivable agreement obligation in connection with the IPO.
Comprehensive income includes net income and other comprehensive income arising from activity related to the
Company’s defined benefit employee benefit plan and unrealized gain on available for sale securities. The
following table summarizes the allocation of total comprehensive income between the controlling and
noncontrolling interests for the year ended December 31, 2012:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Unrealized gain on available for sale
securities . . . . . . . . . . . . . . . . . . . . . . .
Amortization of defined benefit plans
unrecognized net gain (loss) . . . . . . . .
Total other comprehensive loss . . . . . . . . . . .
Attributable to
PBF Energy Inc.
Noncontrolling
Interest
Total
$1,956
$802,081
$804,037
—
(61)
(61)
2
2
(6,506)
(6,504)
(6,567)
(6,565)
Total comprehensive income . . . . . . . . . . . . .
$1,895
$795,577
$797,472
The following summarizes the noncontrolling interest share of PBF LLC’s net income for the period from
December 18, 2012, the effective date of the IPO, to December 31, 2012:
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to the noncontrolling interest
$13,236
(75.6%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,005
Tax Receivable Agreement
PBF LLC intends to make an election under Section 754 of the Internal Revenue Code (the “Code”) effective for
each taxable year in which an exchange of PBF LLC Series A Units for PBF Energy Class A common stock as
described above occurs, which may result in an adjustment to the tax basis of the assets of PBF LLC at the time
of an exchange of PBF LLC Series A Units. As a result of both the initial purchase of PBF LLC Series A Units
from the PBF LLC Series A Unit holders in connection with the IPO and subsequent exchanges, PBF Energy will
become entitled to a proportionate share of the existing tax basis of the assets of PBF LLC. In addition, the
purchase of PBF LLC Series A Units and subsequent exchanges are expected to result in increases in the tax
basis of the assets of PBF LLC that otherwise would not have been available. Both this proportionate share and
these increases in tax basis may reduce the amount of tax that PBF Energy would otherwise be required to pay in
the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of
certain capital assets to the extent tax basis is allocated to those capital assets.
PBF Energy entered into a tax receivable agreement with the PBF LLC Series A Unit holders (the “Tax
Receivable Agreement”) that provides for the payment by PBF Energy to the PBF LLC Series A Unit holders of
F-12
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
1- ORGANIZATION AND BASIS OF PRESENTATION (Continued)
Tax Receivable Agreement (Continued)
an amount equal to 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of
(i) these increases in tax basis and (ii) certain other tax benefits related to entering into the Tax Receivable
Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. For purposes of
the Tax Receivable Agreement, the benefit deemed realized by PBF Energy will be computed by comparing the
actual income tax liability of PBF Energy (calculated with certain assumptions) to the amount of such taxes that
PBF Energy would have been required to pay had there been no increase to the tax basis of the assets of PBF
LLC as a result of the purchase or exchanges of PBF LLC Series A Units and had PBF Energy not entered into
the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax
benefits have been utilized or expired, unless PBF Energy exercises its right to terminate the Tax Receivable
Agreement, PBF Energy breaches any of its material obligations under the Tax Receivable Agreement or certain
changes of control occur, in which case all obligations will generally be accelerated and due as calculated under
certain assumptions.
The payment obligations under the Tax Receivable Agreement are obligations of PBF Energy and not of PBF LLC.
However, as PBF Energy is a holding company with limited operations of its own, its ability to make payments
under the Tax Receivable Agreement is dependent upon PBF LLC’s ability to make future distributions.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
These consolidated financial statements include the accounts of PBF Energy and subsidiaries in which PBF
Energy has a controlling interest. All intercompany accounts and transactions have been eliminated in
consolidation. The accompanying consolidated financial statements include the accounts of PBFI, the General
Partner, and the Partnership until June 1, 2010, the date of the 2010 Reorganization and the accounts of PBF LLC
and its wholly-owned subsidiaries subsequent to the 2010 Reorganization. For the period from March 1, 2008 to
December 16, 2010, PBF LLC was considered to be in the development stage. With the acquisition of the
Paulsboro refinery and commencement of refining operations on December 17, 2010, it ceased to be a
development stage company.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the related disclosures. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash
equivalents. The carrying amount of the cash equivalents approximates fair value due to the short-term maturity
of those instruments.
Concentrations of Credit Risk
For the year ended December 31, 2012, Morgan Stanley Capital Group Inc. (“MSCG”) and Sunoco, Inc. (R&M)
(“Sunoco”) accounted for 57% and 10% of the Company’s revenues, respectively. As of December 31, 2012,
F-13
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of Credit Risk (Continued)
Statoil Marketing and Trading (US) Inc. (“Statoil”) and Sunoco accounted for 28% and 10% of accounts
receivables, respectively.
For the year ended December 31, 2011, MSCG and Sunoco accounted for 52% and 12% of the Company’s
revenues, respectively. As of December 31, 2011, Sunoco and Statoil accounted for 19% and 11% of accounts
receivables, respectively.
MSCG accounted for 90% of total sales for the year ended December 31, 2010.
Revenue, Deferred Revenue and Accounts Receivable
The Company sells various refined products primarily through its refinery subsidiaries and recognizes revenue
related to the sale of products when there is persuasive evidence of an agreement, the sales prices are fixed or
determinable, collectability is reasonably assured and when products are shipped or delivered in accordance with
their respective agreements. Revenue for services is recorded when the services have been provided. The
Company’s Toledo refinery has a products offtake agreement with Sunoco under which Sunoco purchases
approximately one-third of the refinery’s daily gasoline production. The Toledo refinery also sells its products
through short-term contracts or on the spot market.
The Company’s Paulsboro and Delaware City refineries sell light finished products, certain intermediates and
lube base oils to MSCG under products offtake agreements with each refinery (the “Offtake Agreements”). On a
daily basis, MSCG purchases and pays for the refineries’ production of light finished products as they are
produced, delivered to the refineries’ storage tanks, and legal title passes to MSCG. Revenue on these product
sales is deferred until they are shipped out of the storage facility by MSCG.
Under the Offtake Agreements, the Company’s Paulsboro and Delaware City refineries also enter into purchase
and sale transactions of certain intermediates and lube base oils whereby MSCG purchases and pays for the
refineries’ production of certain intermediates and lube products as they are produced and legal title passes to
MSCG. The intermediate products are held in the refineries’ storage tanks until they are needed for further use in
the refining process. The intermediates may also be sold to third parties. The refineries have the right to
repurchase lube products and do so to supply other third parties with that product. When the refineries need
intermediates or repurchase lube products, the products are drawn out of the storage tanks, title passes back to the
refineries and MSCG is paid for those products. These transactions occur at the daily market price for the related
products. These transactions are considered to be made in contemplation of each other and, accordingly, do not
result in the recognition of a sale when title passes from the refineries to MSCG. Inventory remains at cost and
the net cash receipts result in a liability that is recorded at market price for the volumes held in storage with any
change in the market price being recorded in costs of sales. The liability represents the amount the Company
expects to pay to repurchase the volumes held in storage.
While MSCG has legal title, it has the right to encumber and/or sell these products and any such sales by MSCG
result in sales being recognized by the refineries when products are shipped out of the storage facility. As the
exclusive vendor of intermediate products to the refineries, MSCG has the obligation to provide the intermediate
products to the refineries as they are needed. Accordingly, sales by MSCG to others have been limited and are
F-14
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue, Deferred Revenue and Accounts Receivable (Continued)
only made with the Company or its subsidiaries’ approval. In December 2012, the Company gave notice that it
was terminating the Offtake Agreements with MSCG, effective as of June 30, 2013.
The Company’s Paulsboro and Delaware City refineries sell and purchase feedstocks under a supply agreement
with Statoil (the “Crude Supply Agreements”). Statoil purchases the refineries’ production of certain feedstocks
or purchases feedstocks from third parties on the refineries’ behalf. Legal title to the feedstocks is held by Statoil
and the feedstocks are held in the refineries’ storage tanks until they are needed for further use in the refining
process. At that time, the products are drawn out of the storage tanks and purchased by the refineries. These
purchases and sales are settled monthly at the daily market prices related to those products. These transactions
are considered to be made in contemplation of each other and, accordingly, do not result in the recognition of a
sale when title passes from the refineries to Statoil. Inventory remains at cost and the net cash receipts result in a
liability which is discussed further in the Inventory note below.
Accounts receivable are carried at invoiced amounts. An allowance for doubtful accounts is established, if
required, to report such amounts at their estimated net realizable value. In estimating probable losses,
management reviews accounts that are past due and determines if there are any known disputes. There was no
allowance for doubtful accounts at December 31, 2012 and 2011.
Excise taxes on sales of refined products that are collected from customers and remitted to various governmental
agencies are reported on a net basis.
Inventory
Inventories are carried at the lower of cost or market. The cost of crude oil, feedstocks, blendstocks and refined
products are determined under the last-in first-out (“LIFO”) method using the dollar value LIFO method with any
increments valued based on average purchase prices during the year. The cost of supplies and other inventories is
determined principally on the weighted average cost method.
The Company’s Paulsboro and Delaware City refineries acquire substantially all of their crude oil from Statoil
under the Crude Supply Agreements. The Company takes title to the crude oil as it is delivered to the processing
units, in accordance with the Crude Supply Agreements; however, the Company is obligated to purchase all the
crude oil held by Statoil on the Company’s behalf upon termination of the agreement at the then market price.
The Company is also obligated to purchase a fixed volume of feedstocks from Statoil on the later of maturity or
when the arrangement is terminated based on a forward market price of West Texas Intermediate crude oil. As a
result of the purchase obligations, the Company records the inventory of crude oil and feedstocks in the
refineries’ storage facilities. The Company determined the purchase obligations to be contracts that contain
derivatives that change in value based on changes in commodity prices. Such changes in the fair value of these
derivatives are included in cost of sales. On September 17, 2012, the Company gave notice to Statoil, that it
would terminate the crude supply agreement for its Paulsboro refinery effective March 31, 2013. On October 31,
2012, the Delaware City crude supply agreement was amended and modified to among other things, allow the
Company to directly purchase U.S. and Canadian onshore origin crude oil and feedstock that is delivered to the
Delaware City refinery via rail independent of Statoil.
The Company’s Toledo refinery acquires substantially all of its crude oil from MSCG under a crude oil supply
agreement (the “Toledo Crude Oil Supply Agreement”). For the period from March 1, 2011 to May 31, 2011, the
F-15
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory (Continued)
Company took title to the crude oil as it was delivered to the refinery processing units. The Company had
custody and risk of loss for MSCG’s crude oil stored on the refinery premises. As a result, the Company recorded
the crude oil in the Toledo refinery’s storage facilities as inventory with a corresponding accrued liability. The
Toledo Crude Oil Supply Agreement was replaced effective June 1, 2011. Under the new Toledo Crude Oil
Supply Agreement, the Company takes title to crude oil at various pipeline locations for delivery to the refinery
or sale to third parties. The Company records the crude oil inventory when it receives title. Payment for the crude
oil is due to MSCG under the Toledo Crude Oil Supply Agreement three days after the crude oil is delivered to
the Toledo refinery processing units or upon sale to a third party.
Property, Plant, and Equipment
Property, plant and equipment additions are recorded at cost. The Company capitalizes costs associated with the
preliminary, pre-acquisition and development/construction stages of a major construction project. The Company
capitalizes the interest cost associated with major construction projects based on the effective interest rate of total
borrowings. The Company also capitalizes costs incurred in the acquisition and development of software for
internal use, including the costs of software, materials, consultants and payroll-related costs for employees
incurred in the application development stage.
Depreciation is computed using the straight-line method over the following estimated useful lives:
. . . . . . . . . . . . . . . . . . . . . . .
Process units and equipment
Pipeline and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computers, furniture and fixtures . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .
5-25 years
5-20 years
25-40 years
3-15 years
20years
Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments,
which extend the lives of the assets, are capitalized.
Deferred Charges and Other Assets, Net
Deferred charges and other assets include refinery turnaround costs, catalyst, precious metals catalyst, linefill,
deferred financing costs and intangible assets. Refinery turnaround costs, which are incurred in connection with
planned major maintenance activities, are capitalized when incurred and amortized on a straight-line basis over
the period of time estimated to lapse until the next turnaround occurs (generally 3 to 5 years).
Precious metals catalyst and linefill are considered indefinite-lived assets as they are not expected to deteriorate
in their prescribed functions. Such assets are assessed for impairment in connection with the Company’s review
of its long-lived assets as indicators of impairment develop.
Deferred financing costs are capitalized when incurred and amortized over the life of the loan (1 to 8 years).
Intangible assets with finite lives primarily consist of catalyst, emission credits and permits and are amortized
over their estimated useful lives of 1 to 10 years.
F-16
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-Lived Assets and Definite-Lived Intangibles
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate
the carrying value may not be recoverable. Impairment is evaluated by comparing the carrying value of the long-
lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their
ultimate disposition. If such analysis indicates that the carrying value of the long-lived assets is not considered to
be recoverable, the carrying value is reduced to the fair value.
Impairment assessments inherently involve judgment as to assumptions about expected future cash flows and the
impact of market conditions on those assumptions. Although management would utilize assumptions that it
believes are reasonable, future events and changing market conditions may impact management’s assumptions,
which could produce different results.
Asset Retirement Obligations
The Company records an asset retirement obligation at fair value for the estimated cost to retire a tangible long-
lived asset at the time the Company incurs that liability, which is generally when the asset is purchased,
constructed, or leased. The Company records the liability when it has a legal or contractual obligation to incur
costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a
reasonable estimate cannot be made at the time the liability is incurred, the Company will record the liability
when sufficient information is available to estimate the liability’s fair value. Certain of the Company’s asset
retirement obligations are based on its legal obligation to perform remedial activity at its refinery sites when it
permanently ceases operations of the long-lived assets. The Company therefore considers the settlement date of
these obligations to be indeterminable. Accordingly, the Company cannot calculate an associated asset retirement
liability for these obligations at this time. The Company will measure and recognize the fair value of these asset
retirement obligations when the settlement date is determinable.
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of
these accruals generally are based on the completion of investigations or other studies or a commitment to a
formal plan of action. Environmental liabilities are based on best estimates of probable future costs using currently
available technology and applying current regulations, as well as the Company’s own internal environmental
policies. The measurement of environmental remediation liabilities may be discounted to reflect the time value of
money if the aggregate amount and timing of cash payments of the liabilities are fixed or reliably determinable. The
actual settlement of the Company’s liability for environmental matters could materially differ from its estimates due
to a number of uncertainties such as the extent of contamination, changes in environmental laws and regulations,
potential improvements in remediation technologies and the participation of other responsible parties.
Stock-Based Compensation
Stock-based compensation includes the accounting effect of options to purchase PBF Energy Class A common stock
granted by the Company to certain employees, Series A warrants issued or granted by PBF LLC to employees in
connection with their acquisition of PBF LLC Series A units, options to acquire Series A units of PBF LLC granted by
PBF LLC to certain employees, Series B units of PBF LLC that were granted to certain members of management and
F-17
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation (Continued)
restricted PBF LLC Series A Units granted by PBF LLC to certain directors. The estimated fair value of the options to
purchase PBF Energy Class A Common Stock and the PBF LLC Series A warrants and options, is based on the Black-
Scholes option pricing model and the fair value of the PBF LLC Series B units is estimated based on a Monte Carlo
simulation model. The estimated fair value is amortized as stock-based compensation expense on a straight-line
method over the vesting period and included in general and administration expense.
Income Taxes
As a result of the PBF Energy’s acquisition of PBF LLC Series A Units or exchanges of PBF LLC Series A Units
for PBF Energy Class A common stock, PBF Energy expects to benefit from amortization and other tax deductions
reflecting the step up in tax basis in the acquired assets. Those deductions will be allocated to PBF Energy and will
be taken into account in reporting the Company’s taxable income. As a result of a federal income tax election made
by PBF LLC, applicable to a portion of PBF Energy’s acquisition of PBF LLC Series A Units, the income tax basis
of the assets of PBF LLC, underlying a portion of the units PBF Energy acquired, has been adjusted based upon the
amount that PBF Energy paid for that portion of its PBF LLC Series A Units. PBF Energy has entered into an
agreement with the pre-IPO owners of PBF LLC that will provide for an additional payment by PBF Energy to the
exchanging holders of PBF LLC Units equal to 85% of the amount of cash savings, if any, in U.S. federal, state and
local income tax that PBF Energy realizes as a result of (i) these increases in tax basis and (ii) certain other tax
benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under
the tax receivable agreement. As a result of these transactions, PBF Energy’s tax basis in its share of PBF LLC’s
assets will be higher than the book basis of these same assets. This resulted in a deferred tax asset of $181,257, of
which the majority is expected to be realized over 10 years as the tax basis of these assets is amortized.
