PBF (cid:3)Energy (cid:3)Inc. (cid:3)2013 (cid:3)Annual
(cid:3)Report
(cid:3)
(cid:3)
The(cid:3)PBF(cid:3)Energy(cid:3)Refining(cid:3)System(cid:3)
(cid:3)
(cid:3)
PBF(cid:3)owns(cid:3)three(cid:3)oil(cid:3)refineries(cid:3)located(cid:3)in(cid:3)Ohio,(cid:3)Delaware(cid:3)and(cid:3)New(cid:3)Jersey:(cid:3)
(cid:120) Aggregate(cid:3)throughput(cid:3)capacity(cid:3)of(cid:3)approximately(cid:3)540,000(cid:3)barrels(cid:3)per(cid:3)day(cid:3)
(cid:120) Weighted(cid:3)average(cid:3)Nelson(cid:3)Complexity(cid:3)of(cid:3)11.3(cid:3)
(cid:120) Fifth(cid:3)largest(cid:3)U.S.(cid:3)independent(cid:3)refiner(cid:3)(cid:3)
(cid:120) 100%(cid:3)of(cid:3)PADD(cid:3)1(cid:3)coking(cid:3)capacity(cid:3)
(cid:120) Recent(cid:3)rail(cid:3)infrastructure(cid:3)investment(cid:3)on(cid:3)East(cid:3)Coast(cid:3)provides(cid:3)the(cid:3)entire(cid:3)system(cid:3)access(cid:3)to(cid:3)WTI(cid:882)
based,(cid:3)cost(cid:882)advantaged(cid:3)North(cid:3)American(cid:3)crude(cid:3)supply(cid:3)
(cid:3)
(cid:3)
(cid:3)
Toledo Refinery
• 170,000 bpd light, sweet crude refinery
• 9.2 Nelson Complexity
• Mid-Continent location with access to cost-advantaged crudes
•
• Truck and rail unloading infrastructure to run local crudes
• High-conversion refinery with distillate and gasoline yield of approximately of 85%
Increasing regional sweet crude supply
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
• 145,000 bpd crude-by-rail discharge facilities, 40,000 bpd of which are Canadian heavy crudes
• Reconfigured crude slate to focus on cost-advantaged North American crudes and displaced
waterborne 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
TO OUR SHAREHOLDERS
2013 was a developmental year for PBF Energy as we continued to progress our strategy of increasing
access to cost-advantaged North American crudes, while maintaining our flexibility to take advantage of
price dislocations in the waterborne crude market.
Our results for 2013 reflect strong operational performance in the face of weaker benchmark crack
spreads and generally narrower crude oil differentials. Operating income was $320 million for the year,
and adjusted pro forma net income was $1.48 per share, on a fully-exchanged and fully-diluted basis.
We finished 2013 with a cash balance of $77 million, total liquidity in excess of $600 million and a debt
to capitalization ratio of 30%.
Total capital expenditures for 2013, net of rail car purchases and sales, were $31 million, which include
a number of margin-improvement investments and a major turnaround. Projects were completed on
the East Coast that allow Paulsboro and Delaware City to produce 100% ultra-low sulfur diesel or ultra-
low sulfur heating oil. This transition gives us the ability to pursue the products with the highest netback
for the company as seasonal demand changes. The coker and hydrocracker turnaround completed at
Delaware City in the fourth quarter followed a record 26-month run, of the coker complex, which is both
a safety and operational benchmark.
3
A particular bright spot for the year was PBF’s overall performance in the Health, Safety and
Environmental (HSE) areas. PBF Energy maintains the overriding goals of working safely, running reliably
and operating in an environmentally responsible manner. In 2013, PBF achieved many HSE milestones
including the recertification of our Paulsboro Refinery as a Voluntary Protection Program Star Site by the
Occupational Safety and Health Administration (“OSHA”), and a new employee safety record at our
Delaware City refinery by having only a single employee OSHA-recordable case at that location. We
continue to work with Federal, State and local agencies to improve mutual cooperation and maintain
our status as responsible neighbors and good corporate citizens.
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, we cannot be successful.
Safety performance in all three refineries was better than the refining industry average with our refining
system's average total employee recordable incident rate (TRIR) at 0.71 versus the industry average of
0.89. Our contractor TRIR also improved to 0.46 versus an industry average of 0.77.
We continued to invest in our East Coast rail facilities and have committed to lead the industry when it
comes to the safety of our rail operations. In February 2013, we completed our 105,000 barrel per day
light crude unloading facility and have since announced plans to expand its capacity to approximately
130,000 barrels per day by adding additional unloading points. Our 40,000 barrel per day heavy crude
unloading facility was operational for all of 2013 and we are in the process of expanding our heavy crude
discharge capacity to 80,000 barrels per day. Along with our rail facilities expansions, we are also
continuing to grow our PBF Energy-controlled fleet of rail cars.
The rail car fleet that PBF Energy has ordered, and is taking delivery of, is comprised entirely of DOT-
111A cars, which are of the latest design and have many improved safety features compared to later-
model cars. The thicker shells, half-head shields and other protective coverings improve the safety
performance of the cars. PBF Energy has committed to use only these new-style DOT-111A cars for the
delivery of crude oil to our Delaware City refinery and this practice will be fully in place in the first half of
2014. PBF Energy will continue to be an industry supporter of increasing the safety of rail operations
across the entire logistics chain.
We believe our efforts to expand our access to North American crude oils and maintaining our
traditional access to water-borne crude oils have positioned our East Coast assets to take advantage of
any opportunities that the market might offer. Our East Coast refineries are advantaged in two
important areas relative to our competition in PADD 1. First, the Delaware City refinery’s 5,000-acre
setting has provided us with the unique opportunity, for an East Coast asset, to build an extensive onsite
rail crude oil unloading facility versus using third party facilities to trans-load and transport these crudes.
This results in an embedded $2.50 to $3.00 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 remain the only refineries in the region with the units necessary to process heavy
and sour crude oils.
As the markets have adjusted to increased North American crude oil production, we have seen several
favorable price dislocations in the crude oil market which have allowed us to take advantage of wider
differentials and realize lower landed crude costs at our refineries. We believe these favorable price
dislocations for both North American and water-borne crude oil will continue to occur as North
American refineries adjust their inputs to reflect the new realities of crude supply and availability in
North America. We feel that PBF Energy is positioned to move quickly to capitalize on any favorable
pricing opportunities, whether they are North American or water-born barrels.
As we look forward to the year ahead and beyond, we remain focused on increasing shareholder value
through both organic and external growth opportunities. Our board and management remain
committed to enhancing shareholder value and continue to support a regular annual dividend, paid
quarterly, of $1.20 per share.
Following the initial public offering in December 2012, we have been busy in the capital markets. Our
private equity sponsors continued to reduce their holdings in the company through three secondary
offerings, one in June 2013, a second in January 2014 and a third in March 2014. In total, our sponsors
have sold almost 46 million shares since our IPO and reduced their holdings from over 70% to just over
22% of the company. The significance of this is that PBF Energy is no longer a “controlled company”; our
public shareholder base has expanded and our flexibility to pursue our long-term goals has increased.
We also successfully exchanged our $675 million of unregistered notes for registered notes which
provides our bond investors with increased flexibility regarding their investments.
Before concluding, we would like to thank all of PBF’s employees, at both our refineries and our
headquarters, whose dedication and commitment to excellence are the foundations for our success.
Additionally, we thank our Board of Directors for the oversight and leadership that they provide.
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.
SiSiSiSiSSiS ncncncncncnn erererererererelelelelelelelely,y,y,y,y,yy,y,y,y
Sincerely,
Tom O’Malley
ToToTTTTom mm mm O’O’O’O’O’O’OO’MaMaMaMaMaMaMalllllllllllllleyeyeyeyeyeyyey
Executive Chairman
ExExExExExEE ecececee utututtututivivivve e eee ChChChChChChChhaiaiaiaiaiaiairmrmrmrmrmrmrmananananannannnann
Tom Nimbley
ToToTToToToommmm m mmm NiNiNiNiNiNiiiimbmmbmbmbmbmbmbmbmbbmbmbmbbbbbmbmbmmbbblelelleleleleeeeeeeeeeeyy y y yy
Chief Executive Officer
Chihihihihihihh efefefefefefefef EEEEEE EEEEEEEEEEEEEExexexexexeexexeeeeeexeeecucucucucucucuccucccc tititititittivvvevevvee O O OOffffffffffffffffficiciciciciciicerererererr
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CCC
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Toledo Refinery
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2013
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission File Number: 001-35764
Commission File Number: 333-186007
Commission File Number: 333-186007-07
PBF ENERGY INC.
PBF HOLDING COMPANY LLC
PBF FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
DELAWARE
DELAWARE
(State or other jurisdiction of
incorporation or organization)
One Sylvan Way, Second Floor
Parsippany, New Jersey
(Address of principal executive offices)
Delaware
(State or other jurisdiction of
incorporation or organization)
One Sylvan Way, Second Floor
Parsippany, New Jersey
(Address of principal executive offices)
45-3763855
27-2198168
45-2685067
(I.R.S. Employer
Identification No.)
07054
(Zip Code)
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
Class A Common Stock, $0.001 par value
Name of Each Exchange on Which Registered
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.
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Yes
No
Yes
No
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Yes
No
Yes
No
Yes
No
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.
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Yes
No
Yes
No
Yes
No
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).
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Yes
No
Yes
No
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.
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 Rule 12b-2 of the Exchange Act.
Large accelerated
filer
Accelerated filer
Non-accelerated filer
(Do not check if a
smaller reporting
company)
Smaller reporting
company
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PBF Energy Inc.
PBF Holding Company LLC
PBF Finance Corporation
Yes
No
Yes
No
Yes
No
The aggregate market value of the Common Stock of PBF Energy Inc. held by non-affiliates as of June 30, 2013 was $1,024,703,335 based upon the New York
Stock Exchange Composite Transaction closing price.
Aggregate market value of PBF Holding Company LLC membership interests held by non-affiliates: None
Aggregate market value of PBF Finance Corporation common stock interests held by non-affiliates: None
As of February 20, 2014, PBF Energy Inc. had outstanding 54,665,473 shares of Class A common stock and 40 shares of Class B common stock. PBF Energy Inc.
is the sole managing member of, and owner of an equity interest of approximately 56.4% of the outstanding economic interest in, PBF Energy Company LLC.
PBF Energy Company LLC held 100% of the membership interests in PBF Holding Company LLC as of February 20, 2014. PBF Holding Company LLC has no
common stock outstanding. As of February 20, 2014, PBF Finance Corporation had 100 shares of common stock outstanding, all of which were held by PBF
Holding Company LLC.
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, 2013. Portions of the Proxy Statement are incorporated by reference in Part III of this Form 10-K to the extent stated herein.
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 8.
Item 9.
Financial Statements and Supplementary Data
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.
Item 13.
Item 14.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
SIGNATURES
Exhibits and Financial Statement Schedules
PART IV
3
20
40
40
40
40
41
44
49
81
83
83
83
84
84
84
84
85
85
86
2
PART I
This combined Annual Report on Form 10-K is filed by PBF Energy Inc. (“PBF Energy”), PBF
Holding Company LLC (“PBF Holding”) and PBF Finance Corporation ("PBF Finance"). Each Registrant
hereto is filing on its own behalf all of the information contained in this report that relates to such Registrant.
Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes
no representation as to any such information. PBF Energy is the sole managing member of, and owner of an
equity interest representing approximately 40.9% of the outstanding economic interests in, PBF Energy
Company LLC ("PBF LLC") as of December 31, 2013. PBF Holding is a wholly-owned subsidiary of PBF
LLC and PBF Finance is a wholly-owned subsidiary of PBF Holding. PBF Holding is the parent company for
PBF LLC's operating subsidiaries.
PBF Holding is an indirect subsidiary of PBF Energy, representing 100% of PBF Energy’s
consolidated revenue for the year ended December 31, 2013 and constituting 100% of PBF Energy’s revenue
generating assets as of December 31, 2013.
Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to both PBF Energy and
PBF Holding and consolidated subsidiaries, including PBF LLC, PBF Investments LLC (“PBF Investments”),
PBF Services Company LLC, PBF Power Marketing LLC, Toledo Refining Company LLC (“Toledo
Refining”), Paulsboro Natural Gas Pipeline Company LLC, Paulsboro Refining Company LLC (“Paulsboro
Refining”), Delaware Pipeline Company LLC, Delaware City Refining Company LLC (“Delaware City
Refining”), Delaware City Terminaling Company LLC, PBF Logistics GP LLC, PBF Logistics LP and PBF
Rail Logistics Company LLC. Discussions or areas of this report that either apply only to PBF Energy or PBF
Holding are clearly noted in such sections.
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
Mid-Continent 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.
3
During 2012 and 2013, we expanded and upgraded existing on-site railroad infrastructure at our Delaware
City refinery, including the expansion of the crude rail unloading facilities that was completed in February 2013.
Currently, crude delivered to this facility is consumed at our Delaware City refinery. We also transport some of
the crude delivered by rail from Delaware City via barge to our Paulsboro refinery or other third party destinations.
The Delaware City rail unloading facility allows our East Coast refineries to source WTI based crudes from Western
Canada and the Midcontinent, which we believe 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, 2013 of
approximately 40.9% 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) 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
PBF Energy is the sole managing member of PBF LLC. PBF Holding is a wholly-owned subsidiary of PBF
LLC and PBF Finance is a wholly-owned subsidiary of PBF Holding. PBF Holding is the parent company for PBF
LLC's operating subsidiaries.
On December 18, 2012, we completed 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”).
Additionally, on June 12, 2013, we completed a public offering of 15,950,000 shares of our Class A common
stock at a price of $27.00 per share, less underwriting discounts and commissions, in a secondary public offering
(the "June 2013 Secondary Offering"). All of the shares were sold by funds affiliated with Blackstone and First
Reserve. In connection with this offering, Blackstone and First Reserve exchanged 15,950,000 Series A Units of
PBF LLC for an equivalent number of shares of our Class A common stock. The holders of PBF LLC Series B
Units, which include certain executive officers of PBF Energy, had the right to receive a portion of the proceeds
of the sale of the PBF Energy Class A common stock by Blackstone and First Reserve.
As of December 31, 2013, Blackstone and First Reserve and our executive officers and directors and certain
employees beneficially owned 57,201,674 PBF LLC Series A Units (we refer to all of the holders of the PBF LLC
Series A Units as “the members of PBF LLC other than PBF Energy”) and we owned 39,665,473 PBF LLC Series
C Units, and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock
have 59.1% of the voting power in us, and the holders of our issued and outstanding shares of Class A common
stock have 40.9% of the voting power in us. As a result of the ownership of the Class B common stock and the
PBF LLC Series A Units, prior to the January 2014 secondary offering discussed below under "Recent
Developments", Blackstone and First Reserve controlled us as of December 31, 2013, and we in turn, as the sole
managing member of PBF LLC, control PBF LLC and its subsidiaries.
4
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 members of PBF LLC
other than PBF Energy. 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.”
The diagram below depicts our organizational structure as of December 31, 2013:
PBF LLC
Series A Units
•
Represents 59.1% of
the total economic
interest of PBF LLC
• Not publicly traded
• Not publicly traded
• No voting rights
•
•
Economic rights only
Exchangeable on
one-for-one basis for
shares of our Class A
common stock
PBF LLC Series A
Units held by the
Units held by the
financial sponsors
share profits with the
PBF LLC Series B Units
•
Public
Stockholders
Class A common stock
•
40.9% of voting power
in PBF Energy
100% of economic
interests in PBF Energy
•
Sole Managing Member and
PBF LLC Series C Units
•
Represents 40.9% of the total
economic interest of PBF LLC
• Number of PBF LLC Series C
Units held equals number of shares
of our Class A common stock
outstanding
100% management power in PBF LLC
•
• Do not share with the PBF LLC
Series B Units
ABL Revolving Credit Facility
8.25% Senior Secured Notes due 2020
Blackstone,
First Reserve
and
Management
PBF LLC Series B Units
• Are profits interests
•
Share in varying percentages
in the profits of the financial
sponsors
sponsors
• Held solely by our executive
officers
• No voting rights
Shares of Class B common stock
• Voting rights only
• One vote for each PBF
LLC Series A Unit held by
such holder
59.1% of voting power in
PBF Energy Inc.
•
PBF Energy Inc.
(NYSE: PBF)
(PBF Energy)
PBF Energy
Company LLC
(PBF LLC)
PBF Holding
Company LLC
(PBF Holding)
Operating Subsidiaries
5
Recent Developments
On January 6, 2014, we completed a public offering of 15,000,000 shares of our Class A common stock at
a price of $28.00 per share, less underwriting discounts and commissions, in a secondary public offering (the
"January 2014 Secondary Offering"). All of the shares were sold by funds affiliated with Blackstone and First
Reserve. In connection with this offering, Blackstone and First Reserve exchanged 15,000,000 Series A Units of
PBF LLC for an equivalent number of shares of our Class A common stock, which increased PBF Energy's interest
in PBF LLC to approximately 56.4%. The holders of PBF LLC Series B Units, which include certain executive
officers of PBF Energy, had the right to receive a portion of the proceeds of the sale of the PBF Energy Class A
common stock by Blackstone and First Reserve. Completion of the January 2014 Secondary Offering is estimated
to increase our tax receivable agreement liability to $439.6 million due to the tax benefit expected to be generated
as a result of the exchange in connection with the secondary offering and the corresponding tax benefits expected
to be generated in future years from this transaction.
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.
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, 2013, we had
received $39.4 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,
2013, we have invested more than $700.0 million in turnaround and re-start projects at Delaware City, as well as
in the recent strategic development of crude rail unloading facilities. In May 2012, we commenced crude shipments
via rail into a newly developed crude rail unloading facility at our Delaware City refinery. We have expanded and
upgraded the existing on-site railroad infrastructure, including the expansion of the crude rail unloading facilities
which, as of February 2013 were capable of discharging approximately 110,000 bpd, consisting of 40,000 bpd of
heavy crude oil and 70,000 bpd of light crude oil. However, due to greater operating efficiency, discharge capacity
for light crude oil at our dual-loop track has increased from 70,000 bpd to approximately 105,000 bpd. In conjunction
with the development of our rail crude unloading facilities at Delaware City, we constructed a railcar storage yard
with capacity for 330 railcars that is integral to railcar staging and storage and helps facilitate daily rail traffic at
the refinery. We are also adding additional unloading spots to the dual-loop track to increase unloading capabilities
at that facility to approximately 130,000 bpd. Also in 2013 we commenced a third rail crude offloading project
to add an additional 40,000 bpd of heavy crude rail unloading capability at the refinery, which is expected to be
completed by the second half of 2014. Completion of these additional rail projects is expected to increase our
discharge capacity of heavy crude oil from 40,000 bpd to 80,000 bpd and bring the total rail crude unloading
6
capability up to 210,000 bpd by the end of 2014, subject to the delivery of coiled and insulated railcars, the
development of crude rail loading infrastructure in Canada and the use of unit trains.