Deferred taxes are provided using a liability method, whereby deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences represent the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effect or change in tax laws and rates on the date of enactment. The Company recognizes tax
benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its
technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision
for income taxes on the consolidated statements of operations.
Net Income Per Share
For the period subsequent to the IPO basic net income per share is calculated by dividing the net income
available to PBF Energy Class A common stockholders by the weighted average number of shares of PBF
Energy Class A common stock outstanding during the period. Diluted net income per share is calculated by
dividing the net income available to PBF Energy Class A common stockholders, adjusted for the net income
attributable to the noncontrolling interest and the assumed income tax expense thereon, by the weighted average
number of PBF Energy Class A common shares outstanding during the period adjusted to include the assumed
exchange of all PBF LLC Series A units outstanding for PBF Energy Class A common stock and the potentially
dilutive effect of outstanding options to purchase shares of PBF Energy Class A Common Stock, and options and
warrants to purchase PBF LLC Series A Units, subject to forfeiture utilizing the treasury stock method.
F-18
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pension and Other Post-Retirement Benefits
PBF Energy recognizes an asset for the overfunded status or a liability for the underfunded status of its pension
and post-retirement benefit plans. The funded status is recorded within other long-term liabilities. Changes in the
plans’ funded status are recognized in other comprehensive income in the period the change occurs.
Fair Value Measurement
A fair value hierarchy (Level 1, Level 2, or Level 3) is used to categorize fair value amounts based on the quality
of inputs used to measure fair value. Accordingly, fair values derived from Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities. Fair values derived from Level 2 inputs are based on quoted
prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are either
directly or indirectly observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or
liability, and include situations where there is little, if any, market activity for the asset or liability.
The Company uses appropriate valuation techniques based on the available inputs to measure the fair values of
its applicable assets and liabilities. When available, the Company measures fair value using Level 1 inputs
because they generally provide the most reliable evidence of fair value. In some valuations, the inputs may fall
into different levels in the hierarchy. In these cases, the asset or liability level within the fair value hierarchy is
based on the lowest level of input that is significant to the fair value measurements.
Financial Instruments
The estimated fair value of financial instruments has been determined based on the Company’s assessment of
available market information and appropriate valuation methodologies. The Company’s non-derivative financial
instruments that are included in current assets and current liabilities are recorded at cost in the consolidated
balance sheets. The estimated fair value of these financial instruments approximates their carrying value due to
their short-term nature. Derivative instruments are recorded at fair value in the consolidated balance sheets.
The Company’s commodity contracts are measured and recorded at fair value using Level 1 inputs based on
quoted prices in an active market or Level 2 inputs based on quoted market prices for similar instruments. The
Company’s catalyst lease obligation and derivatives related to the Company’s crude oil and feedstocks purchase
obligations are measured and recorded at fair value using Level 2 inputs on a recurring basis, based on
observable market prices.
At December 31, 2011, the fair values of the Company’s term loan, revolving loan and promissory notes
approximate their carrying value, as these borrowings bear interest based upon short-term floating market interest
rates.
Derivative Instruments
The Company is exposed to market risk, primarily related to changes in commodity prices for the crude oil and
feedstocks used in the refining process as well as the prices of the refined products sold. The accounting
treatment for commodity contracts depends on the intended use of the particular contract and on whether or not
the contract meets the definition of a derivative.
F-19
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Derivative Instruments (Continued)
All derivative instruments, not designated as normal purchases or sales, are recorded in the balance sheet as
either assets or liabilities measured at their fair values. Changes in the fair value of derivative instruments that
either are not designated or do not qualify for hedge accounting treatment or normal purchase or normal sale
accounting are recognized currently in earnings. Contracts qualifying for the normal purchase and sales
exemption are accounted for upon settlement. Cash flows related to derivative instruments that are not designated
or do not qualify for hedge accounting treatment are included in operating activities.
The Company designates certain derivative instruments as fair value hedges of a particular risk associated with a
recognized asset or liability. At the inception of the hedge designation, the Company documents the relationship
between the hedging instrument and the hedged item, as well as its risk management objective and strategy for
undertaking various hedge transactions. Derivative gains and losses related to these fair value hedges, including
hedge ineffectiveness, are recorded in cost of sales along with the change in fair value of the hedged asset or
liability attributable to the hedged risk. Cash flows related to derivative instruments that are designated as fair
value hedges are included in operating activities.
Economic hedges are hedges not designated as fair value or cash flow hedges for accounting purposes that are
used to (i) manage price volatility in certain refinery feedstock and refined product inventories, and (ii) manage
price volatility in certain forecasted refinery feedstock, refined product, and refined product sales. These
instruments are recorded at fair value and changes in the fair value of the derivative instruments are recognized
currently in cost of sales.
Derivative accounting is complex and requires management judgment in the following respects: identification of
derivatives and embedded derivatives, determination of the fair value of derivatives, documentation of hedge
relationships, assessment and measurement of hedge ineffectiveness and election and designation of the normal
purchases and sales exception. All of these judgments, depending upon their timing and effect, can have a
significant impact on the Company’s earnings.
Recently Issued Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04 to clarify guidance
relating to fair value measurements. The amended guidance also expands the disclosure requirements for entities’
fair value measurements, particularly those relating to measurements based upon significant unobservable inputs.
The Company adopted the amended fair value measurement guidance on January 1, 2012 resulting in additional
disclosures.
In June 2011, the FASB issued ASU No. 2011-05, which changes the required presentation of other
comprehensive income. Under the new guidelines, entities are required to present net income and other
comprehensive income, along with the components of net income and other comprehensive income, in either one
continuous statement of comprehensive income or in two separate but consecutive statements of net income and
comprehensive income. The accounting standards update eliminates the option of presenting the components of
other comprehensive income within the statement of changes in stockholders’ equity. For the year ended
December 31, 2012, the Company presented the components of total comprehensive income in its consolidated
statements of comprehensive income (loss).
F-20
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
3 - ACQUISITIONS
Toledo Acquisition
On March 1, 2011, a subsidiary of the Company completed the acquisition of the Toledo refinery in Ohio from
Sunoco. The Toledo refinery has a crude oil throughput capacity of 170,000 barrels per day. The purchase price
for the refinery was $400,000, subject to certain adjustments, and was comprised of $200,000 in cash and a
$200,000 promissory note provided by Sunoco. The note was repaid in full in February 2012. The terms of the
transaction also include participation payments beginning in the year ended December 31, 2011 through the year
ending December 31, 2016 not to exceed $125,000 in the aggregate. Participation payments are based on 25% of
the purchased assets’ earnings before interest, taxes, depreciation and amortization, as defined in the agreement
(“EBITDA”) in excess of an annual threshold EBITDA of $125,000 (prorated for 2011 and 2016). Each
participation payment is due no later than one hundred and twenty days after the close of the respective calendar
year end for the years 2011 through 2016. The Company paid $103,643 to Sunoco in April 2012 related to the
amount of contingent consideration earned in 2011.
The Company purchased certain finished and intermediate products for approximately $299,645 with the
proceeds from a note provided by Sunoco (the “Toledo Inventory Note Payable”). The note had an interest rate at
the lower of LIBOR plus 5.5%, or 7.5% and was repaid on May 31, 2011. The Company also purchased crude oil
inventory for $338,395, which it concurrently sold to MSCG for its market value of $369,999. The net cash
received from this transaction was recorded as a reduction in the total purchase price.
The Toledo acquisition was accounted for as a business combination. The purchase price of $784,818 includes
the estimated fair value of future participation payments (contingent consideration). The fair value of the
contingent consideration was estimated using a discounted cash flow analysis, a Level 3 measurement, as more
fully described at Note 17. The following table summarizes the amounts recognized for assets acquired and
liabilities assumed as of the acquisition date.
The total purchase price and the estimated fair values of the assets and liabilities at the acquisition date were as
follows:
Net cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seller promissory note . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seller note for inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated fair value of contingent consideration . . . . . . . .
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-21
Purchase Price
$168,156
200,000
299,645
117,017
$784,818
Fair Value
Allocation
$305,645
8,065
452,084
24,640
(5,616)
$784,818
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
3 - ACQUISITIONS (Continued)
Toledo Acquisition (Continued)
The Company’s consolidated financial statements for the years ended December 31, 2012 and 2011 include the
results of operations of the Toledo refinery since March 1, 2011. The actual results for the Toledo refinery for the
period from March 1, 2011 to December 31, 2011, are shown below. The revenues and net income of the
Company assuming the acquisition had occurred on January 1, 2010, are shown below on a pro forma basis. The
pro forma information does not purport to present what the Company’s actual results would have been had the
acquisition occurred on January 1, 2010, nor is the financial information indicative of the results of future
operations. The unaudited pro forma financial information includes the depreciation and amortization expense
related to the acquisition and interest expense associated with the Toledo acquisition financing.
Revenues
Net Income
Actual results for March 1, 2011 to December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,113,055
$489,243
Supplemental pro forma for January 1, 2011 to
December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . .
$15,961,529
$328,142
Supplemental pro forma for January 1, 2010 to
December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . .
$10,251,394
$ (53,199)
Paulsboro Refinery Acquisition
In September 2010, subsidiaries of the Company entered into two stock purchase agreements with subsidiaries of
Valero Energy Corporation (“Valero”) to acquire its Paulsboro, New Jersey refining business. The purchase price
of $364,911 included $357,657 for the refinery, which has a crude oil throughput capacity of 180,000 barrels per
day, and an associated natural gas pipeline and $7,254 in net working capital. The acquisition was completed on
December 17, 2010 and financed with $204,911 in cash, and the issuance of a $160,000 promissory note with
Valero. The note was repaid in full in February 2012.
The acquisition was accounted for as a business combination. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values. The following summarizes the estimated
fair values of the assets and liabilities at the acquisition date:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post retirement benefit obligation . . . . . . . . . . . . . . . . . . . . .
Allocation
$ 12,122
27,990
25,185
256,100
62,298
14,074
(12,932)
(12,653)
(7,273)
Purchase price, excluding inventory . . . . . . . . . . . . . . .
$364,911
F-22
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
3 - ACQUISITIONS (Continued)
Paulsboro Refinery Acquisition (Continued)
In connection with the Paulsboro refinery acquisition, $130,344 of crude oil and feedstocks and $165,093 of
certain light finished products, intermediates, and lube base oils were purchased by Statoil and MSCG on the
Company’s behalf in connection with the Crude Supply Agreement and the Offtake Agreement, respectively. As
of the acquisition date, the Company recorded the inventory subject to these transactions and a corresponding
liability for crude oil, feedstocks, intermediates, and lube base oils and deferred revenue for light finished
products. No gain or loss was recognized on these transactions, nor did they result in the recognition of revenue.
Although these transactions were entered into in contemplation of the acquisition of the Paulsboro refinery, they
have been excluded from the table above as the Company did not consider them to be part of the acquisition
itself.
Delaware City Acquisition
In April 2010, subsidiaries of the Company entered into an asset purchase agreement with subsidiaries of Valero
to acquire refining and pipeline assets of Valero’s Delaware City refinery. The acquired assets included the idled
refinery, which has a crude oil throughput capacity of 190,000 barrels per day, associated terminal and pipeline,
and a power plant complex. The acquisition was completed on June 1, 2010 for $220,000 in cash plus $4,275 in
acquisition-related costs.
The acquisition of the Delaware City refining and pipeline assets was accounted for as an acquisition of assets.
The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated relative
fair value. The refinery and pipeline assets were idle at the time of the acquisition. The results of operations,
which include certain minor terminal operations and substantial capital improvement activities to prepare the
refinery and power plant for restart, have been included in the Company’s consolidated financial statements since
June 1, 2010. The Company commenced restarting the refinery in June 2011 and the refinery became fully
operational in October 2011.
The following summarizes the purchase price allocation:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocation
$ 13,015
4,700
28,600
156,006
21,954
Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$224,275
The financial results of the Delaware City assets and the Paulsboro refinery have been included in the Company’s
consolidated financial statements since June 1, 2010 and December 17, 2010, respectively. As a result, the
consolidated results of operations for the years ended December 31, 2012 and 2011 include the results of both
refineries for the entire period. The revenues and net loss associated with Paulsboro for the year ended
December 31, 2010, and the consolidated pro forma revenue and net loss of the combined entity assuming the
Paulsboro acquisition had occurred on January 1, 2010, are shown in the table below. The pro forma information
F-23
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
3 - ACQUISITIONS (Continued)
Delaware City Acquisition (Continued)
does not purport to present what the Company’s actual results would have been had the acquisition occurred on
January 1, 2010, nor is the financial information indicative of the results of future operations. This unaudited pro
forma financial information includes depreciation and amortization expense related to the acquisition and interest
expense associated with the Paulsboro acquisition financing. In addition, the 2010 unaudited supplementary pro
forma loss was adjusted to exclude an $895,642 nonrecurring charge related to the impairment of refinery assets
recorded in conjunction with the sale of Paulsboro to the Company.
Actual results for December 17, 2010 to December 31,
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental pro forma for January 1, 2010 to
Revenues
Net Loss
$ 205,997
$ (10,606)
December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,919,660
$(128,890)
Acquisition Expenses
The Company incurred $0, $728, and $6,051 and during 2012, 2011 and 2010, respectively, for consulting and
legal expenses related to acquisitions and non-consummated acquisitions.
4 - INVENTORIES
Inventories consisted of the following:
Crude oil and feedstocks . . . . . . . . . . . . . . . . . . . .
Refined products and blendstocks . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Warehouse stock and other
Crude oil and feedstocks . . . . . . . . . . . . . . . . . . . .
Refined products and blendstocks . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Warehouse stock and other
December 31, 2012
Inventory
Supply and
Offtake
Arrangements
$257,947
417,865
—
Total
$ 642,388
823,410
31,321
Titled
Inventory
$384,441
405,545
31,321
$821,307
$675,812
$1,497,119
December 31, 2011
Inventory
Supply and
Offtake
Arrangements
$317,652
419,613
—
Total
$ 687,029
804,515
25,183
Titled
Inventory
$369,377
384,902
25,183
$779,462
$737,265
$1,516,727
Inventory under inventory supply and offtake arrangements includes crude oil stored at the Company’s Paulsboro
and Delaware City refineries’ storage facilities that the Company will purchase as it is consumed in connection
F-24
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
4 - INVENTORIES (Continued)
with its crude supply agreements; feedstocks and blendstocks sold to counterparties that the Company will
repurchase for further blending into finished products; lube products sold to a counterparty that the Company will
repurchase; and light finished products sold to a counterparty in connection with the offtake agreement and
stored in the Paulsboro and Delaware City refineries’ storage facilities pending shipment by the counterparty.
At December 31, 2012 and December 31, 2011, the replacement value of inventories exceeded the LIFO carrying
value by approximately $79,859 and $115,624, respectively.
5 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Process units, pipelines and equipment . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . .
Computers, furniture and fixtures . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . .
Less—Accumulated depreciation . . . . . . . . . . . . . . . .
December 31,
2012
December 31,
2011
$
61,780
1,484,727
11,073
38,657
145,525
$
61,850
1,353,487
2,836
14,098
122,904
1,741,762
(106,175)
1,555,175
(41,228)
$1,635,587
$1,513,947
The Company commenced the restart of the Delaware City refinery during June 2011 and began depreciating the
assets placed in service effective July 1, 2011. Depreciation expense for the years ended December 31, 2012,
2011 and 2010 was $64,947, $39,968 and $1,259, respectively. The Company capitalized $6,697 and $13,027 in
interest during 2012 and 2011, respectively, in connection with construction in progress.
6 - DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets, net consisted of the following:
December 31,
2012
December 31,
2011
. . . . . . . . . . . . . . . . . .
Deferred turnaround costs, net
Catalyst
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs, net . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Linefill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 78,128
66,377
30,987
12,114
8,042
1,085
616
$ 56,338
68,201
13,980
12,104
8,042
1,703
290
$197,349
$160,658
F-25
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
6 - DEFERRED CHARGES AND OTHER ASSETS, NET (Continued)
The Company recorded amortization expense related to deferred turnaround costs, catalyst and intangible assets
of $27,291, $13,776 and $61 for the years ended December 31, 2012, 2011 and 2010 respectively.