We have entered into agreements to lease or purchase a total of 5,900 railcars, including 4,600 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 to the construction of our rail unloading facilities
at Delaware City and the execution of our railcar procurement strategy, we also created dedicated crude-by-rail
acquisition and rail logistics teams. These teams, staffed by PBF employees in our corporate headquarters, at the
Delaware City refinery and in our field offices in Calgary, Alberta and Oklahoma City, Oklahoma, are responsible
for crude procurement, logistics via rail and monitoring crude-by-rail offloading.
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 slate of
heavy 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 crude coking refineries, the other being 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
Di
l
Diesel
Coker
Middle
Distillate
Crude
Crude
Distillation
Naptha
CCR
Tetra feed
Tetra
Extraction
Benzene
Hydrotreaters
ULSD
Heating Oil
Reformate
B-B
B B
ATB
Vacuum
Distillation
Light
Cycle Oil
FCC
Gas oil
Gas oil
Gas oil
Alky
Gasoline
Butane
ISOM
Isobutane
(Sales)
P-P
Poly
Gasoline
CNHTU
Slurry
(Sales)
Gas oil
SHU
SHU
Naphtha to HDS
Naphtha to HDS
Heavy
Cycle Oil
VTB
Fluid Coker
Naphtha
Gas Oil
Hydrocracker
7
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 (FCU/ 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 on 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, Statoil arranges transportation and insurance for these waterborne deliveries of 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 process 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. Prior to June 30, 2013, we sold the bulk of Delaware City’s clean products to MSCG
through an offtake agreement. Under the offtake agreement, MSCG purchased 100% of our finished clean products
at Delaware City, which included gasoline, heating oil and jet fuel, as well as our intermediates. During the term
of the offtake agreement, we sold the remainder of our refined products directly to a variety of customers on the
spot market or through term agreements. Subsequent to the termination of the offtake agreement, we market and
sell all of our refined products independently to a variety of customers on the spot market or through term agreements.
Inventory Intermediation Agreement. On June 26, 2013, the Company entered into an Inventory
Intermediation Agreement with J. Aron ("Inventory Intermediation Agreement") to support the operations of the
Delaware City refinery, which commenced upon the termination of the product offtake agreement with MSCG.
Pursuant to the Inventory Intermediation Agreement, J. Aron purchased all of the finished and intermediate products
(collectively the “Products”) located at the refinery upon termination of the MSCG product offtake agreement. J.
Aron purchases the Products produced and delivered into the refinery's storage tanks on a daily basis. J. Aron
further agrees to sell to us on a daily basis the Products delivered out of the refinery's storage tanks.
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
8
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.
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.
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
Reformer
Gasoline
Crude
Crude Distillation
p
Naphtha
Kerosene
Diesel
Naphtha
Gas Oil
Distillate
Hydrotreaters
Jet Fuel
Heating Oil
LCO
LCO
Extracts
ATB
Gas Oil
Vacuum Distillation
Lubes
Coker
DAO
VTB
Propane
Deasphalter
Asphalt
Naphtha
Gas Oil
Coke
Coke
Asphalt
9
P-P
P P
Slurry / CSO
Gasoline
Lubes
GDU
Gasoline
Alkylation
Gasoline
FCC
B B
B-B
B-B
Isobutane
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. We have a contract with Saudi Aramco pursuant to which we have
been purchasing up to approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at Paulsboro.
The crude purchased is priced off ASCI.
In addition, under a crude and feedstock supply agreement with Statoil that was terminated effective
March 31, 2013, we directed Statoil to purchase crude and other feedstocks for Paulsboro and Statoil purchased
the crude and feedstocks on the spot market. Accordingly, Statoil entered 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 arranged transportation and insurance for the crude and feedstock supply
and we paid Statoil a per barrel fee for their procurement and logistics services. Statoil held title to the crude and
feedstocks until we ran the crude or feedstocks through our process units. We paid Statoil on a daily basis for the
corresponding volume of crude or feedstocks that were consumed in conjunction with the refining process.
Product Offtake. Prior to June 30, 2013, we sold the bulk of Paulsboro’s clean products to MSCG through
our offtake agreement. With the exception of certain jet fuel and lubricant sales, MSCG purchased 100% of our
finished clean products and intermediates under the offtake agreement. During the term of the offtake agreement,
we sold the remainder of our refined products directly to a variety of customers on the spot market or through term
agreements. Subsequent to the termination of the offtake agreement, we market and sell all of our refined products
independently to a variety of customers on the spot market or through term agreements.
Inventory Intermediation Agreement. On June 26, 2013, the Company entered into an Inventory
Intermediation Agreement with J. Aron to support the operations of the Paulsboro refinery, which commenced
upon the termination of the product offtake agreement with MSCG. Pursuant to the Inventory Intermediation
Agreement, J. Aron purchased all of the Products located at Paulsboro upon termination of the product offtake
agreement. J. Aron purchases the Products produced and delivered into the refinery's storage tanks on a daily basis.
J. Aron further agrees to sell to us on a daily basis the Products delivered out of the refinery's storage tanks.
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
10
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.
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 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 was 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 and the balance paid in 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 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
Diesel
AGO
CT Btms
LUK /
HUK
HCC
O
C
L
l
e
u
F
r
u
o
S
Plant 2/4
FCC / GPU
FCC/GPU
Amine
Anime
e
n
i
l
o
s
a
G
6
C
/
5
C
P-P
BB
FCC Gasoline
FCC G
FCC Gasoline
FCC G
li
li
LSR
LSG
11
Propane
iC4 / nC4
Reformer
Poly
Poly
Tetramer / Nonene
Tetramer / Nonene
Clarified Slurry Oil
Alky / DIB
Gasoline
Gasoline
Benzene
Toluene
Xylene
Gasoline
Gasoline
ULSD
Propane
Iso-Butane
Normal Butane
Gasoline
Gasoline
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 crude
and feedstocks 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.
Principal Products
Our refineries make various grades of gasoline, diesel fuel, jet fuel, and other products from crude oil, other
feedstocks, and blending components. We sell these products through our commercial accounts, and sales with
12
major oil companies. For the years ended December 31, 2013, 2012 and 2011, gasoline and distillates accounted
for 88.6%, 88.8% and 88.1% of our revenues, respectively.
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, 2013, MSCG and Sunoco
accounted for 29% and 10% of our revenues, respectively. The remainder of our refined products are primarily
sold through short-term contracts or on the spot market. As of December 31, 2013, Sunoco accounted for 10% of
accounts receivable.
For the year ended December 31, 2012, MSCG and Sunoco accounted for 57% and 10% of the Company’s
revenues, respectively. As of December 31, 2012, 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.
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. Refining margins remain volatile and our results of
operations may not reflect these historical seasonal trends.
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 crude oil prices and differentials between the prices of different grades of crude oil, 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.
13
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, 2013, we had approximately 1,735 employees. At Paulsboro, 296 of our 460 employees
are covered by a collective bargaining agreement that expires in March 2015. In addition, 678 of our
1,066 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.
Executive Officers of the Registrant
The following is a list of our executive officers as of February 20, 2014:
Name
Thomas D. O’Malley
Thomas J. Nimbley
Michael D. Gayda
Matthew C. Lucey
Jeffrey Dill
Paul Davis
Todd O'Malley
Age
Position
72 Executive Chairman of the Board of Directors
62 Chief Executive Officer
59 President
40 Senior Vice President, Chief Financial Officer
52 Senior Vice President, General Counsel
51 Vice President, Crude Oil and Feedstock
40 Vice President, Products
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
14
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.
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 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.
Paul Davis joined PBF Energy in April of 2012 and was named Vice President, Crude Oil and Feedstocks
responsible for crude oil and refinery feedstock sourcing in May 2013. Previously, Mr. Davis was responsible for
managing the U.S. clean products commercial operations for Hess Energy Trading Company from 2006 to 2012.
Prior to that, Mr. Davis was responsible for Premcor’s U.S. Midwest clean products disposition group. Mr. Davis
has over 29 years of experience in commercial operations in crude oil and refined products, including 16 years
with the ExxonMobil Corporation in various operational and commercial positions, including sourcing refinery
feedstocks and crude oil and the disposition of refined petroleum products, as well as optimization roles within
refineries.
Todd O’Malley joined PBF Energy in November 2010, with over 15 years of energy industry experience,
and was named Vice President, Products responsible for petroleum products and power in May 2013. Mr. O’Malley
joined PBF from the Hess Energy Trading Company where he traded petroleum products in both the United States
and Europe from October 2008 to November 2010. Prior to that, Mr. O’Malley established a proprietary refined
petroleum products and ethanol trading platform for an international investment bank. Previously, Mr. O’Malley
was Vice President of Supply and Distribution of Gulf Oil in charge of petroleum products trading and optimization
of storage and terminal assets. Prior thereto, Mr. O’Malley managed the northeast clean products commercial
operations for Premcor. Mr. O’Malley has held similar commercial roles in other energy-focused organizations
where he traded electricity, natural gas, grains, biofuels, crude oil and petroleum products, both physically and
financially.
Mr. Thomas O'Malley is the uncle of Mr. Todd O'Malley and uncle, by marriage, of Mr. Matthew Lucey.
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,
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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 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 issued for fixed terms 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.
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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.
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.
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"CAA" refers to the Clean Air Act.
“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.
“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.
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"J.Aron" refers to J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc.
“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.
“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.
"RINS" refers to renewable fuel credits required for compliance with the Renewable Fuels Standard.
“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).
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“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.
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 occur, 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
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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.