Intangible assets, net was comprised of permits and emission credits as follows:
Gross amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,597
(2,512)
Net amount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,085
$ 3,701
(1,998)
$ 1,703
December 31,
2012
December 31,
2011
7 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
Inventory supply and offtake arrangements . . . . . . . .
Inventory-related accruals . . . . . . . . . . . . . . . . . . . . . .
Excise and sales tax payable . . . . . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of contingent consideration for refinery
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued transportation costs . . . . . . . . . . . . . . . . . . . .
Accrued utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued construction in progress . . . . . . . . . . . . . . . .
Accrued salaries and benefits . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
December 31,
2011
$ 536,594
287,929
40,776
26,541
22,764
$ 641,588
203,636
36,635
59,017
1,894
21,358
20,338
19,060
16,481
15,212
1,275
24,146
100,380
18,110
17,615
5,909
48,300
—
47,728
$1,032,474
$1,180,812
The Company has the obligation to repurchase certain intermediates and lube products under the products offtake
agreements with MSCG that are held in the Company’s refinery storage tanks. A liability included in Inventory
supply and offtake arrangements is recorded at market price for the volumes held in storage consistent with the
terms of the offtake agreements with any change in the market price being recorded in costs of sales. The liability
represents the amount the Company expects to pay to repurchase the volumes held in storage. The Company
recorded non-cash charges of $11,619 and $22,082 related to this liability for the years ended December 31, 2012
and 2011, respectively.
F-26
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
8 - DELAWARE ECONOMIC DEVELOPMENT AUTHORITY LOAN
In June 2010, in connection with the Delaware City acquisition, the Delaware Economic Development Authority
(the “Authority”) granted a subsidiary of the Company a $20,000 loan to assist with operating costs and the cost
of restarting the refinery. The loan is represented by a zero interest rate note and the entire unpaid principal
amount is payable in full on March 1, 2017, unless the loan is converted to a grant.
The loan converts to a grant in tranches of up to $4,000 annually over a five year period, starting at the one year
anniversary of the “certified restart date” as defined in the agreement and certified by the Authority. In order for
the loan to be converted to a grant, the Company is required to utilize at least 600,000 man hours of labor in
connection with the reconstruction and restarting of the Delaware City refinery, expend at least $125,000 in
qualified capital expenditures, commence refinery operations, and maintains certain employment levels, all as
defined in the agreement. As of December 31, 2012, the Company believes it has satisfied the conditions for the
first tranche of the loan to convert to a grant pending confirmation by the Authority.
The Company recorded the loan as a long-term liability pending approval from the Authority that it has met the
requirements to convert the loan to a grant.
9 - CREDIT FACILITY AND LONG-TERM DEBT
Senior Secured Notes
On February 9, 2012, PBF Holding completed the offering of $675,500 aggregate principal amount of 8.25%
Senior Secured Notes due 2020. The net proceeds, after deducting the original issue discount, the initial
purchasers’ discounts and commissions, and the fees and expenses of the offering, were used to repay all of the
outstanding indebtedness plus accrued interest owed under the Toledo Promissory Note, the Paulsboro
Promissory Note, and the Term Loan, as well as to reduce the outstanding balance of the Revolving Loan. The
Company’s Executive Chairman of the Board of Directors, and certain of his affiliates and family members, and
certain of the Company’s other executives, purchased $25,500 aggregate principal amount of these Senior
Secured Notes. As of December 31, 2012, the estimated fair value of the Senior Secured Notes was $700,963.
The estimated fair value, categorized as a Level 2 measurement, was calculated based on the present value of
future expected payments utilizing implied current market interest rates based on quoted prices of the Senior
Secured Notes at December 31, 2012.
The Senior Secured Notes are secured on a first-priority basis by substantially all of the present and future assets
of PBF Holding and its subsidiaries (other than assets securing the Revolving Loan). As of December 31, 2012,
payment of the Senior Secured Notes is jointly and severally guaranteed by all of PBF Holding’s subsidiaries.
PBF Holding has optional redemption rights to repurchase all or a portion of the Senior Secured Notes at varying
prices no less than 100% of the principal amounts of the notes plus accrued and unpaid interest. The holders of
the Senior Secured Notes have repurchase options exercisable only upon a change in control, certain asset sale
transactions, or in event of a default as defined in the indenture agreement. In addition, the Senior Secured
Notes contain covenant restrictions limiting certain types of additional debt, equity issuances, and payments.
PBF Holding is in compliance with the covenants as of December 31, 2012.
Revolving Loan
In October 2012, PBF Holding amended and restated its asset based revolving credit agreement (“Revolving
Loan”) to a maximum availability of $1,375,000 and extended the maturity date to October 26, 2017. In addition,
F-27
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
9 - CREDIT FACILITY AND LONG-TERM DEBT (Continued)
Revolving Loan (Continued)
the Applicable Margin, as defined in the agreement, was amended to a range of 0.75% to 1.50% for Alternative
Base Rate Loans and 1.75% to 2.50% for Adjusted LIBOR Rate Loans, and the Commitment Fee, as defined in
the agreement, was amended to a range of 0.375% to 0.5%, all depending on the Company’s debt rating. The
Revolving Loan was further expanded to a maximum availability of $1,575,000 in December 2012.
Advances under the Revolving Loan cannot exceed the lesser of $1,575,000 or the Borrowing Base, as defined in
the agreement. The Revolving Loan can be prepaid, without penalty, at any time. Interest on the Revolving Loan
is payable quarterly in arrears, at the option of PBF Holding, either at the Alternate Base Rate plus the Applicable
Margin, or at the Adjusted LIBOR Rate plus the Applicable Margin, all as defined in the agreement. PBF
Holding is required to pay a LC Participation Fee, as defined in the agreement on each outstanding letter of credit
issued under the Revolving Loan equal to the Applicable Margin applied to Adjusted LIBOR Rate Loans, plus a
Fronting Fee equal to 0.125%.
The Revolving Loan has a financial covenant which requires that at any time Excess Availability, as defined in
the agreement, is less than the greater of (i) 17.5% of the lesser of the Borrowing Base and the aggregate
Revolving Commitments of the Lenders, or (ii) $35,000, PBF Holding will not permit the Consolidated Fixed
Charge Coverage Ratio, as defined in the agreement, determined as of the last day of the most recently completed
quarter, to be less than 1.1 to 1.0. PBF Holding was in compliance with this covenant as of December 31, 2012.
At December 31, 2012, PBF Holding had no outstanding loans and standby letters of credit of $449,652 issued
under the Revolving Loan. At December 31, 2011, PBF Holding had outstanding loans of $270,000 and standby
letters of credit of $39,832 issued under the Revolving Loan.
Delaware City Construction Financing
In October 2010, subsidiaries of the Company entered into a project management and financing agreement for a
capital project at the Delaware City refinery. On August 5, 2011 the Delaware City construction advances in the
amount of $20,000 were converted to a term financing payable in equal monthly installments of $530 over a
period of sixty months beginning September 1, 2011 (“Construction Financing”). On August 31, 2012, the
Company repaid all outstanding indebtedness plus accrued interest owed on the Construction Financing. The
Company recorded a loss of $2,797 in interest expense for the early retirement of debt in the year ended
December 31, 2012.
Catalyst Leases
Subsidiaries of the Company have entered into agreements at each of its refineries whereby the Company sold
certain of its catalyst precious metals to large financial institutions and then leased them back. The catalyst is
required to be repurchased by the Company at market value at lease termination. The Company treated these
transactions as financing arrangements, and the lease payments are recorded as interest expense over the
agreements’ terms. The Company has elected the fair value option for accounting for its catalyst repurchase
obligations as the Company’s liability is directly impacted by the change in value of the underlying catalyst. The
fair value of these repurchase obligations as reflected in the table below is measured using Level 2 inputs.
The Paulsboro catalyst lease was entered into effective January 6, 2012 and has a one year term. Proceeds from
the lease of $9,453 were used to repay a portion of the Paulsboro Promissory Note. The annual lease fee for 2012
F-28
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
9 - CREDIT FACILITY AND LONG-TERM DEBT (Continued)
Catalyst Leases (Continued)
was $267. This lease was amended in December 2012 to extend the maturity date to November 2013, with a
lease fee of $262, payable at maturity. The Paulsboro catalyst lease is included in long-term debt as of
December 31, 2012 as the Company has the ability and intent to finance this debt through availability under other
credit facilities if the catalyst lease is not renewed at maturity.
The Toledo catalyst lease was entered into effective July 1, 2011 and has a three year term. Proceeds from the
lease of $18,345, net of a facility fee of $279, were used to repay a portion of the Toledo Promissory Note. The
lease fee for the first one year period was $997. The lease fee is payable quarterly and will be reset annually
based on current market conditions. The lease fee for the second one year period beginning July 2012 is $967,
payable quarterly.
The Delaware City catalyst lease was entered into in October 2010 and has a three year term. Proceeds from the
lease were $17,474, net of $266 in facility fees. The lease fee is payable quarterly and resets annually based on
current market conditions. The lease fee for the first and second one year period beginning in October 2010 was
$1,076 and $946, respectively. The lease fee for the third one year period beginning in October 2012 is $1,048.
The Delaware City catalyst lease is included in long-term debt as of December 31, 2012 as the Company has the
ability and intent to finance this debt through availability under other credit facilities if the catalyst lease is not
renewed at maturity.
Letter of Credit Facility
PBF Holding and certain of its subsidiaries maintained a short-term letter of credit facility, which was renewed
and expanded in April 2012, under which PBF Holding could obtain letters of credit of up to $750,000 consisting
of a committed amount of $500,000 and an uncommitted amount of $250,000 to support certain of PBF
Holding’s crude oil purchases. PBF Holding was charged letter of credit issuance fees on each letter of credit,
plus a fee on the aggregate unused portion of the committed letter of credit facility. PBF Holding terminated the
letter of credit facility in December 2012. At December 31, 2011, PBF Holding had $241,500 of letters of credit
issued under the letter of credit facility.
Long-term debt outstanding consisted of the following:
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Toledo Promissory Note . . . . . . . . . . . . . . . . . . . . . . .
Paulsboro Promissory Note . . . . . . . . . . . . . . . . . . . . .
Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Catalyst leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Financing . . . . . . . . . . . . . . . . . . . . . . . .
Less—Current maturities . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
December 31,
2011
$666,538
—
—
—
—
43,442
—
709,980
—
$ —
270,000
181,655
160,000
123,750
30,266
19,194
784,865
(4,014)
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$709,980
$780,851
F-29
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
9 - CREDIT FACILITY AND LONG-TERM DEBT (Continued)
Debt Maturities
Debt maturing in the next five years and thereafter is as follows:
Year Ending
December 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 26,741
16,701
—
—
—
666,538
$709,980
10 - OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following:
December 31,
2012
December 31,
2011
Defined benefit pension plan liabilities . . . . . . . . . . . .
Post retiree medical plan . . . . . . . . . . . . . . . . . . . . . . .
Environmental liabilities . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent portion of fair value of contingent
consideration for refinery acquisition . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,983
9,730
7,303
—
1,083
$ 6,651
8,912
10,398
21,852
1,400
$38,099
$49,213
The fair value of contingent consideration for refinery acquisition was reclassified to current liabilities, at
December 31, 2012, as the obligation is expected to be settled within the next twelve months.
11 - STOCKHOLDERS’ AND MEMBERS’ EQUITY STRUCTURE
Class A Common Stock
Holders of Class A common stock are entitled to receive dividends when and if declared by the Board of
Directors out of funds legally available therefore, subject to any statutory or contractual restrictions on the
payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any
outstanding preferred stock. Upon the Company’s dissolution or liquidation or the sale of all or substantially all
of the assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred
stock having liquidation preferences, if any, the holders of shares of Class A common stock will be entitled to
receive pro rata remaining assets available for distribution. Holders of shares of Class A common stock do not
have preemptive, subscription, redemption or conversion rights.
F-30
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
11 - STOCKHOLDERS’ AND MEMBERS’ EQUITY STRUCTURE (Continued)
Class B Common Stock
Holders of shares of Class B common stock are entitled, without regard to the number of shares of Class B
common stock held by such holder, to one vote for each PBF LLC Series A Unit beneficially owned by such
holder. Accordingly, the pre-IPO owners of PBF LLC collectively have a number of votes in PBF Energy that is
equal to the aggregate number of PBF LLC Series A Units that they hold.
Holders of shares of Class A common stock and Class B common stock vote together as a single class on all
matters presented to stockholders for their vote or approval, except as otherwise required by applicable law.
Holders of Class B common stock do not have any right to receive dividends or to receive a distribution upon a
liquidation or winding up of PBF Energy.
Preferred Stock
Authorized preferred stock may be issued in one or more series, with designations, powers and preferences as
shall be designated by the Board of Directors.
PBF LLC Capital Structure
PBF LLC Series A Units
The allocation of profits and losses and distributions to PBF LLC Series A unit holders is governed by the
Limited Liability Company Agreement of PBF LLC. PBF LLC Series A unit holders do not have voting rights.
In connection with the 2010 reorganization described in Note 1, the Company issued 3,087,600 Series A units with
a value of $10 per unit on June 1, 2010 in exchange for all Class A and Class B units in PBF Energy Partners LP.
The exchange of Series A units for the Class A and Class B units in PBF Energy Partners LP was made on a value
for value basis and there was no effect on the consolidated statement of operations and consolidated statement of
comprehensive income (loss) as a result of the reorganization.
PBF LLC Series B Units
The PBF LLC Series B Units are intended to be “profit interests” within the meaning of Revenue Procedures 93-27
and 2001-43 of the Internal Revenue Service and have a stated value of zero at issuance. The PBF LLC Series
B Units are held by certain of the Company’s officers, have no voting rights and are designed to increase in value
only after the Company’s financial sponsors achieve certain levels of return on their investment in PBF LLC
Series A Units. Accordingly, the amounts paid to the holders of PBF LLC Series B Units, if any, will reduce only
the amounts otherwise payable to the PBF LLC Series A Units held by the Company’s financial sponsors, and will
not reduce or otherwise impact any amounts payable to PBF Energy (the holder of PBF LLC Series C Units), the
holders of the Company’s Class A common stock or any other holder of PBF LLC Series A Units. The maximum
number of PBF LLC Series B Units authorized to be issued is 1,000,000.
PBF LLC Series C Units
The PBF LLC Series C Units rank on a parity with the PBF LLC Series A Units as to distribution rights, voting
rights and rights upon liquidation, winding up or dissolution. PBF LLC Series C Units are held solely by PBF
Energy.
F-31
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
11 - STOCKHOLDERS’ AND MEMBERS’ EQUITY STRUCTURE (Continued)
PBF LLC Capital Structure (Continued)
Information about the issued classes of PBF LLC units for the years ended December 31, 2012, 2011 and 2010,
is as follows:
Balance—January 1, 2010 . . . . . . . . . . . . . . . .
Equity reorganization . . . . . . . . . . . . . . . . .
Member capital contribution . . . . . . . . . . . .
Units allocated to management . . . . . . . . . .
Balance—December 31, 2010 . . . . . . . . . . . . . .
Units allocated to management . . . . . . . . . .
Member capital contribution . . . . . . . . . . . .
Balance—December 31, 2011 . . . . . . . . . . . . . .
Issuances of restricted units . . . . . . . . . . . .
Exercise of warrants and options . . . . . . . .
Balance—December 18, 2012 . . . . . . . . . . . . . .
Reorganization and offering transaction . . .
Issuance of Series C units . . . . . . . . . . . . . .
Exchange of Series A Units for Class A
Series A Units
Series B Units
Series C Units
—
3,087,600
48,305,514
—
51,393,114
—
40,864,698
92,257,812
23,904
2,661,636
—
—
—
950,000
950,000
50,000
—
1,000,000
—
—
—
—
—
—
—
—
—
—
—
—
94,943,352
(21,967,686)
—
1,000,000
—
— 21,967,686
1,600,000
—
common stock of PBF Energy Inc. . . . . .
(3,535)
—
3,535
Balance—December 31, 2012 . . . . . . . . . . . . . .
72,972,131
1,000,000
23,571,221
The warrants and options exercised in the table above include both non-compensatory and compensatory
PBF LLC Series A warrants and options.
12 - STOCK-BASED COMPENSATION
Stock-based compensation expense included in general and administrative expenses consisted of the following:
PBF LLC Series A Unit compensatory warrants
and options . . . . . . . . . . . . . . . . . . . . . . . . . . .
PBF LLC Series B Units . . . . . . . . . . . . . . . . . . .
PBF Energy options . . . . . . . . . . . . . . . . . . . . . .