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
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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 and delivered by rail to our East Coast refineries. 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 $21.80 per barrel in
2012 to $24.62 per barrel for the year ended December 31, 2013, 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. This applies as well to our East Coast strategy of delivering crude by rail. 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.
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
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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 refineries are subject to interruptions of supply and distribution as a result of our reliance on pipelines
and railroads for transportation of crude oil and refined products.
During 2012 and 2013, we expanded and upgraded existing on-site railroad infrastructure at our Delaware
City refinery, which significantly increased our capacity to unload crude by rail. Currently, the majority of the
crude delivered to this facility is consumed at our Delaware City refinery, although we also transport some of the
crude delivered by rail from Delaware City via barge to our Paulsboro refinery. The Delaware City rail unloading
facilities allow our East Coast refineries to source WTI based crudes from Western Canada and the Midcontinent,
which can provide significant cost advantages versus traditional Brent based international crudes. Any disruptions
or restrictions to our supply of crude by rail due to problems with third party logistics infrastructure or operations
or as a result of increased regulations, could increase our crude costs and negatively impact our results of operations
and cash flows.
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 these pipelines to transport crude oil or refined
products is disrupted because of accidents, weather interruptions, governmental regulation, terrorism, other third
party action or casualty or other of events.
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 or our future debt
obligations, comply with certain deadlines related to environmental regulations and standards, or pursue our
business strategies, including acquisitions, 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
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our various supply and Inventory Intermediation Agreements. We terminated our supply agreement with Statoil
for our Paulsboro refinery effective March 31, 2013 and our MSCG Offtake Agreements for our Paulsboro and
Delaware City refineries effective July 1, 2013. Concurrent with the termination of our MSCG Offtake Agreements,
we entered into Inventory Intermediation Agreements with J. Aron at our Paulsboro and Delaware City refineries.
Pursuant to the Inventory Intermediation Agreements, J. Aron purchases and holds title to all of the intermediate
and finished products produced by the Delaware City and Paulsboro refineries and delivered into the tanks at the
refineries (or at other locations outside of the refineries as agreed upon by both parties). Furthermore, J. Aron
agrees to sell the intermediate and finished products back to us as they are discharged out of the refineries' tanks
(or other locations outside of the refineries as agreed upon by both parties). We market and sell the finished products
independently to third parties.
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. Termination of our Inventory Intermediation Agreements with J. Aron would require
us to finance our refined products inventory covered by the agreements at terms that may not be as favorable.
Additionally, we are obligated to repurchase from J. Aron all volumes of products located at the refineries’ storage
tanks (or at other locations outside of the refineries as agreed upon by both parties) upon termination of these
agreements, which may have a material adverse impact on our working capital and financial condition. Further, if
we are not able to market and sell our finished products to credit worthy customers, 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 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
24
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 of 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 other refiners, producers and marketers in other industries that
supply their own renewable fuels or 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.
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,
25
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.
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.
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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, 2013, approximately 296 of our 460 employees at Paulsboro are covered by a collective
bargaining agreement that expires in March of 2015. In addition, 678 of our 1,066 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 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. 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 or Statoil at our request, may hedge some percentage of future crude supply. 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.
27
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, 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 a 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.
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.
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Our operations could be disrupted if our information systems are hacked or 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 hacked or otherwise interfered with by an unauthorized access, or 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 and
health and safety regulations, which are complex and change frequently.
Our operations are subject to federal, state and local laws regulating, among other things, the handling of
petroleum and other regulated materials, the emission and discharge of materials into the environment, waste
management, and remediation of discharges of petroleum and petroleum products, characteristics and composition
of gasoline and distillates and other matters otherwise relating to the protection of the environment. Our operations
are also subject to extensive laws and regulations relating to occupational health and safety.
We cannot predict what additional environmental, health and safety legislation or regulations may be adopted
in the future, or how existing or future laws or regulations may 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.
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
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, our Delaware City refinery and our Delaware City Rail Terminal are located in Delaware's
coastal zone where certain activities are regulated under the Delaware Coastal Zone Act and closely monitored by
environmental interest groups. On June 14, 2013, two administrative appeals were filed by the Sierra Club and
Delaware Audubon regarding a permit Delaware City Refining Company LLC (“DCR”) obtained to allow loading
of crude oil onto barges. The appeals allege that both the loading of crude oil onto barges and the operation of the
Delaware City rail unloading terminal violate Delaware’s Coastal Zone Act. The first appeal is Number 2013-1
before the State Coastal Zone Industrial Control Board (the “CZ Board”), and the second appeal is before the
Environmental Appeals Board and appeals Secretary’s Order No. 2013-A-0020. The CZ Board held a hearing on
the first appeal on July 16, 2013, and ruled in favor of DCR and the State of Delaware and dismissed the Appellants’
29
appeal for lack of standing. Sierra Club and Delaware Audubon have appealed that decision to the Delaware
Superior Court, New Castle County, Case No. N13A-09-001 ALR, and Delaware City Refining and the State have
filed cross-appeals. Briefs are due to be filed in this appeal in the first quarter of 2014 but no date has been set for
a decision by the Superior Court. A hearing on the second appeal before the Environmental Appeals Board, case
no. 2013-06, was held on January 13, 2014, and the Board ruled in favor of Delaware City Refining and the State
and dismissed the appeal for lack of jurisdiction. A written decision from the Board is pending, after which the
Appellants will again have the right to appeal the decision to Superior Court. If the Appellants in one or both of
these matters ultimately prevail, the outcome may have an adverse material effect on our financial condition,
results of operations or cash flows.
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.
30
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.
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
31
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.
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, the re-start of Delaware City, our IPO and construction of our rail facilities, 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.
Changes in laws or standards affecting the transportation of North American crude oil by rail could significantly
impact our operations, and as a result cause our costs to increase.
Investigations into recent rail accidents involving the transport of crude oil have prompted government
agencies and other interested parties to call for increased regulation of the transport of crude oil by rail including
in the areas of crude oil constituents, rail car design, routing of trains and other matters. If changes in law, regulations
or industry standards occur that result in requirements to reduce the volatile or flammable constituents in crude
oil that is transported by rail, alter the design or standards for rail cars, change the routing or scheduling of trains
carrying crude oil, or any other changes that detrimentally affect the economics of delivering North American
crude oil by rail to our refineries, our costs could increase, which could have a material adverse effect on our
financial condition, results of operations and cash flows.
We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits
and authorizations or otherwise comply with health, safety, environmental and other laws and regulations.
Our operations require numerous permits and authorizations under various laws and regulations. These
authorizations and permits are subject to revocation, renewal or modification and can require operational changes to
limit impacts or potential impacts on the environment and/or health and safety. A violation of authorization or permit
conditions or other legal or regulatory requirements could result in substantial fines, criminal sanctions, permit
revocations, injunctions, and/or facility shutdowns. In addition, major modifications of our operations could require
modifications to our existing permits or upgrades to our existing pollution control equipment. Any or all of these
matters could have a negative effect on our business, results of operations and cash flows.
We may incur significant liability under, or costs and capital expenditures to comply with, environmental and
health and safety regulations, which are complex and change frequently.
32
Our operations are subject to federal, state and local laws regulating, among other things, the handling of
petroleum and other regulated materials, the emission and discharge of materials into the environment, waste
management, and remediation of discharges of petroleum and petroleum products, characteristics and composition
of gasoline and distillates and other matters otherwise relating to the protection of the environment. Our operations
are also subject to extensive laws and regulations relating to occupational health and safety.
We cannot predict what additional environmental, health and safety legislation or regulations may be adopted
in the future, or how existing or future laws or regulations may 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.
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 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, our Delaware City refinery and our Delaware City Rail Terminal are located in Delaware's coastal
zone where certain activities are regulated under the Delaware Coastal Zone Act and closely monitored by
environmental interest groups. On June 14, 2013, two administrative appeals were filed by the Sierra Club and
Delaware Audubon regarding a permit Delaware City Refining Company LLC (“DCR”) obtained to allow loading
of crude oil onto barges. The appeals allege that both the loading of crude oil onto barges and the operation of the
Delaware City rail unloading terminal violate Delaware’s Coastal Zone Act. The first appeal is Number 2013-1
before the State Coastal Zone Industrial Control Board (the “CZ Board”), and the second appeal is before the
Environmental Appeals Board and appeals Secretary’s Order No. 2013-A-0020. The CZ Board held a hearing on
the first appeal on July 16, 2013, and ruled in favor of DCR and the State of Delaware and dismissed the Appellants’
appeal for lack of standing. Sierra Club and Delaware Audubon have appealed that decision to the Delaware
Superior Court, New Castle County, Case No. N13A-09-001 ALR, and Delaware City Refining and the State have
filed cross-appeals. Briefs are due to be filed in this appeal in the first quarter of 2014 but no date has been set for
a decision by the Superior Court. A hearing on the second appeal before the Environmental Appeals Board, case
no. 2013-06, was held on January 13, 2014, and the Board ruled in favor of Delaware City Refining and the State
and dismissed the appeal for lack of jurisdiction. A written decision from the Board is pending, after which the
Appellants will again have the right to appeal the decision to Superior Court. If the Appellants in one or both of
these matters ultimately prevail, the outcome may have an adverse material effect on our financial condition, results
of operations or cash flows.
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, 2013, we have total long-term debt including the Delaware Economic Development Authority Loan,
of $747.6 million, all of which is secured, and we could have incurred an additional $615.9 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;
33
• covenants contained in our existing debt arrangements limit our ability to borrow additional funds, dispose
•
of assets and make certain investments;
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.
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
34
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 our 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, 8.25% Senior Secured Notes due 2020 issued by PBF Holding in
February 2012, or 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.
Blackstone and First Reserve through their ownership of units of PBF LLC have substantial influence or control
over us, and their interests may differ from those of our public stockholders.
As of February 20, 2014, Blackstone and First Reserve collectively possess in the aggregate approximately
38.0% of the combined voting power of our common stock. As a result, Blackstone and First Reserve have the
ability to significantly influence or control the management and affairs of our company and potentially determine
the outcome of matters submitted to our stockholders for approval, including the election and removal of our
directors, the appointment of management, future issuances of securities, the incurrence of debt by us, amendments
to our organizational documents, making acquisitions and significant investments and capital expenditures and the
entering into of extraordinary transactions. Blackstone’s and First Reserve’s interests may not in all cases be aligned
with our Class A common stockholders’ interests.
For example, Blackstone and First Reserve may have different tax positions which could influence their
positions, including regarding whether and when we dispose of assets and whether and when we 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 influence us to make acquisitions,
investments and capital expenditures that increase our indebtedness, or to sell revenue-generating assets or to not
make such acquisitions, investments or capital expenditures. Pursuant to the stockholders agreement we are party
to with Blackstone and First Reserve, following the January 2014 Secondary Offering, Blackstone and First Reserve
will each have the ability to nominate two of our directors so long as it owns between 15% and 25% of our voting
stock, and one director so long as it owns between 7.5% and 15% of our voting stock. 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
35
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.
Although we are no longer a “controlled company” within the meaning of the NYSE rules, we may rely on
exemptions from certain corporate governance requirements during a one-year transition period.
Following our January 2014 Secondary Offering, Blackstone and First Reserve no longer control a majority
of the combined voting power of all classes of our voting stock. As a result, we no longer are a “controlled company”
within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a majority of our directors
must be independent within one year of the date we no longer qualify as a “controlled company.” The NYSE rules
also require that we have at least one independent director on each of the compensation and nominating and
corporate governance committees prior to the date we no longer qualify as a “controlled company,” at least a
majority of independent members within 90 days of such date and that the compensation and nominating and
corporate governance committees be composed entirely of independent directors within one year of such date. We
might utilize certain of these exemptions during these transition periods. Accordingly, until January 2015, our
stockholders may not have the same protections afforded to stockholders of companies that are subject to all of
the corporate governance requirements of the NYSE. See “Item 13. Certain Relationships and Related Transactions
and Director Independence.”
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 prior offerings 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.
We are party to 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 and PBF LLC Series B 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, including such acquisitions in connection with our prior offerings 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. As
of December 31, 2013, we have recognized a liability for the tax receivable agreement of $287.3 million reflecting
our estimate of the undiscounted amounts that we expect to pay under the agreement due to exchanges that occurred
prior to that date, and to range over the next five years from approximately $12.5 million to $34.6 million per year
and decline thereafter. 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 that additional future
payments under the tax receivable agreement relating to the exchange by the selling stockholders in connection
with the January 2014 Secondary Offering to aggregate $140.5 million. Future payments by us in respect of
subsequent exchanges of PBF LLC Series A Units would be in addition to these amounts and are expected to be
substantial as well. For example, if 50%, with respect to the amount and timing of PBF Energy income, or more
of the capital and profits interests in PBF LLC are transferred in a taxable sale or exchange within a period of 12
consecutive months, PBF LLC will undergo, for federal income tax purposes, a “technical termination” that could
affect the amount of PBF LLC’s taxable income in any year and the allocation of taxable income among the
members of PBF LLC, including PBF Energy. If PBF Energy does not have taxable income, PBF Energy generally
is not required (absent a change of control or circumstances requiring an early termination payment) to make
payments under the tax receivable agreement for that taxable year because no benefit will have been actually
realized. However, any tax benefits that do not result in realized benefits in a given tax year will likely generate
tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax
attributes will result in payments under the tax receivable agreement. The foregoing numbers are merely estimates
36
based on assumptions that are subject to change due to various factors, including, among other factors, the timing
of exchanges of 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 from the estimates above. 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, after it has paid its taxes and other obligations, to make payments under the tax receivable
agreement. 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 $31.46 per share (the closing price on December 31, 2013) and that LIBOR
were to be 1.85%, we estimate that, as of December 31, 2013 the aggregate amount of these accelerated payments
would have been approximately $789.4 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 that 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.
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
37
controls and procedures and internal controls over financial reporting. We have implemented additional procedures
and processes for the purpose of addressing the standards and requirements applicable to public 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.
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 now that 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, 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 now that 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
38
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.
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;
•
the impact of disruptions to crude or feedstock supply to any of our refineries, including disruptions due
to problems with third party logistics infrastructure;
litigation and government investigations;
the timing and announcement of any potential acquisitions and subsequent impact of any future acquisitions
on our capital structure, financial condition or results of operations;
•
•
• changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof
affecting our business or industry, including any lifting by the federal government of the restrictions on
exporting U.S. crude oil;
• 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.
In addition, the stock markets generally may experience significant volatility, often unrelated to the operating
performance of the individual companies whose securities are publicly traded. 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.
Future sales of our shares of Class A common stock could cause our stock price to decline.
The market price 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, including sales related to financing acquisitions, 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,
39
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.
We are party to a registration rights agreement with the other members of PBF LLC pursuant to which we
continue to be required to register under the Securities Act and applicable state securities laws the resale of the
shares of Class A common stock issuable to them upon exchange of all of the PBF LLC Series A Units held by
them. We currently have an effective shelf registration statement covering the resale of up to 6,310,055 shares of
our Class A common stock issued or issuable to certain holders of PBF LLC Series A Units (other than Blackstone
and First Reserve), which shares may be sold from time to time in the public markets, subject to the lock-up
agreements described below. Our shares also may be sold under Rule 144 under the Securities Act depending on
the holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
See “Item 1. Business”.
ITEM 3. LEGAL PROCEEDINGS
On June 14, 2013, two administrative appeals were filed by the Sierra Club and Delaware Audubon regarding
a permit Delaware City Refining Company LLC (“DCR”) obtained to allow loading of crude oil onto barges. The
appeals allege that both the loading of crude oil onto barges and the operation of the Delaware City rail unloading
terminal violate Delaware’s Coastal Zone Act. The first appeal is Number 2013-1 before the State Coastal Zone
Industrial Control Board (the “CZ Board”), and the second appeal is before the Environmental Appeals Board and
appeals Secretary’s Order No. 2013-A-0020. The CZ Board held a hearing on the first appeal on July 16, 2013,
and ruled in favor of DCR and the State of Delaware and dismissed the Appellants’ appeal for lack of standing.
Sierra Club and Delaware Audubon have appealed that decision to the Delaware Superior Court, New Castle
County, Case No. N13A-09-001 ALR, and DCR and the State have filed cross-appeals. Briefs are due to be filed
in this appeal in the first quarter of 2014 but no date has been set for a decision by the Superior Court. A hearing
on the second appeal before the Environmental Appeals Board, case no. 2013-06, was held on January 13, 2014,
and the Board ruled in favor of DCR and the State and dismissed the appeal for lack of jurisdiction. A written
decision from the Board is pending, after which the Appellants will again have the right to appeal the decision to
Superior Court. If the Appellants in one or both of these matters ultimately prevail, the outcome may have an
adverse material effect on our financial condition, results of operations or cash flows.
On July 24, 2013, the Delaware Department of Natural Resources and Environmental Control ("DNREC")
issued a Notice of Administrative Penalty Assessment and Secretary’s Order to Delaware City Refining Company
LLC for alleged air emission violations that occurred during the re-start of the refinery in 2011 and subsequent to
the re-start. The penalty assessment seeks $460,200 in penalties and $69,030 in cost recovery for DNREC’s expenses
associated with investigation of the incidents. We dispute the amount of the penalty assessment and allegations
made in the order, and are in discussions with DNREC to resolve the assessment.
ITEM 4. MINE SAFETY DISCLOSURE
None.
40
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
PBF Energy 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 20, 2014 there were 8 holders of record of our Class A common stock and 40 holders of
record of our Class B common stock, 100% of PBF Holding's outstanding membership interests were held by PBF
LLC.
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, 2013. The initial public offering price of our Class A common
stock was $26.00 per share.
2013:
First Quarter ended March 31, 2013
Second Quarter ended June 30, 2013
Third Quarter ended September 30, 2013
Fourth Quarter ended December 31, 2013
2012:
December 13 to December 31, 2012
Sales Prices of the
Common Stock
High
Low
Dividends
Per
Common Share
$
$
$
$
$
42.50
39.00
26.66
31.52
29.05
$
$
$
$
$
27.10
23.54
20.15
21.20
26.00
$
$
$
$
$
0.30
0.30
0.30
0.30
—
There is no established public trading market for membership interests of PBF Holding.
Dividend Policy
Subject to the following paragraphs, PBF Energy currently intends to continue to pay quarterly cash dividends
of approximately $0.30 per share on its Class A common stock.
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 PBF Energy's board of directors, and we are not obligated under any applicable
laws, governing documents or any contractual agreements with PBF LLC's 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). PBF Energy's 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 PBF Energy's tax receivable agreement and our subsidiaries’ outstanding debt documents, and such other
factors as PBF Energy's 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 PBF Energy's 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
41
Facility and the 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.
PBF Energy is a holding company and has no material assets other than its ownership interests of PBF LLC.
In order for PBF Energy to pay any dividends, they will need to cause PBF LLC to make distributions to it 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 PBF Energy. 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, PBF LLC may be unable to obtain cash from PBF Holding to satisfy its obligations
and make distributions to PBF Energy for dividends, if any, to PBF Energy's stockholders. If PBF LLC makes
such distributions to PBF Energy, the holders of PBF LLC Series A Units will also be entitled to receive pro rata
distributions.