Years Ended December 31,
2012
2011
2010
$1,589
1,277
88
$2,954
$1,135
1,381
—
$2,516
$ 378
1,922
—
$2,300
PBF LLC Series A warrants and options
PBF LLC granted compensatory warrants to employees of the Company in connection with their purchase of
Series A units in PBF LLC. The warrants grant the holder the right to purchase PBF LLC Series A Units. One-
F-32
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
12 - STOCK-BASED COMPENSATION (Continued)
PBF LLC Series A warrants and options (Continued)
quarter of the PBF LLC Series A compensatory warrants were exercisable at the date of grant and the remaining
three-quarters become exercisable over equal annual installments on each of the first three anniversaries of the
grant date subject to acceleration in certain circumstances. A total of 551,759 and 691,230 such PBF LLC Series
A compensatory warrants were granted during the years ended December 31, 2011 and 2010, respectively. They
are exercisable for ten years from the date of grant. The remaining warrants became fully exercisable in
connection with the IPO of PBF Energy.
A total of 205,000 and 620,000 options to purchase PBF LLC Series A units were granted to certain employees,
management and directors, in 2012 and 2011, respectively. Options vest over equal annual installments on each
of the first three anniversaries of the grant date subject to acceleration in certain circumstances. The options are
exercisable for ten years from the date of grant.
The estimated fair value of compensatory warrants and options granted during the years ended December 31,
2012, 2011 and 2010 was determined using the Black-Scholes pricing model with the following weighted
average assumptions:
Years Ended December 31,
2012
2011
2010
Expected life (in years) . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate of return . . . . . . . . . . . . . . . . . . . .
Exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.75
5.75
6.00
55.00% 40.00% 42.30%
1.84%
1.06%
1.00%
2.25%
2.43%
0.91%
$12.55
$10.00
$10.00
The total estimated fair value of PBF LLC Series A warrants and options granted in 2012, 2011 and 2010 was
$1,207, $2,116 and $1,179, respectively, and the weighted average fair value per unit was $5.89, $1.81 and
$1.71, respectively. Unrecognized compensation expense related to PBF LLC Series A warrants and options at
December 31, 2012 was $1,427.
F-33
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
12 - STOCK-BASED COMPENSATION (Continued)
PBF LLC Series A warrants and options (Continued)
The following table summarizes activity for PBF LLC Series A compensatory warrants and options for the years
ended December 31, 2012, 2011 and 2010.
Weighted
Average
Remaining
Contractual
Life
(in years)
Weighted
Average
Exercise Price
Stock-based awards, outstanding January 1, 2010 . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2010 . . . . . . . . . . .
Number of
PBF LLC
Series A
Compensatory
Warrants
and Options
—
691,320
—
—
691,320
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,171,759
(25,000)
(2,500)
$ —
10.00
—
—
$10.00
10.00
10.00
10.00
Outstanding at December 31, 2011 . . . . . . . . . . .
1,835,579
$10.00
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
205,000
(849,186)
(6,667)
Outstanding at December 31, 2012 . . . . . . . . . . .
1,184,726
Exercisable and vested at December 31, 2012 . .
Exercisable and vested at December 31, 2011 . .
Expected to vest at December 31, 2012 . . . . . . .
608,039
508,600
1,184,726
12.55
10.00
10.00
$10.44
$10.00
$10.00
$10.44
—
10.00
—
—
9.74
10.00
—
—
8.99
10.00
—
—
8.23
8.00
8.85
8.23
As of December 31, 2012 and 2011, members of management of the Company had also purchased an aggregate
of 2,740,718 non-compensatory Series A warrants in PBF LLC with an exercise price of $10.00 per unit, all of
which were immediately exercisable. During the year ended December 31, 2012, 2,672,299 of the warrants were
exercised, with a portion being exercised on a cashless basis. At December 31, 2012, there were 68,419 non-
compensatory warrants outstanding.
PBF LLC Series B Units
PBF LLC Series B Units were issued and allocated to certain members of management during the years ended
December 31, 2011 and 2010. One-quarter of the PBF LLC Series B Units vested at the time of grant and the
remaining three-quarters vest in equal annual installments on each of the first three anniversaries of the grant
date, subject to accelerated vesting upon certain events. Unrecognized compensation expense related to PBF LLC
Series B units at December 31, 2012 was $530.
F-34
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
12 - STOCK-BASED COMPENSATION (Continued)
PBF LLC Series B Units (Continued)
The following table summarizes activity for PBF LLC Series B Units for the years ended December 31, 2012,
2011 and 2010:
Non-vested units at January 1, 2010 . . . . . . . . . . . . . . . .
Allocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
PBF LLC
Series B units
—
950,000
(237,500)
—
Non-vested units at December 31, 2010 . . . . . . . . . . . . .
712,500
Allocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,000
(262,500)
—
Weighted
Average
Grant Date
Fair Value
$ —
5.11
5.11
—
$5.11
5.11
5.11
—
Non-vested units at December 31, 2011 . . . . . . . . . . . . .
500,000
$5.11
Allocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(250,000)
—
—
5.11
—
Non-vested units at December 31, 2012 . . . . . . . . . . . . .
250,000
$5.11
PBF Energy options
A total of 682,500 options to purchase shares of PBF Energy Class A Common Stock were granted to certain
employees and management of the Company concurrent with the IPO. The PBF Energy options vest over equal
annual installments on each of the first four anniversaries of the grant date subject to acceleration in certain
circumstances. The options are exercisable for ten years from the date of grant.
The estimated fair value of PBF Energy options granted during the year ended December 31, 2012 was
determined using the Black-Scholes pricing model with the following weighted average assumptions:
Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2012
6.25
51.0%
3.01%
0.89%
$26.00
The total estimated fair value of PBF Energy options granted in 2012 was $6,327 and the weighted average
per unit value was $9.27. Unrecognized compensation expense related to PBF Energy options at December 31,
2012 was $6,239.
F-35
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
12 - STOCK-BASED COMPENSATION (Continued)
PBF Energy options (Continued)
The following table summarizes activity for PBF Energy options for the year ended December 31, 2012. There were
no options granted, exercised or forfeited prior to 2012.
Number of
PBF Energy
Class A
Common
Stock Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life
(in years)
Stock-based awards, outstanding January 1, 2012 . . .
—
$ —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
682,500
—
—
26.00
—
—
Outstanding at December 31, 2012 . . . . . . .
682,500
$26.00
Exercisable and vested at December 31,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
$ —
Exercisable and vested at December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected to vest at December 31, 2012 . . . .
—
682,500
$ —
$26.00
—
10.00
—
—
9.95
—
—
9.95
13 - INCOME TAXES
The Company’s income before income taxes is earned solely in the United States. For periods following its IPO,
PBF Energy is required to file a separate federal corporate income tax return and recognizes income taxes on its
pre-tax income, which to-date has consisted solely of its share (approximately 24.4% as of December 31, 2012)
of PBF LLC’s pre-tax income. PBF LLC is organized as a limited liability company and is not subject to income
taxes. As PBF LLC was not a taxable entity, and remains as such subsequent to the IPO, the Company’s
consolidated financial statements do not reflect any income taxes for PBF LLC for periods prior to the IPO or
any income taxes on pre-tax income attributable to the noncontrolling interest in PBF LLC.
F-36
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
13 - INCOME TAXES (Continued)
The provision for (benefit from) income taxes consisted of:
Current expense:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred expense:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Year
Ended
December 31,
2012
$ —
—
—
1,134
141
1,275
Total provision for income taxes . . . . . . . . . . . . . . . . . . . .
$1,275
The difference between the Company’s effective income tax rate and the United States statutory rate is
reconciled below:
Tax computed at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) attributable to flow—through of certain tax
35.0%
adjustments:
State income taxes (net federal income tax)
. . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4%
.1%
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39.5%
A summary of the components of deferred tax assets and deferred tax liabilities at December 31, 2012 follows:
Deferred tax assets
Purchase interest step-up . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carry forwards . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets, net
. . . . . . . . . . . . . . . . .
Deferred tax liabilities
Property, plant and equipment . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
$181,257
6,087
9,503
196,847
—
196,847
69,088
6,534
646
76,268
Net deferred tax assets (liabilities) . . . . . . . . . . . . .
$120,579
F-37
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
13 - INCOME TAXES (Continued)
The Company has federal and state income tax net operating loss carry forwards of $14,755 and $18,678,
respectively, which will expire at various dates from 2018 through 2033.
Income tax years that remain subject to examination by material jurisdictions, where an examination has not
already concluded are:
United States
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2012
2012
2012
The Company does not have any unrecognized tax benefits.
14 - RELATED PARTY TRANSACTIONS
The Company engaged Fuel Strategies International, Inc, the principal of which is the brother of the Executive
Chairman of the Board of Directors of the Company, to provide consulting services relating to petroleum coke
and commercial operations. For the years ended December 31, 2012, 2011 and 2010, the Company incurred
charges of $903, $462 and $303 respectively, under this agreement.
The Company has an agreement with the Executive Chairman of the Board of Directors, for the use of an
airplane that is owned by a company owned by the Executive Chairman. The Company pays a charter rate that is
the lowest rate this aircraft is chartered to third-parties. For the years ended December 31, 2012, 2011 and 2010,
the Company incurred charges of $1,030, $821 and $393, respectively, related to use of this plane.
15 - COMMITMENTS AND CONTINGENCIES
Lease and Other Commitments
The Company leases office space, office equipment, refinery facilities and equipment, and tank cars under non-
cancelable operating leases. Total rent expense was $41,563, $29,233, and $1,078 for the years ended
December 31, 2012, 2011 and 2010, respectively. The Company is party to agreements which provide for the
treatment of wastewater and the supply of hydrogen and steam for the Paulsboro and Toledo refineries. The
Company made purchases of $30,335, $30,773 and $0 under these supply agreements for the years ended
December 31, 2012, 2011 and 2010, respectively.
The fixed and determinable amounts of the obligations under these agreements and total minimum future annual
rentals, exclusive of related costs, are approximately:
Year Ending
December 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 66,180
56,937
49,813
47,634
42,916
81,329
$344,809
F-38
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
15 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment Agreements
Concurrent with the PBF Energy IPO in December 2012, PBFI entered into amended and restated employment
agreements with members of executive management and certain other key personnel that include automatic
annual renewals, unless canceled. Under some of the agreements, certain of the executives would receive a lump
sum payment of between one and a half to 2.99 times of their base salary and continuation of certain employee
benefits for the same period upon termination by the Company “Without Cause”, or by the employee “For Good
Reason”, or upon a “Change in Control”, as defined in the agreements. Upon death or disability, certain of the
Company’s executives, or their estates, would receive a lump sum payment of at least one half of their base
salary.
Remediation Liabilities
The Company’s refineries are subject to extensive and frequently changing federal, state and local laws and
regulations, including, but not limited to, those relating to the discharge of materials into the environment or that
otherwise relate to the protection of the environment, waste management and the characteristics and the
compositions of fuels. Compliance with existing and anticipated laws and regulations can increase the overall
cost of operating the refineries, including remediation, operating costs and capital costs to construct, maintain
and upgrade equipment and facilities.
In connection with the Paulsboro acquisition, the Company assumed certain environmental remediation
obligations. The environmental liability of $9,669 recorded as of December 31, 2012 ($12,086 as of
December 31, 2011) represents the present value of expected future costs discounted at a rate of 8%. At
December 31, 2012 the undiscounted liability is $15,287 and the Company expects to make aggregate payments
for this liability of $6,168 over the next five years. The current portion of the environmental liability is recorded
in accrued expenses and the non-current portion is recorded in other long-term liabilities. A trust fund related to
this liability in the amount of $12,114 and $12,104, acquired in the Paulsboro acquisition, is recorded as
restricted cash in deferred charges and other assets, net as of December 31, 2012 and 2011, respectively.
In connection with the acquisition of the Delaware City assets, Valero remains responsible for certain pre-
acquisition environmental obligations up to $20,000 and the predecessor to Valero in ownership of the refinery
retains other historical obligations.
In connection with the Delaware City assets and Paulsboro refinery acquisitions, the Company and Valero
purchased ten year, $75,000 environmental insurance policies to insure against unknown environmental liabilities
at each site. In connection with the Toledo refinery acquisition, Sunoco remains responsible for environmental
remediation for conditions that existed on the closing date for twenty years from March 1, 2011.
In 2010, the State of New York adopted a Low-Sulfur Heating Oil mandate that beginning July 1, 2012 requires
all heating oil sold in New York State to contain no more than 15 parts per million of sulfur. Not all of the
heating oil we produce meets this specification. In addition, on June 1, 2012, the Environmental Protection
Agency issued final amendments to the New Source Performance Standards (“NSPS”) for petroleum refineries,
including standards for emissions of nitrogen oxides from process heaters and work practice standards and
monitoring requirements for flares. The Company is evaluating the impact of the regulation and amended
standards on its refinery operations. The Company cannot currently estimate the cost that may be incurred, if any,
to comply by July 1, 2015 with the amended NSPS.
F-39
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
15 - COMMITMENTS AND CONTINGENCIES (Continued)
Remediation Liabilities (Continued)
The Company is also currently subject to certain other existing claims and proceedings. The Company believes
that there is only a remote probability that future costs related to any of these known contingent liability
exposures would have a material impact on its financial position or results of operations.
PBF LLC Limited Liability Company Agreement
In connection with the IPO, the limited liability agreement of PBF LLC was amended and restated. PBF LLC’s
amended and restated limited liability company agreement provides for tax distributions to the members of PBF
LLC, including PBF Energy, subject to available cash and applicable law and contractual restrictions (including
pursuant to the Company’s debt instruments) and based on certain assumptions. Generally, these tax distributions
will be an amount equal to the Company’s estimate of the taxable income of PBF LLC multiplied by an assumed
tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate (subject to
adjustment for certain non-deductible expenses).
Tax Receivable Agreement
The Company has recognized a $160,011 payable to related parties pursuant to a Tax Receivable Agreement for
the estimated payments to the holders of PBF LLC Series A Units, of which $1,007 and $159,004 is classified as
current and noncurrent, respectively, as of December 31, 2012. The estimated liability is based on forecasts of
future taxable income over the anticipated life of the Company’s future business operations, assuming no
material changes in the relevant tax law. The assumptions used in the forecasts are subject to substantial
uncertainty about the Company’s future business operations and the actual payments that the Company is
required to make under the Tax Receivable Agreement could differ materially from current estimates. PBF
Energy is obligated to make these payments and expects to obtain funding for these payments by causing PBF
LLC to distribute cash on a pro-rata basis to its owners, which currently include PBF Energy, which holds a
24.4% interest, and PBF LLC Series A Unit holders who hold a 75.6% interest in PBF LLC. Accordingly, based
on current ownership percentages, the total cash payments related to the Tax Receivable Agreement, including
pro-rata distributions from PBF LLC to PBF LLC Series A Unit holders, would exceed the amounts that PBF
Energy is directly obligated to pay.
The PBF LLC Series A Unit holders may reduce their ownership in PBF LLC by exchanging their Series A Units
in PBF LLC for shares of PBF Energy common stock. Such a decrease in ownership would reduce subsequent
pro-rata distributions, but may result in additional increases in the tax basis of PBF Energy’s investment in PBF
LLC and require PBF Energy to make increased payments under the Tax Receivable Agreement. Required
payments under the Tax Receivable Agreement also may increase or become accelerated if PBF Energy exercises
its right to terminate the Tax Receivable Agreement, PBF Energy breaches any of its material obligations under
the Tax Receivable Agreement, or certain changes of control occur.
16 - EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
The Company’s defined contribution plan covers all employees. Employees are eligible to participate as of the
first day of the month following 30 days of service. Participants can make basic contributions up to 50 percent of
F-40
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
16 - EMPLOYEE BENEFIT PLANS (Continued)
Defined Contribution Plan (Continued)
their annual salary subject to Internal Revenue Service limits. The Company matches participants’ contributions
at the rate of 200 percent of the first 3 percent of each participant’s total basic contribution based on the
participant’s total annual salary. The Company’s contribution to the qualified defined contribution plans was
$9,969 and $7,204 for the years ended December 31, 2012 and 2011, respectively.
Defined Benefit and Post Retiree Medical Plans
The Company sponsors a noncontributory defined benefit pension plan (the “Qualified Plan”) with a policy to
fund pension liabilities in accordance with the limits imposed by the Employee Retirement Income Security Act
of 1974 (“ERISA”) and Federal income tax laws. In addition, the Company sponsors a supplemental pension
plan covering certain employees, which provides incremental payments that would have been payable from the
Company’s principal pension plan, were it not for limitations imposed by income tax regulations. The funded
status is measured as the difference between plan assets at fair value and the projected benefit obligation which is
to be recognized in the balance sheet. The plan assets and benefit obligations are measured as of the balance
sheet date.