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 its ABL Revolving Credit Facility, the Senior Secured Notes and other debt instruments.
Subject to certain exceptions, the ABL Revolving Credit Facility and the indenture governing the Senior Secured
Notes prohibit PBF Holding from making distributions to PBF LLC if certain defaults exist. In addition, both the
indenture and the ABL Revolving Credit Facility contain additional restrictions limiting PBF Holding’s ability to
make distributions to PBF LLC. Subject to certain exceptions, the restricted payment covenant under the indenture
restricts PBF Holding from making cash distributions unless its fixed charge coverage ratio, as defined in the
indenture, is at least 2.0 to 1.0 after giving pro forma effect to such distributions and such cash distributions do
not exceed an amount equal to the aggregate net equity proceeds received by it (either as a result of certain capital
contributions or from the sale of certain equity or debt securities) plus 50% of its consolidated net income (or less
100% of consolidated net loss) which is defined to exclude certain non-cash charges, such as impairment charges,
plus certain other items. Two important exceptions to the foregoing are (i) a permission to pay up to the greater of
$100.0 million and 1% of PBF Holding’s total assets and (ii) a permission to pay an additional $200.0 million
subject to compliance with a total debt ratio of 2.0 to 1.0. The ABL Revolving Credit Facility generally restricts
PBF Holding’s ability to make cash distributions if (x) the aggregate amount of such distributions exceeds the then
existing available amount basket (as defined by the ABL Revolving Credit Facility) and (y) before and after giving
effect to any such distribution (a) it fails to have pro forma excess availability under the facility greater than an
amount equal to 17.5% of the lesser of (1) the then existing borrowing base and (2) the then current aggregate
revolving commitment amount, which as of December 31, 2013 was $1.610 billion or (b) it fails to maintain on a
pro forma basis a fixed charge coverage ratio, as defined by the ABL Revolving Credit Facility, of at least 1.1 to
1.0. As a result, we cannot assure you that PBF Holding will be able to make distributions to PBF LLC in order
for PBF LLC to make distributions to PBF Energy. If that is the case, it is unlikely that PBF Energy will be able
to declare dividends as contemplated herein.
Based upon our operating results for the year ended December 31, 2013, PBF Holding was permitted under
its ABL Revolving Credit Facility and indenture to pay distributions to PBF LLC so that PBF LLC could make
distributions to its members, including us, in amounts sufficient to enable us to pay a quarterly dividend at the rate
specified above. The ability of PBF Holding to comply with the foregoing limitations and restrictions is, to a
significant degree, subject to its operating results, which is dependent on a number of factors outside of our control.
As a result, we cannot assure you that we will be able to declare dividends as contemplated herein. See “Item 1A.
Risk Factors - Risks Related to Our Organizational Structure and Class A Common Stock - We cannot assure you
that we will continue to declare dividends or have the available cash to make dividend payments.”
PBF LLC made pre-IPO cash distributions to its members in the amount of $161.0 million during 2012.
PBF Holding paid $215.8 million in distributions to PBF LLC during the year ended December 31, 2013. PBF
LLC used $116.0 million of this amount in total to make four separate non-tax distributions of $0.30 per unit ($1.20
per unit in total) to its members, of which $37.9 million was distributed to PBF Energy and the balance was
42
distributed to PBF LLC’s other members. PBF Energy used this $37.9 million to pay four separate equivalent cash
dividends of $0.30 per share of Class A common stock on November 21, 2013, August 21, 2013, June 7, 2013 and
March 15, 2013. PBF LLC used the remaining $99.8 million from PBF Holding’s distribution to make tax
distributions to its members, with $20.2 million distributed to PBF Energy, of which $1.1 million was paid by PBF
LLC directly to the applicable taxing authorities on behalf of PBF Energy, and $79.6 million to its other members.
PBF LLC will continue to make tax distributions to its members in accordance with its amended and restated
limited liability company agreement.
Assuming approximately 96,867,147 PBF LLC Series A Units and PBF LLC Series C Units outstanding,
the aggregate annual distributions which are anticipated to be required to be made by PBF Holding to PBF LLC,
such that PBF LLC may make an equivalent distribution to its members (including PBF Energy) in order for PBF
Energy to pay the anticipated $0.30 per quarter cash dividend on its Class A common stock, would be approximately
$116.2 million. As of December 31, 2013, PBF Holding had cash and cash equivalents of $77.0 million and
approximately $615.9 million of unused borrowing availability under its ABL Revolving Credit Facility to fund
its operations, if necessary. We believe our and our subsidiaries’ available cash and cash equivalents, other sources
of liquidity to operate our business and operating performance provide us with a reasonable basis for our assessment
that we can continue to support our intended dividend policy.
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, 2013. 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 1 YEAR CUMULATIVE TOTAL RETURN*
Among PBF Energy Inc., the S&P 500 Index, and a Peer Group
$160
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
12/13/12
12/13/12
12/31/13
PBF Energy Inc.
S&P 500
Peer Group
*$100 invested on 12/13/12 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2014 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
43
PBF Energy Inc. Class A Common Stock
S&P 500
Peer Group
12/13/2012
12/31/2012
12/31/2013
$
$
100.00
100.00
100.00
$
110.67
100.91
103.11
124.73
133.59
149.73
Recent Sales of Unregistered Securities—Exchange of PBF LLC Series A Units to Class A Common Stock
In the fourth quarter of 2013, a total of 83,860 PBF LLC Series A Units were exchanged for 83,860 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.
Additionally, on January 6, 2014, Blackstone and First Reserve completed a public offering of 15,000,000
shares of our Class A common stock at a price of $28.00 per share, less underwriting discounts and commissions,
in a secondary public offering. All of the shares were sold by funds affiliated with Blackstone and First Reserve.
In connection with this offering, Blackstone and First Reserve exchanged 15,000,000 Series A Units of PBF LLC
for an equivalent number of shares of our Class A common stock in a transaction exempt from registration under
Section 4(2) of the Securities Act.
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, 2013. The information regarding equity compensation plans approved by
security holders represents our 2012 Equity Incentive Plan.
Equity Compensation Plan Information
(A)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(B)
(C)
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))
1,380,392
$
—
1,380,392
$
27.26
—
27.26
3,619,608
—
3,619,608
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
(1) Securities available for future issuance under the plan can be issued in various forms, including, without
limitation, restricted stock and stock options.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical consolidated financial and other data of PBF Energy and
PBF Holding. The data presented is PBF Energy's data, unless otherwise noted. The selected historical consolidated
financial data as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31,
2013 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, 2011, 2010, and 2009
for the years ended December 31, 2010 and 2009 have been derived from the audited financials of PBF LLC and
44
PBF Holding 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 and PBF Holding 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 “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” and our consolidated financial statements and the related notes thereto, included in “Item 8. Financial
Statements and Supplementary Data.”
The historical financial information for all periods prior to PBF Energy's 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 public company during
those periods. We were not operated as a 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.
The following tables reflect our financial and operating highlights (amounts in thousands, except per share
data) except for income taxes, net income attributable to noncontrolling interest and earnings per share for the
years ended December 2013 and 2012, each of which apply only to the financial results of PBF Energy. In addition,
general and administrative expenses for PBF Energy for the year ended December 31, 2013 include a charge of
$8.5 million associated with a change in the tax receivable agreement liability. Total assets for PBF Energy include
deferred tax assets which do not apply to PBF Holding. PBF Holding's interest expense also includes interest
related to an intercompany note with PBF Energy, which is eliminated in consolidation.
45
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
Income (loss) from operations
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
Net income (loss)
Less: net income attributable to
noncontrolling interest
Net income attributable to PBF
Energy Inc.
Weighted-average shares of Class A
common stock outstanding:
Basic
Diluted
Net income available to Class A
common stock per share:
Basic
Diluted
Balance sheet data (at end of
period) :
Total assets
Total long-term debt (4)
Total equity
Other financial data :
Capital expenditures (5)
2013
2012
2011
2010
2009 (3)
Year Ended December 31,
$19,151,455
$ 20,138,687
$ 14,960,338
$ 210,671
$
228
17,803,314
18,269,078
13,855,163
203,971
812,652
738,824
658,831
25,140
—
—
104,334
(183)
—
111,479
319,859
120,443
(2,329)
—
92,238
920,433
86,183
15,859
6,294
—
728
—
6,051
—
—
53,743
305,690
1,402
(41,752)
44
(6,110)
—
(2,768)
(5,215)
(1,217)
—
—
—
(1,388)
(44,357)
—
10
(6,100)
—
$ (44,357) $ (6,100)
4,691
(93,784)
230,766
16,681
214,085
(3,724)
(108,629)
805,312
1,275
7,316
(65,120)
242,671
—
804,037
$
242,671
174,545
802,081
$
39,540
$
1,956
32,488,369
33,061,081
23,570,240
97,230,904
$
$
1.22
1.20
$
$
0.08
0.08
$ 4,413,808
$ 4,253,702
$ 3,621,109
$1,274,393
$ 19,150
747,576
729,980
804,865
1,715,256
1,723,545
1,110,918
325,064
458,661
—
18,694
$
415,702
$
222,688
$
574,883
$
72,118
$
70
46
(1) Consulting services income provided to a related party was $10 and $221 for the years ended December 31,
2010 and 2009, 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 financial statement data is that of PBF Investments LLC, which was converted to a
limited liability company and renamed PBF Energy Company LLC in 2010.
(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.
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 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
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 for the period from January 1,
2010 through December 16, 2010 and as of December 16, 2010 and for the year ended December 31, 2009 has
been derived from audited financial statements not included in this Annual Report on Form 10-K.
47
PAULSBORO REFINING BUSINESS—PBF LLC’S PREDECESSOR
Statement of operations data:
Operating revenues (1)
Cost and expenses:
Cost of sales (2)
Operating expenses
General and administrative expenses (3)
Asset impairment loss
Depreciation and amortization expense
Total costs and expenses
Operating income (loss)
Interest and other income and expense, net
Income (loss) before income tax expense (benefit)
Income tax expense (benefit) (4)
Net income (loss)
Balance sheet data (at end of period):
Total assets
Total liabilities
Net parent investment
Selected financial data:
Capital expenditures
Period from
January 1,
2010 through
December 16,
2010
Year Ended December 31,
2009
(in thousands)
$
4,708,989
$
3,549,517
4,487,825
259,768
14,606
895,642
66,361
5,724,202
(1,015,213)
500
(1,014,713)
(322,962)
(691,751) $
$
510,205
42,582
467,623
3,419,460
266,319
15,594
8,478
65,103
3,774,954
(225,437)
1,249
(224,188)
(86,586)
(137,602)
1,440,557
357,289
1,083,268
20,122
$
96,754
$
$
$
(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.
48
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, that involve risk and uncertainties. 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 "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere 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 products;
• 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) and generate earnings and cash flow;
• our substantial indebtedness;
• our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;
• termination of our Inventory Intermediation Agreements with J. Aron could have a material adverse effect
on our liquidity, as we would be required to finance our refined products inventory covered by the agreements.
Additionally, we are obligated to repurchase from J. Aron all volumes of products located at the Paulsboro
and Delaware City refineries’ storage tanks upon termination of these agreements;
• restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
• payments to the holders of PBF LLC Series A Units and PBF LLC Series B Units under our tax receivable
agreement for certain tax benefits we may claim;
• our assumptions regarding payments arising under the tax receivable agreement and other arrangements
relating to our organizational structure are subject to change due to various factors, including, among other
factors, the timing of exchanges of PBF LLC Series A Units for shares of our Class A common stock as
49
contemplated by the tax receivable agreement, the price of our Class A common stock at the time of such
exchanges, the extent to which such exchanges are taxable, and the amount and timing of our income;
• our expectations and timing with respect to our acquisition activity and whether any acquisitions are accretive
or dilutive to shareholders;
• our expectations with respect to our capital improvement projects including the development and expansion
of our Delaware City crude unloading facilities and status of an air permit to transfer crude to Paulsboro;
• the impact of disruptions to crude or feedstock supply to any of our refineries, including disruptions due
to problems with third party logistics infrastructure or operations, including pipeline and rail transportation;
• the possibility that we might reduce or not make further dividend payments;
• the impact of current and future laws, rulings and governmental regulations, including any change by the
federal government in the restrictions on exporting U.S. crude oil;
• adverse impacts from changes in our regulatory environment or actions taken by environmental interest
groups;
• the costs of being a public company, including Sarbanes-Oxley Act compliance;
• any decisions we make with respect to our energy-related logistical assets that could qualify for an MLP
structure, including future opportunities that we may determine present greater potential value to stockholders
than the planned MLP initial public offering;
• the timing and structure of the planned MLP initial public offering may change;
• unanticipated developments may delay or negatively impact the planned MLP initial public offering;
• receipt of regulatory approvals and compliance with contractual obligations required in connection with the
planned MLP initial public offering;
• the impact of the planned MLP initial public offering on our relationships with our employees, customers
and vendors and our credit rating and cost of funds; and
• although we are no longer a “controlled company” following our January 2014 Secondary Offering,
Blackstone and First Reserve continue to be able to significantly influence our decisions, and it is possible
that their interests will conflict with ours.
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.
Our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or as of the
date 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.
Explanatory Note
This consolidated Form 10-K is filed by PBF Energy Inc., PBF Holding Company LLC and PBF Finance
Corporation. Each Registrant hereto is filing on its own behalf all of the information contained in this report that
relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant,
and therefore makes no representation as to any such information as of December 31, 2013. PBF Energy is the
sole managing member of, and owner, as of December 31, 2013, of an equity interest representing approximately
40.9% of the outstanding economic interests in, PBF LLC. PBF Holding is a wholly-owned subsidiary of PBF
50
LLC and PBF Finance is a wholly-owned subsidiary of PBF Holding. PBF Holding is the parent company for PBF
LLC's operating subsidiaries.
PBF Holding is an indirect subsidiary of PBF Energy, representing 100% of PBF Energy’s consolidated
revenue for the year ended December 31, 2013 and constituting 100% of PBF Energy’s revenue generating assets
as of December 31, 2013.
Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to both PBF Energy and
PBF Holding and subsidiaries. Discussions or areas of this report that either apply only to PBF Energy or PBF
Holding are clearly noted in such sections.
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 was formed.
June 1, 2010
The idle Delaware City refinery and its related assets were acquired from affiliates
of Valero Energy Corporation (“Valero”) for approximately $220.0 million.
December 17, 2010
The Paulsboro refinery and its related assets were acquired from affiliates of Valero
for approximately $357.7 million, excluding working capital.
March 1, 2011
The Toledo 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
December 2012
June 2013
January 2014
Our subsidiary, PBF Holding, issued $675.5 million aggregate principal amount of
8.25% Senior Secured Notes due 2020.
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.
Blackstone and First Reserve completed a secondary public offering selling a total
of 15,950,000 Class A common shares.
Blackstone and First Reserve completed a secondary public offering selling a total
of 15,000,000 Class A common shares.
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.
51
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 the 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 Facility, and
MSCG purchased the refinery’s crude oil inventory on our behalf. Additionally, included in the terms of the sale
was a five-year participation payment of up to $125.0 million payable to Sunoco based upon post-acquisition
earnings of the refinery, of which the maximum aggregate amount of $125.0 million was paid as of 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. The agreement was expanded again in November 2013 to increase
the maximum availability to $1.610 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.
52
PBF Energy Inc. Public Offerings
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 from certain of its existing members. 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 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.
Additionally, on June 12, 2013, Blackstone and First Reserve completed a public offering of 15,950,000
shares of our Class A common stock at a price of $27.00 per share, less underwriting discounts and commissions,
in a secondary public offering, which we refer to as the June 2013 Secondary Offering. All of the shares were sold
by funds affiliated with Blackstone and First Reserve and we did not receive any of the proceeds from the sale of
these shares. In connection with this offering, Blackstone and First Reserve exchanged 15,950,000 Series A Units
of PBF LLC for an equivalent number of shares of our Class A common stock. The holders of PBF LLC Series
B Units, which include certain executive officers of PBF Energy, had the right to receive a portion of the proceeds
of the sale of the PBF Energy Class A common stock by Blackstone and First Reserve.
As of December 31, 2013, Blackstone and First Reserve and our executive officers and directors and certain
employees beneficially owned 57,201,674 PBF LLC Series A Units (we refer to all of the holders of the PBF LLC
Series A Units as “the members of PBF LLC other than PBF Energy”) and we owned 39,665,473 PBF LLC Series
C Units, and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock
had 59.1% of the voting power in us, and the holders of our issued and outstanding shares of Class A common
stock had 40.9% of the voting power in us.
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 members 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, as of December 31, 2013, a liability for the tax receivable
agreement of $287.3 million reflecting our estimate of the undiscounted amounts that we expect to pay under the
agreement due to exchanges in connection with our public offerings. 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, are recorded in general
and administrative expense and may result in adjustments to our income tax expense and deferred tax assets and
liabilities.
Renewable Fuels Standard
We have seen an escalation in the cost of renewable fuel credits, known as RINs, required for compliance
with the Renewable Fuels Standard. We incurred approximately $126.4 million in RINs costs during the year
ended December 31, 2013 as compared to $43.7 million and $25.9 million during the years ended December 31,
2012 and 2011, an increase due primarily to higher prices for ethanol-linked RINs and increases in our production
53
of on-road transportation fuels since 2011. Our RINs purchase obligation is dependent on our actual shipment of
on-road transportation fuels domestically and the amount of blending achieved.
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 depends 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.
The performance of our East Coast refineries generally 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.
54
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, and through our crude supply agreements with Statoil and
Saudi Aramco. Our crude supply agreement with Statoil for Paulsboro was terminated effective March 31, 2013,
at which time we began 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 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.
During 2012, we expanded and upgraded the existing on-site railroad infrastructure at the Delaware City
refinery, including the expansion of the crude rail unloading facilities that was completed in February 2013 and is
capable of discharging approximately 110,000 bpd, consisting of 40,000 bpd of heavy crude oil and 70,000 bpd
of light crude oil. However, due to greater operating efficiency, discharge capacity for light crude oil at our dual-
loop track at the Delaware City refinery has increased from 70,000 bpd to approximately 105,000 bpd. In
conjunction with the development of our rail crude unloading facilities at Delaware City, we constructed a railcar
storage yard with capacity for 330 railcars that is integral to railcar staging and storage and helps facilitate daily
rail traffic at the refinery. Also in 2013 we commenced a third rail crude offloading project to add an additional
40,000 bpd of heavy crude rail unloading capability at the refinery, which is expected to be completed by the
second half of 2014. Completion of this third rail 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 185,000 bpd. As a result
of our crude rail unloading facility expansion, the delivery of coiled and insulated railcars, the development of
crude rail loading infrastructure in Canada and the use of unit trains, we expect to be capable of taking delivery
of approximately 80,000 bpd of Canadian heavy crude oil at the Delaware City refinery by the end of 2014. We
are also adding additional unloading spots to the dual-loop track to increase unloading capabilities at that facility
to approximately 130,000 bpd. Completion of these additional rail projects 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 210,000
bpd by the end of 2014, subject to the delivery of coiled and insulated railcars, the development of crude rail loading
infrastructure in Canada and the use of unit trains.