The non-union Delaware City employees and all Paulsboro employees became eligible to participate in the
Company’s defined benefit plans as of the respective acquisition dates. The union Delaware City employees
became eligible to participate in the Company’s defined benefit plans upon commencement of normal operations.
The Company did not assume any of the employees’ pension liability accrued prior to the respective acquisitions.
The Company formed the Post Retirement Medical Plan on December 31, 2010 to provide health care coverage
continuation from date of retirement to age 65 for qualifying employees associated with the Paulsboro
acquisition. The Company credited the qualifying employees with their prior service under Valero which resulted
in the recognition of a liability for the projected benefit obligation.
F-41
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
16 - EMPLOYEE BENEFIT PLANS (Continued)
Defined Benefit and Post Retiree Medical Plans (Continued)
The changes in the benefit obligation, the changes in fair value of plan assets, and the funded status of the
Company’s Pension and Post Retirement Medical Plans as of and for the years ended December 31, 2012 and
2011 were as follows:
Pension Plans
Post Retirement
Medical Plan
2012
2011
2012
2011
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct benefit payments . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain)
$ 11,409
11,437
502
(48)
6,916
$ 2,052
8,678
140
—
539
$ 8,912
633
395
(21)
(189)
$ 7,273
540
381
—
718
Projected benefit obligation at end of year . . . . . . . . . . .
$ 30,215
$11,409
$ 9,730
$ 8,912
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . .
$ 4,758
422
(48)
5,100
$
441
(83)
—
4,400
$ —
—
(21)
21
Fair value of plan assets at end of year . . . . . . . . . . . . . .
$ 10,232
$ 4,758
$ —
$ —
—
—
—
$ —
Reconciliation of funded status:
Fair value of plan assets at end of year . . . . . . . . . . . . . .
Less benefit obligations at end of year . . . . . . . . . . . . . .
$ 10,232
30,215
$ 4,758
11,409
$ —
9,730
$ —
8,912
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . .
$(19,983)
$ (6,651)
$(9,730)
$(8,912)
The accumulated benefit obligations for the Company’s Pension Plans exceed the fair value of the assets of those
plans at December 31, 2012 and 2011. The accumulated benefit obligation for the defined benefit plans
approximated $24,555 and $8,979 at December 31, 2012 and 2011, respectively.
Benefit payments, which reflect expected future services, that the Company expects to pay are as follows for the
years ended December 31:
Pension Benefits
Post Retirement
Medical Plan
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,942
2,116
3,216
4,180
5,948
44,921
$
87
168
301
401
565
5,487
F-42
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
16 - EMPLOYEE BENEFIT PLANS (Continued)
Defined Benefit and Post Retiree Medical Plans (Continued)
The Company’s funding policy for its defined benefit plans is to contribute amounts sufficient to meet legal
funding requirements, plus any additional amounts that may be appropriate considering the funded status of the
plans, tax consequences, the cash flow generated by the Company and other factors. The Company plans to
contribute approximately $11,100 to the Company’s Pension Plans during 2013.
The components of net periodic benefit cost were as follows for the years ended December 31, 2012, 2011 and
2010:
Pension Benefits
Post Retirement
Medical Plan
2012
2011
2010
2012
2011
2010
Components of net period benefit cost:
. . . . . . . . . . . . . . . . . . . . .
Service cost
Interest cost
. . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . .
Amortization of prior service cost . . . .
Amortization of actuarial loss . . . . . . .
$11,437
502
(323)
11
30
$8,678
140
(38)
11
56
$347
40
(15)
—
—
$ 633
395
—
—
—
Net periodic benefit cost
. . . . . . . . . . . . . . .
$11,657
$8,847
$372
$1,028
$540
381
—
—
—
$921
$—
—
—
—
—
$—
The pre-tax amounts recognized in other comprehensive income (loss) for the years ended December 31, 2012,
2011 and 2010 were as follows:
Pension Benefits
Post Retirement
Medical Plan
2012
2011
2010
2012
2011
2010
Prior service costs . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial loss (gain)
. . . . . . . . . . . . . . . . . .
Amortization of losses . . . . . . . . . . . . . . . . . . .
$ — $— $ (125)
(909)
661
6,817
—
(67)
(41)
$ — $— $—
738 —
(189)
—
—
—
Total changes in other comprehensive loss . . .
$6,776
$594
$(1,034)
$(189)
$738
$—
The pre-tax amounts in accumulated other comprehensive loss as of December 31, 2012 and 2011 that have not
yet been recognized as components of net periodic costs were as follows:
Prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (103)
(8,306)
$ (114)
(1,519)
Pension Benefits
2012
2011
Post Retirement
Medical Plan
2012
$ —
(528)
2011
$ —
(738)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(8,409)
$(1,633)
$(528)
$(738)
F-43
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
16 - EMPLOYEE BENEFIT PLANS (Continued)
Defined Benefit and Post Retiree Medical Plans (Continued)
The following pre-tax amounts included in accumulated other comprehensive loss as of December 31, 2011 are
expected to be recognized as components of net period benefit cost during the year ended December 31, 2012:
Amortization of prior service costs . . . . . . . . . . . .
Amortization of net actuarial loss . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11
420
$ 431
$ —
—
$ —
Pension Benefits
Post Retirement
Medical Plan
The weighted average assumptions used to determine the benefit obligations as of December 31, 2012 and 2011
were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . .
3.45% 4.45%
4%
4%
3.45%
—
2012
2011
2012
2011
4.45%
—
Pension Benefits
Post Retirement Medical Plan
The discount rate assumptions used to determine the defined benefit and Post Retirement Medical plans
obligations as of December 31, 2012 and 2011 were based on the Mercer Yield Curve. The Mercer Yield Curve
is developed from a portfolio of high-quality investment grade bonds. To determine the discount rate, each year’s
projected cash flow for the defined benefit and Post Retirement Medical plans is discounted at a spot (zero-
coupon) rate appropriate for that maturity; the discount rate is the single equivalent rate that produces the same
discounted present value.
The weighted average assumptions used to determine the net periodic benefit costs for the years ended
December 31, 2012, 2011 and 2010 were as follows:
Pension Benefits
Post Retirement Medical Plan
2012
2011
2010
2012
2011
2010
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on plan assets . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . .
4.45% 5.25% 6% 4.45% 5.25% —
—
4.25% 4.25% 4% —
—
4% 4% —
—
—
4%
The assumed health care cost trend rates as of December 31, 2012 and 2011 were as follows:
Post Retirement
Medical Plan
2012
2011
Health care cost trend rate assumed for next
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate to which the cost trend rate was assumed to
decline (the ultimate trend rate)
. . . . . . . . . . . .
Year that the rate reached the ultimate trend
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7%
4.5%
2027
7%
4.5%
2024
F-44
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
16 - EMPLOYEE BENEFIT PLANS (Continued)
Defined Benefit and Post Retiree Medical Plans (Continued)
Assumed health care costs trend rates have a significant effect on the amounts reported for retiree health care
plans. A one percentage-point change in assumed health care costs trend rates would have the following effects
on the medical postretirement benefits:
Effect on total of service and interest cost components . . . . . .
Effect on accumulated postretirement benefit obligation . . . . .
1%
Increase
$ 144
1,137
1%
Decrease
$(123)
(994)
The tables below present the fair values of the assets of the Company’s Qualified Plan as of December 31, 2012
and 2011 by level of fair value hierarchy. Assets categorized in Level 1 of the hierarchy are measured at fair
value using a market approach based on published net asset values of mutual funds. As noted above, the
Company’s post retirement medical plan is funded on a pay-as-you-go basis and has no assets.
Fair Value Measurements Using
Quoted Prices in Active Markets
(Level 1)
December 31,
2012
2011
Government securities:
Vanguard Intermediate-Term Treasury Fund . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . .
$10,232
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,232
$4,758
—
$4,758
The Company’s investment strategy for its Qualified Plan is to achieve a reasonable return on assets that supports
the plan’s interest credit rating, subject to a moderate level of portfolio risk that provides liquidity. Consistent
with these financial objectives as of December 31, 2012, the plan assets were 100% intermediate fixed income
investments. The overall expected long-term rate of return on plan assets for the Qualified Plan is based on the
Company’s view of long-term expectations and asset mix.
17 - FAIR VALUE MEASUREMENTS
The tables below present information about the Company’s financial assets and liabilities measured and recorded
at fair value on a recurring basis and indicate the fair value hierarchy of the inputs utilized to determine the fair
values as of December 31, 2012 and 2011.
As of December 31, 2012
Level 1
Level 2
Level 3
Total
Assets:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . . . .
Liabilities:
Catalyst lease obligations . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration for refinery acquisition . . .
F-45
$175,786
3,303
$ — $ — $175,786
3,303
—
—
—
—
—
—
5,595
—
5,595
43,442
1,872
—
—
—
21,358
43,442
1,872
21,358
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
17 - FAIR VALUE MEASUREMENTS (Continued)
As of December 31, 2011
Level 1
Level 2
Level 3
Total
Assets:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . .
$
666
72
Liabilities:
Catalyst lease obligations . . . . . . . . . . . . . . . . . . . . .
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . . . .
Contingent consideration for refinery acquisition . . . .
—
—
—
$ — $ — $
—
30,266
—
—
666
72
30,266
3,070
—
—
122,232
3,070
122,232
The valuation methods used to measure financial instruments at fair value are as follows:
• Money market funds categorized in Level 1 of the fair value hierarchy are measured at fair value based
on quoted market prices and included within cash and cash equivalents.
• The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value
based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair
value hierarchy are measured at fair value using a market approach based upon future commodity
prices for similar instruments quoted in active markets.
• The derivatives included with inventory supply arrangement obligations and the catalyst lease
liabilities are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a
market approach based upon future commodity prices for similar instruments quoted in active markets.
• The contingent consideration for refinery acquisition obligation at December 31, 2012 is categorized in
Level 3 of the fair value hierarchy and is estimated using a discounted cash flow model based on
management’s estimate of the future cash flows of the Toledo refinery; a risk free rate of return of
0.16%; credit rate spread of 4.38%; and a discount rate of 4.54%. The change in fair value of the
obligation during the year ended December 31, 2012 was impacted primarily by the change in the time
value of money discount as the obligation is expected to be paid in full by April 2013. A significant
decrease in the estimated future cash flows used in the cash flow model would result in a decrease in
the fair value for this liability.
The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value
hierarchy:
Balance at beginning of period . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss included in earnings . . . . . . . . . . . . . . . .
Transfers into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31,
2012
2011
$ 122,232
—
(103,642)
2,768
—
—
$ —
117,017
—
5,215
—
—
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21,358
$122,232
There were no transfers between levels during the years ended December 31, 2012 and 2011, respectively.
F-46
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
18 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
18 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company uses derivative instruments to mitigate certain exposures to commodity price risk. The Company’s
crude supply agreements contain purchase obligations for certain volumes of crude oil and other feedstocks. The
Company was also party to an agreement that contained purchase obligations for certain volumes of stored
intermediates inventory during the years ended December 31, 2012 and 2011, which was terminated during the
first quarter of 2012. The purchase obligations related to crude oil and feedstocks are derivative instruments that
have been designated as fair value hedges in order to hedge the commodity price volatility of certain refinery
inventory beginning July 1, 2011. The fair value of these purchase obligation derivatives is based on market
prices of crude oil and intermediates in the future. The level of activity for these derivatives is based on the level
of operating inventories.
As of December 31, 2012, there were 2,529,447 barrels of crude oil and feedstocks (3,101,333 barrels at
December 31, 2011) outstanding under these derivative instruments designated as fair value hedges and no
barrels (117,848 barrels at December 31, 2011) outstanding under these derivative instruments not designated as
hedges. These volumes represent the notional value of the contract.
The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are
not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as
well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic
hedges is consistent with the objectives discussed above for fair value hedges. As of December 31, 2012, there
were 9,234,000 barrels of crude oil and 1,310,000 barrels of refined products (7,000 and 349,000, respectively, as
of December 31, 2011), outstanding under short and long term future commodity derivative contracts not
designated as hedges representing the notional value of the contracts.
The following tables provide information about the fair values of these derivative instruments as of
December 31, 2012 and 2011 and the line items in the consolidated balance sheet in which the fair values are
reflected. See Note 17 for additional information related to the fair values of derivative instruments.
Description
Derivatives designated as hedging instruments:
December 31, 2012:
Derivatives included with inventory supply
Balance Sheet Location
Fair Value
Asset/(Liability)
arrangement obligations . . . . . . . . . . . . . . . .
Accrued expenses
$ 5,595
December 31, 2011:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . .
Accrued expenses
$(1,465)
Derivatives not designated as hedging
instruments:
December 31, 2012:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . .
Accrued expenses
Accounts receivable
$ —
$ 1,431
December 31, 2011:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . .
Accrued expenses
Accounts receivable
$(1,605)
72
$
F-47
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
18 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
The Company’s policy is to net the fair value of the derivatives included with inventory supply arrangement
obligations against the liability related to inventory supply arrangements with the same counterparty as the legal
right of offset exists.
The following tables provide information about the gain or loss recognized in income on these derivative
instruments and the line items in the consolidated statement of operations in which such gains and losses are
reflected.
Description
Derivatives designated as hedging instruments:
For the year ended December 31, 2012:
Derivatives included with inventory supply
Location of Gain or (Loss)
Recognized in
Income on
Derivatives
Gain or (Loss)
Recognized in
Income on Derivatives
arrangement obligations . . . . . . . . . . . . . . . . . .
Cost of sales
$ 7,060
For the year ended December 31, 2011:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . .
Cost of sales
$ (6,076)
For the year ended December 31, 2010:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging instruments:
For the year ended December 31, 2012:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . .
For the year ended December 31, 2011:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . .
For the year ended December 31, 2010:
Derivatives included with inventory supply
arrangement obligations . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . .
Hedged items designated in fair value hedges:
For the year ended December 31, 2012:
Cost of sales
$ —
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
$
(8)
$ 34,778
$ 2,829
$ 5,604
$ (2,043)
$ —
Crude oil and feedstock inventory . . . . . . . . . . . .
Cost of sales
$ (4,704)
For the year ended December 31, 2011:
Crude oil and feedstock inventory . . . . . . . . . . . .
Cost of sales
For the year ended December 31, 2010:
Crude oil and feedstock inventory . . . . . . . . . . . .
Cost of sales
$ 6,558
$ —
Ineffectiveness related to the Company’s fair value hedges resulted in a gain of $2,356 and $482 for the years
ended December 31, 2012 and 2011, respectively. The gains and losses due to ineffectiveness were excluded
from the assessment of hedge effectiveness. The Company did not apply hedge accounting to any of its
derivative instruments prior to July 1, 2011.
F-48
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
19 - REVENUES
The following table provides information relating to the Company’s revenues from external customers for each
product or group of similar products for the periods:
Years Ended December 31,
2012
2011
2010
Gasoline and distillates . . . . . . . . . . . . . . . . . . .
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lubricants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquefied petroleum gases . . . . . . . . . . . . . . . . .
Asphalt and residual oils . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,878,957
705,373
517,921
380,747
370,420
285,269
$13,182,234
344,311
525,095
430,435
441,638
36,625
$175,083
—
13,718
5,739
8,739
7,392
$20,138,687
$14,960,338
$210,671
20 - NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income per common share attributable to
PBF Energy:
Basic Earnings Per Share:
Numerator for basic net income per Class A common share-net income attributable to
PBF Energy Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,956
Denominator for basic net income per Class A common share-weighted average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,570,240
Basic net income attributable to PBF Energy Inc. per Class A common share . . . . . . . .
$
0.08
Diluted Earnings Per Share:
Numerator:
Net income attributable to PBF Energy Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: Net income attributable to noncontrolling interest (1) . . . . . . . . . . . . . . . . . . .
Less: Income tax on net income attributable to noncontrolling interest (1) . . . . . . .
Numerator for diluted net income per Class A common share . . . . . . . . . . . . . . . . . . . . .
$
$
1,956
10,005
(3,948)
8,013
Denominator:
Denominator for basic net income per Class A common share-weighted average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive securities:
Conversion of PBF LLC Series A Units (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,570,240
72,972,131
688,533
Denominator for diluted net income per common share-adjusted weighted average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,230,904
Diluted net income attributable to PBF Energy Inc. per Class A common share . . . . . . .
$
0.08
F-49
PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
20 - NET INCOME PER SHARE (Continued)
(1) The diluted earnings per share calculation above, assumes the conversion of all outstanding PBF LLC
Series A Units to Class A Common Stock of PBF Energy as of the date of the IPO. The net income
attributable to PBF Energy, used in the numerator of the diluted earnings per share calculation is
adjusted to reflect the net income, as well as the corresponding income tax (based on a 39.5% effective
tax rate) attributable to the converted units.
Dilutive earnings per share excludes the effects of options to purchase 682,500 shares of PBF Energy
Class A common stock because they are anti-dilutive.
21 - SUBSEQUENT EVENTS
Toledo Refinery Fire
On January 30, 2013, there was a brief fire within the fluid catalytic cracking complex (“FCC”) at the Toledo
refinery. The FCC was the only unit involved and it was temporarily shut down. There were no injuries or known
offsite impacts. The refinery resumed running at planned rates on February 18, 2013.
Dividend Declaration
On February 20, 2013, the Company’s Board of Directors declared a dividend of $0.30 per share on outstanding
Class A common stock. The dividend is payable on March 15, 2013 to Class A common stockholders of record at
the close of business on March 5, 2013.
Delaware Economic Development Authority Loan
In February 2013, the Company received confirmation from the Delaware Economic Development Authority that
they had satisfied the conditions necessary for the first $4.0 million tranche of the loan to be converted to a grant.
See Note 8 for further details on the Delaware Economic Development Authority Loan.
F-50
PBF ENERGY INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
The following table summarizes quarterly financial data for the years ended December 31, 2012 and 2011
(in thousands, except per share amounts).
Revenues . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . .
Net income attributable to PBF Energy
Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share -assuming
dilution . . . . . . . . . . . . . . . . . . . . . . . .
2012 Quarter Ended
March 31
June 30
September 30
December 31 (a)
$4,716,106
(164,083)
(202,532)
$5,077,015
579,506
555,742
$5,395,206
220,109
186,564
$4,950,360
284,901
264,263
1,956
$
.08
March 31 (b)
June 30
September 30
December 31 (c)
2011 Quarter Ended
Revenues . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . .
$1,912,456
(38,605)
(47,821)
$3,526,681
177,885
168,575
$4,744,760
331,979
306,397
$4,776,441
(165,569)
(184,480)
(a) On December 12, 2012, PBF Energy Inc. completed an initial public offering which closed on December 18,
2012.
(b) The Company acquired the Toledo refinery on March 1, 2011 from Sunoco.
In October 2011 the Delaware City refinery became fully operational.
(c)
F-51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of PBF Holding Company LLC:
We have audited the accompanying balance sheet of the Paulsboro Refining Business as of December 16, 2010,
and the related statement of income, changes in net parent investment, and cash flows for the period from
January 1 through December 16, 2010. These financial statements are the responsibility of the management of
the Paulsboro Refining Business. Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Paulsboro Refining
Business’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Paulsboro Refining Business as of December 16, 2010, and the results of its operations and its
cash flows for the period from January 1 through December 16, 2010, in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG LLP
San Antonio, Texas
June 23, 2011
F-52
PAULSBORO REFINING BUSINESS
BALANCE SHEET
(In thousands)
Current assets:
ASSETS
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 16,
2010
12,122
686
155,332
829
168,969
341,236
—
341,236
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$510,205
LIABILITIES AND
NET PARENT INVESTMENT
Current liabilities:
Current portion of capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligation, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
27
12,950
6,046
162
19,185
107
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,290
Commitments and contingencies
Net parent investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
467,623
Total liabilities and net parent investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$510,205
See accompanying notes to the financial statements.
F-53
PAULSBORO REFINING BUSINESS
STATEMENT OF INCOME
(In thousands)
Period from
January 1, 2010
through
December 16,
2010
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,708,989
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,487,825
259,768
14,606
895,642
66,361
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,724,202
Operating income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income and expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit)
(1,015,213)
500
(1,014,713)
(322,962)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (691,751)
See accompanying notes to the financial statements.
F-54
PAULSBORO REFINING BUSINESS
STATEMENT OF CHANGES IN NET PARENT INVESTMENT
(In thousands)
Balance as of January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash advances from parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,083,268
(691,751)
76,106
Balance as of December 16, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 467,623
See accompanying notes to the financial statements.
F-55
PAULSBORO REFINING BUSINESS
STATEMENT OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Period from
January 1, 2010
Through
December 16,
2010
$(691,751)
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in current assets and current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,361
895,642
(283,470)
(8,663)
(11,840)
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
(33,721)
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred turnaround and catalyst costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investing activities, net
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Capital lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash advances from (repayments to) parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(20,122)
(17,011)
(5,229)
(42,362)
(25)
76,106
76,081
(2)
2
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
See accompanying notes to the financial statements.
F-56
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS
1 - BUSINESS DESCRIPTION
The Paulsboro Refining Business (the Business) includes the operations of the Paulsboro Refinery and related
assets. The Paulsboro Refinery is located on 950 acres in Paulsboro, New Jersey, approximately 15 miles south
of Philadelphia on the Delaware River. The refinery has a total throughput capacity, including crude oil and other
feedstocks, of approximately 185,000 barrels per day. The refinery’s main processing facilities include a crude
unit, a coker, a propane deasphalting unit, a fluid catalytic cracking unit, a continuous catalytic desulfurization
unit, and a sulfur recovery unit. The refinery processed primarily sour crude oils into a wide slate of products
including gasolines, distillates, lube oil basestocks and lube extracts, asphalt, fuel oil, petroleum coke, propane
and sulfur. Feedstocks and refined products were typically transported by tanker and barge via refinery-owned
dock facilities along the Delaware River, Buckeye Pipeline Company’s product distribution system into western
Pennsylvania and Ohio, a local truck rack owned by NuStar Energy L.P., railcars, and the Colonial pipeline,
which allowed products to be sold into the New York Harbor market.
The Paulsboro Refinery was acquired by a subsidiary of Valero Energy Corporation (Valero) from Mobil Oil
Corporation (Mobil) on September 16, 1998. References to Valero or Parent herein may refer to Valero Energy
Corporation or one or more of its direct or indirect subsidiaries that were not included in the financial statements
of the Business, as the context requires.
As described in Note 3, the Business was sold to PBF Holding Company LLC (PBF Holding) on December 17,
2010. These financial statements include the operations of the Business through December 16, 2010.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements have been prepared in accordance with applicable United States generally accepted
accounting principles (GAAP). The financial statements reflect Valero’s historical cost basis in the Business.
The financial statements include allocations and estimates of general and administrative costs of Valero that were
attributable to the operations of the Business. The Business purchased its crude oil and other feedstocks from and
sold its refined products to Valero. Purchases of feedstock by the Business from Valero were recorded at the cost
paid to third parties by Valero, and sales of refined products from the Business to Valero were recorded at
intercompany transfer prices, which were market prices adjusted by quality, location, and other differentials on
the date of the sale. Management believes that the assumptions, estimates, and allocations used to prepare these
financial statements are reasonable. However, the amounts reflected in these financial statements may not
necessarily be indicative of the revenues, costs, and expenses that would have resulted if the Business had been
operated as a separate entity.
The Business’ results of operations may have been affected by seasonal factors, such as the demand for
petroleum products, which vary during the year, or industry factors that may be specific to a particular period,
such as industry supply capacity and refinery turnarounds. In addition, the Business’ results of operations were
dependent on Valero’s feedstock acquisition and refined product marketing activities.
Management has evaluated subsequent events that occurred after December 16, 2010 through June 23, 2011, the
date these financial statements were issued. Any material subsequent events that occurred during this time have
been properly recognized or disclosed in these financial statements.
F-57
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates. On an ongoing basis, management reviewed its estimates based on currently
available information. Changes in facts and circumstances could result in revised estimates.
Inventories
Inventories represent inventories located at the refinery and consisted of refinery feedstocks purchased for
processing, refined products, and materials and supplies. Inventories were carried at the lower of cost or market.
The cost of refinery feedstocks purchased for processing and refined products were determined under the last-in,
first-out (LIFO) method using the dollar-value LIFO method, with any increments valued based on purchase
prices at the end of the year. The cost of materials and supplies was determined under the weighted-average cost
method.
Property, Plant and Equipment
Property, plant and equipment were stated at cost. Additions to property, plant and equipment, including
capitalized interest and certain costs allocable to construction and property purchases, were recorded at cost.
The costs of minor property units (or components of property units), net of salvage value, retired or abandoned
were charged or credited to accumulated depreciation under the composite method of depreciation. Gains or
losses on sales or other dispositions of major units of property were recorded in income and were reported in
depreciation and amortization expense.
Depreciation of property, plant and equipment was recorded on a straight-line basis over the estimated useful
lives of the related facilities primarily using the composite method of depreciation. Leasehold improvements and
assets acquired under capital leases were amortized using the straight-line method over the shorter of the lease
term or the estimated useful life of the related asset. The Business recorded additional accumulated depreciation
of $354,829 in recognition of the asset impairment discussed below and in Note 3.
Deferred Charges and Other Assets
Deferred charges and other assets included the following:
•
•
•
refinery turnaround costs, which were incurred in connection with planned major maintenance
activities at the Paulsboro Refinery and which were deferred when incurred and amortized on a
straight-line basis over the period of time estimated to lapse until the next turnaround occurs;
fixed-bed catalyst costs, representing the cost of catalyst that was changed out at periodic intervals
when the quality of the catalyst has deteriorated beyond its prescribed function, which were deferred
when incurred and amortized on a straight-line basis over the estimated useful life of the specific
catalyst; and
process royalty costs, which were deferred when incurred and amortized over the life of the specific
royalty.
Impairment and Disposal of Long-Lived Assets
Long-lived assets were tested for recoverability whenever events or changes in circumstances indicated that the
carrying amount might not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds
the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived
F-58
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
asset is not recoverable, an impairment loss is recognized in an amount by which its carrying amount exceeds its
fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods.
On December 16, 2010, the Business recorded an asset impairment charge of $896 million as a result of Valero’s
sale of the Business to PBF Holding on December 17, 2010.
Environmental Matters
Liabilities for future remediation costs were recorded when environmental assessments and/or remedial efforts
were probable and the costs could be reasonably estimated. Other than for assessments, the timing and magnitude
of these accruals generally were based on the completion of investigations or other studies or a commitment to a
formal plan of action. Environmental liabilities were based on best estimates of probable undiscounted future
costs over a 20-year time period using currently available technology and applying current regulations, as well as
the Business’ own internal environmental policies. Amounts recorded for environmental liabilities were not
reduced by possible recoveries from third parties.
Asset Retirement Obligations
The Business had asset retirement obligations with respect to certain of its refinery assets due to various legal
obligations to clean and/or dispose of various component parts at the time they were retired. As of December 31,
2010, the Business had recorded asset retirement obligations related to certain pond closures and a landfill
closure.
In addition to these recorded asset retirement obligations, the Business had asset retirement obligations with
respect to certain other component parts of its refinery assets. However, those component parts could be used for
extended and indeterminate periods of time as long as they were properly maintained and/or upgraded. It was
management’s practice and current intent to maintain those refinery assets and continue making improvements to
those assets based on technological advances. As a result, management believed that those refinery assets had an
indeterminate life for purposes of estimating asset retirement obligations because dates or ranges of dates upon
which such refinery assets would be retired cannot be reasonably estimated at this time. When a date or range of
dates can be reasonably estimated for the retirement of any component part of those refinery assets, an estimate
of the cost of performing the retirement activities will be determined and a liability will be recorded for the fair
value of that cost using established present value techniques.
Net Parent Investment
The net parent investment represents a net amount consisting of the Parent’s initial investment in the Business
and subsequent adjustments resulting from the operations of the Business and various transactions between the
Business and Valero. The Business participated in the Parent’s centralized cash management program under
which all of the Business’ cash receipts were remitted to and all cash disbursements were funded by the Parent.
Other transactions affecting the net parent investment include general and administrative expenses incurred by
Valero and allocated to the Business. There were no terms of settlement or interest charges associated with the
net parent investment.
Revenue Recognition
Revenues were recorded by the Business upon delivery of the refined products to the Parent, which was the point
at which title to the products was transferred.
F-59
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
Cost of Sales
Cost of sales included the cost of feedstock acquired for processing by the Business, including transportation
costs to deliver the feedstock to the refinery.
Operating Expenses
Operating expenses consisted primarily of labor costs of refinery personnel, maintenance, fuel and power costs,
chemical and catalyst costs, and third-party services. Such expenses were recognized as incurred.
Stock-Based Compensation
Employees of the Business participate in various employee benefit plans of the Parent, including certain stock-
based compensation plans as discussed in Note 9. Compensation expense for awards under the stock-based
compensation plans was based on the fair value of the awards granted and was recognized in the statements of
income on a straight-line basis over the requisite service period of each award. For new grants that had
retirement-eligibility provisions, the Business used the substantive vesting period approach, under which
compensation cost was recognized immediately for awards granted to retirement-eligible employees or over the
period from the grant date to the date retirement eligibility was achieved if that date was expected to occur before
the nominal vesting periods of the awards was fulfilled.
Income Taxes
Income taxes were accounted for under the asset and liability method. Under this method, deferred tax assets and
liabilities were recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred amounts
were measured using enacted tax rates expected to apply to taxable income in the year those temporary
differences were expected to be recovered or settled.
The Business paid the Parent the amount of its current federal income tax liability as determined under a
tax-sharing arrangement with the Parent; the accrual and payment of the current federal income tax liability was
recorded in net parent investment in the financial statements in the year incurred. The current state income tax
liability of the Business was reflected in income taxes payable.
Historically, the Business’ results of operations were included in the consolidated federal income tax return filed
by Valero and were included in state income tax returns of subsidiaries of Valero. The income tax provision
represented the current and deferred income taxes that would have resulted if the Business were a stand-alone
taxable entity filing its own income tax returns. Accordingly, the calculations of the current and deferred income
tax provision necessarily require certain assumptions, allocations, and estimates that management believed were
reasonable to reflect the tax reporting for the Business as a stand-alone taxpayer.
The Business elected to classify any interest expense and penalties related to the underpayment of income taxes
in income tax expense.
Segment Disclosures
The Business operated in only one segment, the refining segment of the oil and gas industry.
Financial Instruments
The Business’ financial instruments included cash, receivables, and payables. The estimated fair values of these
financial instruments approximated their carrying amounts.
F-60
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
3 - SALE OF BUSINESS
On December 17, 2010, the Business was sold to PBF Holding for $661 million of proceeds, of which
$160 million consisted of a short-term note. Working capital, consisting primarily of inventory, was included as
part of this transaction. On December 16, 2010, the Business recorded an impairment charge of $896 million to
reflect the reduction in the carrying value of its assets.
4 - INVENTORIES
Inventories consisted of the following (in thousands):
December 16,
2010
Refinery feedstocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refined products and blendstocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 50,604
92,664
12,064
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$155,332
A reduction in inventory volumes during the period from January 1, 2010 through December 16, 2010 and for the
year ended December 31, 2009 resulted in a liquidation of LIFO inventory layers that were established in prior
years. The effect of these liquidations was to decrease cost of sales by $20.8 million for the period from
January 1, 2010 through December 16, 2010.
As of December 16, 2010, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying
amounts by approximately $171.3 million.
5 - PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment consisted of the following (in thousands):
Estimated
Useful Lives
December 16,
2010
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crude oil processing facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Precious metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment
25years
40 – 42years
5 – 20years
Property, plant and equipment, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
7,564
1,410,361
3,005
5,231
51,518
63,664
(1,200,107)
341,236
—
$
341,236
The Business leased an oxygen facility under a capital lease that is discussed further in Note 8. The capital lease,
which is included above in “other,” had a net book value of $0.2 million, net of accumulated amortization of
$0.1 million, as of December 16, 2010.
Depreciation expense for the period from January 1, 2010 through December 16, 2010 was $52.1 million.
F-61
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
As of December 16, 2010, various projects with a total cost of approximately $56 million had been temporarily
suspended. These costs were written off and included in the asset impairment charge discussed in Note 3.
6 - ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
Accrued expenses and other long-term liabilities as of December 16, 2010 consisted of the following (in
thousands):
Accrued
Expenses
Other
Long-Term
Liabilities
2010
2010
Asset retirement obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and regulatory liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain income tax position liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee wage and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,500
1,405
625
—
501
15
$ 7,867
11,459
1,983
1,981
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,046
$23,290
Environmental Liabilities
In connection with the acquisition of the Paulsboro Refinery in 1998, Valero assumed certain environmental
liabilities including, but not limited to, certain remediation obligations related primarily to clean-up costs
associated with groundwater contamination, landfill closure and post-closure monitoring costs, and tank farm
spill prevention costs.
The table below reflects the changes in the environmental liabilities of the Business (in thousands):
Balance as of beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments, net of third-party recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,008
700
(2,844)
Balance as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,864
Period from
January 1
through
December 16,
2010
F-62
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
Asset Retirement Obligations
The table below reflects the changes in asset retirement obligations of the Business (in thousands):
Period from
January 1
through
December 16,
2010
Balance as of beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,807
(440)
Balance as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,367
7 - COMMITMENTS AND CONTINGENCIES
Leases
The Business had long-term operating lease commitments for office facilities and office equipment. In most
cases, the Business expects that in the normal course of business, its leases will be renewed or replaced by other
leases.
The Business leased an oxygen facility under an agreement accounted for as a capital lease. The lease expires in
May 2015.
As of December 16, 2010, future minimum rentals for leases having initial or remaining noncancelable lease
terms in excess of one year were as follows (in thousands):
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remainder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Leases
Capital
Lease
$ 34
$ 1,574
34
1,587
34
1,610
34
1,634
1,657
14
1,965 —
Total minimum rental payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,027
150
Less interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16)
$134
Rental expense for all operating leases was $12.0 million for the period ended December 16, 2010.
Litigation Matters
MTBE Litigation
As of June 23, 2011, Valero and several of its subsidiaries are named in numerous cases involving claims related
to MTBE contamination in groundwater based on the manufacture, marketing and supply of gasoline containing
MTBE. With respect to the historic operations at the Paulsboro Refinery, ten of these cases may involve
F-63
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
allegations of liability for gasoline containing MTBE manufactured at the Paulsboro Refinery. The Valero
subsidiary that previously owned the Paulsboro Refinery has been named in four of the cases along with Valero
and other Valero subsidiaries and has potential liability in the other six cases. In connection with the sale of the
Business, Valero retained the liability for these matters. The plaintiffs are generally water providers,
governmental authorities, and private water companies alleging that refiners and marketers of MTBE and
gasoline containing MTBE are liable for manufacturing or distributing a defective product. Valero has been
named in these lawsuits together with many other refining industry companies. Valero is being sued primarily as
a refiner and distributor of MTBE and gasoline containing MTBE. Valero does not own or operate gasoline
station facilities in most of the geographic locations in which damage is alleged to have occurred. The lawsuits
generally seek individual, unquantified compensatory and punitive damages, injunctive relief, and attorneys’
fees. All but one of the cases are pending in federal court and most are consolidated for pre-trial proceedings in
the U.S. District Court for the Southern District of New York (Multi-District Litigation Docket No. 1358, In re:
Methyl-Tertiary Butyl Ether Products Liability Litigation). Discovery is open in all cases. Valero believes that it
has strong defenses to all claims and is vigorously defending the lawsuits. Although Valero has recorded a loss
contingency liability with respect to the MTBE litigation portfolio, the Business had not recorded a liability for
this litigation.
Other Litigation
The Business was also a party to other claims and legal proceedings arising in the ordinary course of business.
Management believed that there was only a remote likelihood that future costs related to known contingent
liabilities related to these legal proceedings would have a material adverse impact on the results of operations or
financial position of the Business.
8 - EMPLOYEE BENEFIT PLANS
Employees who work for the Business were included in the various employee benefit plans of the Parent. These
plans included qualified, non-contributory defined benefit retirement plans, defined contribution plans, employee
and retiree medical, dental, and life insurance plans, incentive plans (i.e., stock options, restricted stock, and
bonuses), and other such benefits. For the incentive plans, the Business was charged with the bonus, stock option,
and restricted stock expense directly attributable to its employees. For the purposes of these financial statements,
the Business was considered to be participating in multi-employer benefit plans of the Parent.
The Business’ allocated share of the Parent’s employee benefit plan expenses were as follows (in thousands):
Defined benefit plans excluding incentive plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,361
6,305
Employee benefit plan expenses incurred by the Business were included in operating expenses with the related
payroll costs.
Period from
January 1
through
December 16,
2010
F-64
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
9 - INCOME TAXES
The amounts presented below relate only to the Business and were calculated as if the Business filed separate
federal and state income tax returns.
Components of income tax expense (benefit) were as follows (in thousands):
Period from
January 1
through
December 16,
2010
Current:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (39,492)
—
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(39,492)
Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(247,514)
(35,955)
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(283,470)
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(322,962)
The following is a reconciliation of total income tax expense (benefit) to income taxes computed by applying the
U.S. statutory federal income tax rate (35% for all periods presented) to income (loss) before income tax expense
(benefit) (in thousands):
Federal income tax expense (benefit) at the U.S. statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state income tax expense (benefit), net of U.S. federal income tax effect . . . . . . . . . . . . . . . . . .
U.S. manufacturing deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Period from
January 1
through
December 16,
2010
$(355,150)
(23,371)
2,540
52,644
375
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(322,962)
F-65
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
The tax effects of significant temporary differences representing deferred income tax assets and liabilities were
as follows (in thousands):
December 16,
2010
Deferred income tax assets:
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses (NOL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and employee benefit liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,300
22,795
5,255
4,481
70,007
3,664
Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107,502
(88,444)
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,058
Deferred income tax liabilities:
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,016)
(42)
(19,058)
Net deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
The Business had the following income tax credit and loss carryforwards as of December 16, 2010
(in thousands):
Amount
Expiration
U.S. state NOL (gross amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$389,651
2,000
2029 through 2030
2016 through 2017
The Business recorded a valuation allowance as of December 16, 2010 due to uncertainties related to its ability to
utilize some of its deferred income taxes, primarily consisting of certain state NOLs, state credits, and federal
deferred tax assets. The valuation allowance was based on estimates of taxable income in the various
jurisdictions in which the Business operated and the period over which deferred income taxes would be
recoverable. The realization of net deferred income tax assets recorded as of December 16, 2010 was primarily
dependent upon the ability of the Business to generate future taxable income in certain states. Because the
Business was sold on December 17, 2010 and no gain was recognized from the sale, no future taxable income
will be generated, and therefore the Business recorded a valuation allowance.
The following is a reconciliation of the change in unrecognized tax benefits, excluding the effect of related
penalties and interest and the federal tax effect of state unrecognized tax benefits (in millions):
Balance as of beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions related to prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,668
(510)
Balance as of end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,158
F-66
Period from
January 1
through
December 16,
2010
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
10 - SUPPLEMENTAL CASH FLOW INFORMATION
In order to determine net cash provided by (used in) operating activities, net income (loss) was adjusted by,
among other things, changes in current assets and current liabilities as follows (in thousands):
Period from
January 1
through
December 16,
2010
Decrease (increase) in current assets:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(12,122)
(110)
21,230
412
Increase (decrease) in current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,885)
(6,140)
(48)
—
Changes in current assets and current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (8,663)
The above changes in current assets and current liabilities differ from changes between amounts reflected in the
applicable balance sheets for the respective periods for the following reasons:
•
•
the amounts shown above exclude changes in cash, deferred income taxes, and current portion of
capital lease obligation, and
amounts accrued for capital expenditures and deferred turnaround and catalyst costs were reflected in
investing activities when such amounts were paid.
Cash flows related to income taxes and interest were as follows (in thousands):
Period from
January 1
through
December 16,
2010
Income taxes paid, net of tax refunds received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid (net of amount capitalized) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(39,492)
7
11 - RELATED-PARTY TRANSACTIONS
Related-party transactions of the Business included the purchase of feedstocks by the Business from Valero,
operating revenues received by the Business from its sales of refined products to Valero, and the allocation of
insurance and security costs and certain general and administrative costs from Valero to the Business. Purchases
of feedstock by the Business from Valero were recorded at the cost paid to third parties by Valero. Sales of
refined products from the Business to Valero were recorded at intercompany transfer prices, which were market
prices adjusted by quality, location, and other differentials on the date of the sale. General and administrative
costs were charged by Valero to the Business based on management’s determination of such costs attributable to
the operations of the Business. However, such related-party transactions cannot be presumed to be carried out on
an arm’s length basis as the requisite conditions of competitive, free-market dealings may not exist. For purposes
of these financial statements, payables and receivables related to transactions between the Business and Valero
were included as a component of the net parent investment.
F-67
PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
The Business participated in the Parent’s centralized cash management program under which cash receipts and
cash disbursements were processed through the Parent’s cash accounts with a corresponding credit or charge to
an intercompany account. This intercompany account was included in the net parent investment.
As discussed above, Valero provided the Business with certain general and administrative services, including the
centralized corporate functions of legal, accounting, treasury, environmental, engineering, information
technology, and human resources. For these services, Valero charged the Business a portion of its total general
and administrative expenses incurred in the U.S. The general and administrative expenses represented the amount
of such costs allocated to the Business for the periods presented, with this allocation based on investments in
property, operating revenues, and payroll expenses. Management believed that the amount of general and
administrative expenses allocated to the Business was a reasonable approximation of the costs related to the
Business.
The following table summarizes the related-party transactions of the Business (in thousands):
Revenues.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Period from
January 1
through
December 16,
2010
$4,708,989
4,485,451
3,071
14,606
F-68
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
PBF ENERGY INC.
(Registrant)
By:
/s/ Thomas J. Nimbley
(Thomas J. Nimbley)
Chief Executive Officer
(Principal Executive Officer)
Date: February 28, 2013
POWER OF ATTORNEY
Each of the officers and directors of PBF Energy Inc., whose signature appears below, in so signing, also
makes, constitutes and appoints each of Michael Gayda, Matthew Lucey and Jeffrey Dill, and each of them, his
true and lawful attorneys-in-fact, with full power and substitution, for him in any and all capacities, to execute
and cause to be filed with the SEC any and all amendments to this Annual Report on Form 10-K, with exhibits
thereto and other documents connected therewith and to perform any acts necessary to be done in order to file
such documents, and hereby ratifies and confirms all that said attorneys-in-fact or their substitute or substitutes
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Thomas J. Nimbley
(Thomas J. Nimbley)
/s/ Matthew C. Lucey
(Matthew C. Lucey)
/s/ Karen B. Davis
(Karen B. Davis)
/s/ Thomas D. O’Malley
(Thomas D. O’Malley)
/s/ Spencer Abraham
(Spencer Abraham)
/s/ Jefferson F. Allen
(Jefferson F. Allen)
/s/ Martin J. Brand
(Martin J. Brand)
/s/ Timothy H. Day
(Timothy H. Day)
Chief Executive Officer
(Principal Executive Officer)
February 28, 2013
Senior Vice President, Chief
Financial Officer
(Principal Financial Officer)
February 28, 2013
Chief Accounting Officer
(Principal Accounting Officer)
February 28, 2013
Executive Chairman of the
Board of Directors
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Signature
Title
Date
/s/ David I. Foley
(David I. Foley)
/s/ Dennis Houston
(Dennis Houston)
/s/ Edward F. Kosnik
(Edward F. Kosnik)
/s/ Neil A. Wizel
(Neil A. Wizel)
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
Director
February 28, 2013
PBF ENERGY INC.
2012 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT FOR DIRECTORS
Exhibit 10.22
THIS AGREEMENT (the “Agreement”), is made effective as of the date set forth on the signature page
hereto (the “Date of Grant”), between PBF Energy Inc. (the “Company”) and the individual named on the
signature page hereto (the “Grantee”).
R E C I T A L S:
WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby
incorporated by reference and made a part of this Agreement; and
WHEREAS, the Committee (as defined in the Plan) has determined that it would be in the best interests of
the Company and its stockholders to grant the Restricted Shares (as defined below) provided for herein to the
Grantee pursuant to the Plan and the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as
follows:
1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set
forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.
(a) Company Group: The Company and its subsidiaries and Affiliates.
(b) Disability: Disabled or Disability with respect to a Grantee, means the definition of Disabled or
Disability used in such Grantee’s employment agreement or agreement to provide services, or if no such
agreement exists, or such term is not defined therein, “disabled” or “disability” means that such Grantee becomes
physically or mentally incapacitated and is therefore unable for a period of six consecutive months or for an
aggregate of nine months in any twenty-four consecutive month period to perform such Grantee’s duties as an
employee of or service provider to the Company Group. The determination of a disability will be made by the
Company, provided that, in the event that an Award under this Agreement should become subject to
Section 409A, “Disabled” and “Disability” shall have the meaning set forth in Section 409A and Treasury
Regulation Section 1.409A-3(i)(4) thereunder, unless determined otherwise in the discretion of the Committee.
(c) Good Reason: Good Reason means, without the Grantee’s consent: (i) with respect to the Grantee, a
material breach by any member of the Company Group of any of its material covenants or obligations under this
Agreement, the Plan or any service agreement of any member of the Company Group; or (ii) the failure of the
Company Group to pay or cause to be paid the Grantee’s fees or other compensation when due; provided, that
prior to the Grantee’s separation from service for Good Reason under clauses (i) and (ii) above, the Grantee must
give written notice to the Company Group member to which he renders services of any such event that
constitutes Good Reason within twenty (20) days of the occurrence of such event and such event must remain
uncorrected for thirty (30) days following receipt of such written notice; and provided further that any
termination due to Good Reason must occur no later than sixty (60) days after the occurrence of the event giving
rise to Good Reason.
(d) Plan: The PBF Energy Inc. 2012 Equity Incentive Plan, as it may be amended or supplemented from
time to time.
(e) Restricted Share: A Share with respect to which the terms, conditions and restrictions are set forth in
Section 3 of this Agreement.
2. Grant of the Restricted Shares; Section 83(b) Election.
(a) The Company hereby grants to the Grantee, on the terms and conditions hereinafter set forth herein and
in the Plan, the number of Shares set forth on the signature page hereto, subject to adjustment as set forth in the
Plan.
(b) The Grantee hereby acknowledges that he or she has been informed that, with respect to the grant of the
Restricted Shares, an election (the “Election”) may be filed by the Grantee with the Internal Revenue Service,
within 30 days of the Grant Date, electing pursuant to Section 83(b) of the Code to be taxed currently on the fair
market value of the Shares on the Grant Date. The Company believes this may result in recognition of U.S.
federal taxable income to the Grantee on the Grant Date, equal to the fair market value of the Shares on such
date. Absent such an Election, taxable income will be measured and recognized by the Grantee at the time or
times at which Shares become vested. State, local and other tax considerations may also apply. The Grantee shall
seek the advice of his or her own tax advisors in connection this Award and the advisability of filing the Election.
The Grantee understands that any taxes paid as a result of the filing of the Election might not be recovered if the
unvested portion of such Shares are forfeited to the Company. The Grantee acknowledges that it is the Grantee’s
sole responsibility and not the Company’s to timely file the Election, even if the Grantee requests the Company
or its representative to make this filing on the Grantee’s behalf. The Grantee agrees to notify the Company within
10 days of filing any such Election.
3. Vesting; Terms and Conditions.
(a) General. Subject to the Grantee’s continued service or employment with the Company Group through
the applicable vesting date, the restrictions with respect to the Restricted Shares shall lapse and the Shares shall
become nonforfeitable at the times set forth on the signature page hereto.
(b) Termination of Service. If the Grantee’s service or employment with the Company Group terminates for
any reason prior to the vesting in accordance with Section 3(a), unless otherwise provided for in Section 3(c), the
Restricted Shares, to the extent not then vested and exercisable, shall be immediately forfeited by the Grantee
without consideration.
(c) Accelerated Vesting Under Certain Circumstances. Notwithstanding the foregoing, the Award shall vest
as to 100% of the Shares subject to the Award (but only to the extent the Award has not otherwise previously
been forfeited), and the Shares shall become nonforfeitable, in the event of (i) a Change in Control or (ii) the
termination of the Grantee’s service as a Director (A) without Cause, (B) if the Grantee is ready, willing and able
to serve on the Board of Directors but is not re-appointed or re-elected other than for Cause; (C) due to death or
Disability, (D) if the Board of Directors, in consultation with the Chief Executive Officer, so determines, upon
retirement, and (E) by the Grantee for Good Reason.
(d) Ownership of Shares. Subject to the restrictions set forth in the Plan and this Agreement, the Grantee
shall possess from Date of Grant all incidents of ownership of the Restricted Shares granted hereunder, including,
without limitation, (i) the right to vote such Restricted Shares, and (ii) the right to receive dividends (on a current
basis) with respect to such Restricted Shares (but only to the extent declared and paid to holders of Shares by the
Company in its sole discretion), provided, however, that any such dividends shall be treated, to the extent
required by applicable law, as additional compensation for tax purposes if paid on Restricted Shares.
4. No Right to Continued Employment or Service. Neither the Plan nor this Agreement shall be construed as
giving the Grantee the right to be retained in the employ of, or in any consulting relationship to, any member of
the Company Group. Further, any member of the Company Group may at any time dismiss the Grantee or
discontinue any employment or consulting relationship, free from any liability or any claim under the Plan or this
Agreement, except as otherwise expressly provided herein. Any determinations as to whether the Grantee
continues to be employed shall be at the discretion of the Committee.
2
5. Certificate; Book Entry Form; Legend.
(a) The Company shall issue the Restricted Shares either (i) in certificate form or (ii) in book entry form,
registered in the name of the Grantee, with legends or notations, as applicable referring to the terms, conditions
and restrictions applicable to the Award. To the extent applicable, all certificates (or book entries) representing
the Shares shall be subject to the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any applicable federal or state laws, and
the Committee may cause a legend or legends to be put on any such certificates (or notations made next to the
book entries) to make appropriate reference to such restrictions. The Grantee further agrees that any certificate
issued for Restricted Shares prior to the lapse of any outstanding restrictions relating thereto shall be inscribed
with the following legend:
This certificate and the shares of stock represented hereby are subject to the terms and conditions, including
forfeiture provisions and restrictions against transfer, contained in the PBF Energy Inc. 2012 Equity
Incentive Plan, as amended from time to time, and an agreement entered into between the registered owner
and the Company, copies of which are on file at the principal offices of the Company.
(b) Upon the lapse of restrictions relating to any Restricted Shares, the Company shall, as applicable, either
remove the notations on any such Shares of Restricted Stock issued in book-entry form or deliver to the Grantee
or the Grantee’s personal representative a stock certificate representing a number of Shares, free of the restrictive
legend described in Section 5(a) above, equal to the number of Shares with respect to which such restrictions
have lapsed. If certificates representing such Shares shall have theretofore been delivered to the Grantee, such
certificates shall be returned to the Company, complete with any necessary signatures or instruments of transfer
prior to the issuance by the Company of such unlegended Shares.
(c) Any Restricted Shares forfeited pursuant to this Agreement shall be transferred to, and reacquired by, the
Company without payment of any consideration by the Company, and neither the Grantee nor any of the
Grantee’s permitted transferees, successors, heirs, assigns or personal representatives shall thereafter have any
further rights or interests in such Shares. If certificates for any such Shares containing restrictive legends shall
have theretofore been delivered to the Grantee (or his/her permitted transferees, successors, heirs, assigns or
personal representatives), such certificates shall be returned to the Company, complete with any necessary
signatures or instruments of transfer.
6. Transferability. The non-vested portion of the Restricted Shares shall not be transferable or assignable by
the Grantee other than by will or by the laws of descent and distribution; provided, that, subject to the approval
by the Committee, in its discretion, the Restricted Shares may be transferred for no consideration to, or for the
benefit of, an “immediate family member” (to be defined by the Committee) or to a bona fide trust for the
exclusive benefit of such immediate family member, or a partnership or limited liability company in which
immediate family members are the only partners or members. Any sale, exchange, transfer, assignment, pledge,
hypothecation, fractionalization, hedge or other disposition in violation of this Section 6 shall be void, and shall
not be recognized by the Company. All of the terms and conditions of the Plan and this Agreement shall be
binding upon any permitted successors and assigns or Permitted Transferees.
7. Taxes; Withholding. The Grantee may be required to pay to the Company Group and the Company Group
shall have the right and is authorized to withhold any applicable withholding or other taxes in respect of the
Award or any payment or transfer under or with respect to the Restricted Shares and to take such other action as
may be necessary in the opinion of the Committee to satisfy all of the Company’s obligations for the payment of
such withholding or other taxes. The Grantee acknowledges that he or she is solely responsible for the direct
payment of any taxes owed by Grantee in connection with the Award for which the Company is not statutorily
required to withhold, and with respect to which the Company has not entered into an agreement with Grantee to
withhold such taxes voluntarily.
3
8. Notices. Any notice under this Agreement shall be addressed to the Company in care of its Secretary, and
to the Grantee at the address appearing in the personnel records of the Company for the Grantee or to either party
at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall
be deemed effective upon receipt thereof by the addressee.
9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the
state of Delaware without regard to conflicts of laws.
10. Arbitration. Any dispute with regard to the enforcement of this Agreement shall be exclusively resolved
by a single experienced arbitrator licensed to practice law in the State of New York, selected in accordance with
the American Arbitration Association (“AAA”) rules and procedures, at an arbitration to be conducted in the
State of New York pursuant to the Commercial Arbitration Rules of AAA with the arbitrator applying the
substantive law of the State of Delaware as provided for under Section 9 hereof. The AAA shall provide the
parties hereto with lists for the selection of arbitrators composed entirely of arbitrators who are members of the
National Academy of Arbitrators and who have prior experience in the arbitration of disputes between employers
and senior executives. The determination of the arbitrator shall be final and binding on the parties hereto and
judgment therein may be entered in any court of competent jurisdiction. Each party shall pay its own attorneys
fees and disbursements and other costs of the arbitration.
11. Amendment. This Agreement may be amended only by a written instrument executed by the parties
hereto, which specifically states that it is amending this Agreement.
12. Restricted Shares Subject to Plan; Conflict. By entering into this Agreement the Grantee agrees and
acknowledges that the Grantee has received and read a copy of the Plan. The Restricted Shares are subject to the
Plan. The terms and provisions of the Plan, as they may be amended from time to time, are hereby incorporated
by reference. In the event of a conflict between any term or provision contained herein and a term or provision of
the Plan, the applicable terms and provisions of the Plan will govern and prevail, except where the terms of this
Agreement are more restrictive than the terms of the Plan.
13. Severability. In the event that any one or more of the provisions of this Agreement shall be or become
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
14. Non-Disclosure of Confidential Information.
(a) Protection of Confidential Information. All items of information, documents (including electronically
stored documents like email), and materials pertaining to the business and operations of the Company Group that
are not made public by the Company Group through authorized means will be considered confidential (hereafter,
“Confidential Information”). Confidential Information includes, but is not limited to, customer lists, business
referral source lists, internal cost and pricing data and analysis, marketing plans and strategies, personnel files
and evaluations, financial and accounting data, operational and other business affairs and methods, contracts,
technical data, know-how, trade secrets, computer software and other proprietary and intellectual property, and
plans and strategies for future developments relating to any of the foregoing. Except in connection with the
faithful performance of the Grantee’s duties hereunder or as permitted pursuant to Section 14(c), the Grantee
shall, in perpetuity, maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate,
disclose or publish, or use for his benefit or the benefit of any person, firm, corporation or other entity any
Confidential Information, or deliver to any person, firm, corporation or other entity any document, record,
notebook, computer program or similar repository of or containing any such Confidential Information. The
parties hereby stipulate and agree that as between them the foregoing matters are important, material and
confidential proprietary information and trade secrets and affect the successful conduct of the businesses of the
Company Group, or any of its successors.
4
(b) Return of Confidential Information. Upon termination of the Grantee’s service or employment with the
Company for any reason, the Grantee upon the request of the Company will promptly either destroy or deliver to
the Company any and all Confidential Information in the Grantee’s possession and any other documents
concerning the customers, business plans, marketing strategies, products or processes of the Company Group.
(c) No Prohibition. Nothing in this Agreement shall prohibit the Grantee from (i) disclosing information and
documents when required by law, subpoena or court order (provided the Grantee gives reasonable notice thereof
and makes reasonably available to the Company and its counsel the documents and other information sought and
assists such counsel, at the Company’s expense, in resisting or otherwise responding to such order or process),
(ii) disclosing information and documents to his attorney or tax adviser for the purpose of securing legal or tax
advice, (iii) disclosing the post-employment restrictions in this Agreement to any potential new employer,
(iv) retaining, at any time, his personal correspondence, his personal rolodex or outlook contacts and documents
related to his own personal benefits, entitlements and obligations, or (v) disclosing or retaining information that,
through no act of the Grantee in breach of this Agreement or any other party in violation of an existing
confidentiality agreement with the Company, is generally available to the public, is in the public domain at the
time of disclosure or is available from other sources.
15. Specific Performance. The Grantee acknowledges and agrees that remedies at law available to the
Company for a breach or threatened breach of any of the provisions of Section 14 would be inadequate and any
member of the Company Group would suffer irreparable damages as a result of such breach or threatened breach.
In recognition of this fact, the Grantee agrees that, in the event of such a breach or threatened breach, in addition
to any remedies at law, the Company without posting any bond, shall be entitled to obtain equitable relief in the
form of specific performance, temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
16. Conformity to Section 409A. It is intended that the Award either be exempt from or avoid taxation under
Section 409A. Any ambiguity in this Agreement shall be interpreted to preserve exemption from, or comply with,
Section 409A. To the extent applicable, as determined in the sole discretion of the Committee with and upon
advice of counsel, (a) each amount or benefit payable pursuant to this Agreement shall be deemed a separate
payment for purposes of Section 409A and (b) in the event the equity interests of the Company are publicly
traded on an established securities market or otherwise and the Grantee is a “specified employee” (as determined
under the Company’s administrative procedure for such determinations, in accordance with Section 409A) at the
time of the Grantee’s separation from service, any payments under this Agreement that are deemed to be deferred
compensation subject to Section 409A shall not be paid or begin payment until the earlier of the Grantee’s death
and the first day following the six (6) month anniversary of the Grantee’s date of separation from service. The
Committee shall use commercially reasonable efforts to implement the provisions of this Section 16 in good
faith; provided that neither the Company, the Board, the Committee nor any of the Company’s employees,
directors or representatives shall have any liability to Grantee with respect to this Section 16.
17. Section Headings; Construction. The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the sections. All words used in this
Agreement shall be construed to be of such gender or number, as the circumstances require. Unless otherwise
expressly provided, the word “including” does not limit the preceding words or terms.
18. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[The remainder of this page intentionally left blank.]
5
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
PBF ENERGY INC.
By
Name:
Title:
[NAME OF GRANTEE]
The Date of Grant is
.
The number of Restricted Shares is [
].
The Fair Market Value on the date of grant shall be $[
] per Share.
Subject to the Grantee’s continued service or employment with the Company Group through the applicable
vesting date, the restrictions with respect to the Restricted Shares shall lapse at the following times:
Date Shares Subject to Award Vest
Upon the first anniversary of the Grant Date
Upon the second anniversary of the Grant Date
Upon the third anniversary of the Grant Date
Upon the fourth anniversary of the Grant Date
Percentage of Shares
as to Which Award Vests
25%
25%
25%
25%
[Signature Page to Restricted Stock Agreement]
6
SECTION 83(b) ELECTION
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended, to include in taxpayer’s gross income as compensation for services the excess (if any) of the fair
market value of the shares described below over the amount paid for those shares.
1.
The name, taxpayer identification number, address of the undersigned, and the taxable year for which this
election is being made are:
NAME:
ADDRESS:
TAXPAYER I.D. NO.:
TAXABLE YEAR: Calendar Year 20
2.
3.
4.
5.
6.
7.
The property which is the subject of this election is
of PBF Energy Inc. (the “Company”).
shares of Series A Common Stock (the “Shares”)
The property was transferred to the undersigned on
, 20
.
The property is subject to the following restrictions:
The Shares are subject to transfer restrictions, forfeiture and certain repurchase provisions under
the terms of certain agreements with the Company.
The fair market value at the time of transfer (determined without regard to any restriction other than a
nonlapse restriction as defined in Section 1.83-3(h) of the Income Tax Regulations) is:
$
per Share x
Shares =$
.
For the property transferred, the undersigned paid $
per Share x
Shares= $
.
The amount to be include in gross income is $
minus the amount reported in Item 6.]
. [This is the result of the amount reported in Item 5
The undersigned taxpayer will files this election with the Internal Revenue Service office with which taxpayer
files his or her annual income tax return not later than 30 days after the date of transfer of the property. A
copy of the election also will be furnished to the Company. Additionally, the undersigned will include a copy
of the election with his or her income tax return for the taxable year in which the property is transferred. The
undersigned is the person performing the services in connection with which the property was transferred.
Dated:
, 20
Taxpayer’s Signature:
7
LIST OF SUBSIDIARIES
Name
PBF Energy Company LLC
PBF Holding Company LLC
PBF Services Company LLC
PBF Investments LLC
Delaware City Refining Company LLC
Delaware Pipeline Company LLC
PBF Power Marketing LLC
Paulsboro Natural Gas Pipeline Company LLC
Paulsboro Refining Company LLC
Toledo Refining Company LLC
PBF Finance Corporation
PBF Logistics GP LLC
PBF Logistics LP
Exhibit 21.1
Jurisdiction of Incorporation or
Organization:
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-185968 on Form S-8 of our
report dated February 28, 2013 relating to the combined and consolidated financial statements of PBF Energy
Inc. and subsidiaries (combined and consolidated with PBF Energy Company LLC and subsidiaries) as of
December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012, appearing
in this Annual Report on Form 10-K of PBF Energy Inc. for the year ended December 31, 2012.
Exhibit 23.1
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 28, 2013
Consent of Independent Registered Public Accounting Firm
Exhibit 23.2
The Board of Directors
PBF Energy Inc.
We consent to the incorporation by reference in the registration statement on Form S-8 (Registration
No. 333-185968) of PBF Energy Inc. of our reported dated June 23, 2011, with respect to the balance sheet of
Paulsboro Refining Business as of December 16, 2010, and the related statements of income, changes in net
parent investment, and cash flows for the period from January 1 through December 16, 2010, which report
appears in the December 31, 2012 annual report on Form 10-K of PBF Energy Inc.
/s/ KPMG LLP
San Antonio, Texas
February 28, 2013
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Thomas J. Nimbley, certify that:
1. I have reviewed this annual report on Form 10-K of PBF Energy Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Thomas J. Nimbley
Thomas J. Nimbley
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Matthew C. Lucey, certify that:
1. I have reviewed this annual report on Form 10-K of PBF Energy Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 28, 2013
/s/ Matthew C. Lucey
Matthew C. Lucey
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K for the year ended December 31, 2012 of PBF Energy Inc.
(the Company), as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Thomas
J. Nimbley, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: February 28, 2013
/s/ Thomas J. Nimbley
Thomas J. Nimbley
Chief Executive Officer
(Principal Executive Officer)
A signed original of the written statement required by Section 906 has been provided to PBF Energy Inc. and will
be retained by PBF Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K for the year ended December 31, 2012 of PBF Energy Inc.
(the Company), as filed with the Securities and Exchange Commission on the date hereof (the Report), I,
Matthew C. Lucey, Senior Vice President, Chief Financial Officer of the Company, hereby certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: February 28, 2013
/s/ Matthew C. Lucey
Matthew C. Lucey
Senior Vice President, Chief Executive Officer
(Principal Financial Officer)
A signed original of the written statement required by Section 906 has been provided to PBF Energy Inc. and will
be retained by PBF Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.
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CORPORATE HEADQUARTERS
1 Sylvan Way, Second Floor
Parsippany, New Jersey, 07054
BOARD OF DIRECTORS
Thomas D. O’Malley
Executive Chairman
COMMON STOCK
New York Stock Exchange Symbol: PBF
Spencer Abraham
Member of Compensation and Nominating, and Governance
Committees
Jefferson F. Allen
Chairman of Audit Committee, Member of Compensation
Committee
Martin J. Brand
Timothy H. Day
Chairman of Nominating and Corporate Governance Committee,
Member of Compensation Committee
David I. Foley
Chairman of Compensation Committee, Member of Nominating and
Governance Committee
Dennis M. Houston
Member of Audit Committee
Edward F. Kosnik
Member of Audit Committee
Neil A. Wizel
INVESTOR RELATIONS
Colin Murray
973-455-7578
TRANSFER AGENT AND REGISTRAR
Questions regarding stock holdings, certificate
replacement/transfer, and address changes
should be directed to:
AMERICAN STOCK TRANSFER & TRUST COMPANY
Operations Center
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449
www.amstock.com
AUDITORS
Deloitte & Touche LLP
CORPORATE OFFICERS
Thomas J. Nimbley
Chief Executive Officer
Michael D. Gayda
President
Donald F. Lucey
Chief Commercial Officer
Matthew C. Lucey
Chief Financial Officer
Jeffrey Dill
General Counsel