During 2012 and January 2013, we have entered into agreements to lease or purchase 5,900 crude railcars
which will enable us to transport this crude to each of our refineries. Of the 5,900 crude railcars, we recently
purchased 717 railcars, and subsequently sold them to a third party, which has leased the railcars back to us for
periods of between four and six years. This transportation flexibility allows our East Coast refineries to process
the most cost advantaged crude available.
55
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, and renewable fuel credits,
known as RINs, required for compliance with the Renewable Fuels Standard. 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 53.5%
gasoline, 32.5% distillate (consisting of ULSD, marketed as ULSD or low sulfur heating oil, and conventional
heating oil), 1% high-value petrochemicals, with the remaining portion of the product slate comprised of lower-
value products (5% petroleum coke, 5% LPGs and 3% 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 65% to 70% 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 5.5% 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% gasoline, 41%
distillate (comprised of jet fuel, ULSD and heating oil), 5.5% high-value Group I lubricants, with the remaining
portion of the product slate comprised of lower-value products (3% petroleum coke, 4% LPGs, 3% fuel oil, 6%
asphalt and 0.5% 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 65% to 70% of total throughput. The remaining throughput
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;
56
•
•
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 6% to 7.5% of our total production volume; and
the Paulsboro refinery produces Group I lubricants which, through an extensive production process, have 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 50% gasoline, 36.5% distillate (comprised of approximately 49.5% jet fuel and 50.5% 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% 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.
57
Results of Operations
The following tables reflect our financial and operating highlights for the years ended December 31, 2013,
2012 and 2011 (amounts in thousands, except per share data) except for income taxes, net income attributable to
noncontrolling interest and earnings per share, each of which apply only to the financial results of PBF Energy. In
addition, general and administrative expenses for PBF Energy for the year ended December 31, 2013 include a
charge of $8.5 million associated with a change in the tax receivable agreement liability. PBF Holding's interest
expense also includes interest related to an intercompany note with PBF Energy, which is eliminated in
consolidation.
Year Ended December 31,
$
2013
19,151,455
17,803,314
1,348,141
812,652
$
2012
20,138,687
18,269,078
1,869,609
738,824
2011
14,960,338
13,855,163
1,105,175
658,831
86,183
—
728
53,743
305,690
(5,215)
7,316
(65,120)
242,671
—
120,443
(2,329)
—
92,238
920,433
(2,768)
(3,724)
(108,629)
805,312
1,275
804,037
$
242,671
802,081
1,956
1,046,598
$
417,962
0.08
0.08
104,334
(183)
—
111,479
319,859
—
4,691
(93,784)
230,766
16,681
214,085
174,545
39,540
436,867
1.22
1.20
$
$
$
$
Revenue
Cost of sales, excluding depreciation
Gross refining margin (1)
Operating expenses, excluding depreciation
General and administrative expenses
Gain on sale of asset
Acquisition-related expenses
Depreciation and amortization expense
Income 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
Less: net income attributable to
noncontrolling interest
Net income attributable to PBF Energy Inc.
Gross margin
Net income available to Class A common stock
per share:
Basic
Diluted
——————————
(1) See Gross Refining Margin below.
$
$
$
$
$
58
The table below summarizes certain market indicators relating to our operating results as reported by
Platts.
Year Ended December 31,
2013
2012
2011
Dated Brent Crude
West Texas Intermediate (WTI) crude oil
Crack Spreads
(dollars per barrel, except as noted)
$
$
108.66
97.99
$
$
$
$
$
$
$
$
$
$
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)
12.34
20.09
10.67
11.38
13.31
6.67
24.62
5.12
0.63
3.73
451.0
452.8
165.3
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
111.67
94.13
14.29
27.13
17.54
12.04
22.95
4.97
21.80
5.77
0.96
2.83
464.4
463.2
169.5
111.26
95.04
9.93
24.14
16.22
12.63
18.28
3.82
15.63
(3.31)
(9.79)
4.00
427.9
429.4
128.7
2013 Compared to 2012
Overview— Net income for PBF Energy was $214.1 million for the year ended December 31, 2013 compared
to $804.0 million for the year ended December 31, 2012. Net income attributable to PBF Energy was $39.5 million,
or $1.20 per diluted share ($1.48 per share on a fully exchanged, fully diluted basis based on adjusted pro forma
net income as described below in Non-GAAP Financial Measures), for the year ended December 31, 2013. The
net income attributable to PBF Energy represents PBF Energy’s equity interest in PBF LLC’s pre-tax income, less
applicable income taxes, of approximately 24.4% prior to the June 2013 Secondary Offering and approximately
40.9% subsequent to the June 2013 Secondary Offering. Net income for PBF Holding, which does not include
income tax benefits or the expense associated with the change in our tax receivable agreement liability, was $238.9
million for the year ended December 31, 2013 compared to $805.3 million for the year ended December 31, 2012.
Our throughput rates during the year ended December 31, 2013 and 2012, were impacted by unplanned
downtime at our Toledo refinery and planned downtime at our Delaware City refinery. On January 31, 2013 there
was a brief fire within the fluid catalytic cracking complex at the Toledo refinery that resulted in that unit being
temporarily shutdown. The refinery resumed running at planned rates on February 18, 2013. During the fourth
quarter of 2013, our Delaware City Refinery was impacted by a 40-day planned turnaround of the coker unit. In
the first quarter of 2012, the Toledo refinery was impacted by a 30-day turnaround of its hydrocracker, reformer
and UDEX units which commenced on March 9, 2012. Our results for the year ended December 31, 2013 were
unfavorably impacted by lower crack spreads and the result of unfavorable crude differentials, higher operating
59
expenses due to increased energy costs, repair and restart costs related to the Toledo fire, turnaround at the Delaware
City refinery, as well as higher costs of compliance with the Renewable Fuels Standard.
Revenues— Revenues totaled $19.2 billion for the year ended December 31, 2013 compared to $20.1 billion
for the year ended December 31, 2012, a decrease of $1.0 billion, or 4.9%. For the year ended December 31, 2013,
the total throughput rates in the East Coast and Mid-Continent refineries averaged approximately 310,300 bpd and
142,500 bpd, respectively. For the year ended December 31, 2012, the total throughput rates at our East Coast and
Mid-Continent refineries averaged approximately 316,000 bpd, and 147,200 bpd, respectively. The decrease in
throughput rates at our East Coast refineries in 2013 compared to 2012 was primarily driven by market factors
including narrower crude differentials for rail-delivered crude as well as the Delaware City coker unit turnaround
which reduced crude run rates during the period. The decrease in throughput rates at our Mid-Continent refinery
in 2013 compared to 2012 was primarily due to the refinery's 18-day unplanned down time in the first quarter of
2013, attributable to the fire at the Toledo refinery as described above, as well as refinery maintenance. For the
year ended December 31, 2013, the total barrels sold at our East Coast and Mid-Continent refineries averaged
approximately 307,600 bpd and 153,700 bpd, respectively. For the year ended December 31, 2012, the total barrels
sold at our East Coast and Mid-Continent refineries averaged approximately 311,900 bpd and 159,000 bpd,
respectively. Total barrels sold at our Mid-Continent refinery are typically higher than throughput rates, reflecting
sales and purchases of refined products outside the refinery. Total barrels sold at our East Coast refineries typically
reflect inventory movements in addition to throughput rates.
Gross Margin— Gross refining margin (as defined below in Non-GAAP Financial Measures) totaled $1,348.1
million, or $8.16 per barrel of throughput, for the year ended December 31, 2013 compared to $1,869.6 million,
or $11.03 per barrel of throughput during the year ended December 31, 2012, a decrease of $521.5 million. Gross
margin, including refinery operating expenses and depreciation, totaled $436.9 million, or $2.64 per barrel of
throughput, for the year ended December 31, 2013, compared to $1,046.6 million, or $6.17 per barrel of throughput,
for the year ended December 31, 2012, a decrease of $609.7 million. The decrease in gross refining margin was
primarily due to reduced throughput rates, unfavorable movement in crude differentials, and higher costs of
compliance with the Renewable Fuels Standard.
Average industry refining margins in the U.S. Mid-Continent were generally weaker during the year ended
December 31, 2013, as compared to the same period in 2012. The WTI (Chicago) 4-3-1 industry crack spread was
approximately $20.09 per barrel or 25.9% lower in the year ended December 31, 2013, as compared to the same
period in 2012. Additionally, the price of WTI versus Syncrude and Bakken decreased in 2013, which negatively
impacted our overall cost of crude.
The Dated Brent (NYH) 2-1-1 industry crack spread was approximately $12.34 per barrel, or 13.6%, lower
in the year ended December 31, 2013, as compared to the same period in 2012. Furthermore, the WTI/Dated Brent
differential was $6.87 lower in the year ended December 31, 2013, as compared to the same period in 2012 and
the Dated Brent/Maya differential was approximately $0.66 per barrel lower in the year ended December 31, 2013
as compared to the same period in 2012. A decrease in the WTI/Dated Brent crude differential unfavorably impacts
our East Coast refineries which have increased shipments of WTI based crudes from the Bakken and Western
Canada. A reduction in the Dated Brent/Maya crude differential, our proxy for the light/heavy crude differential,
has a negative impact on our East Coast refineries, which can process a large slate of medium and heavy, sour
crude oil that is priced at a discount to light, sweet crude oil.
Operating Expenses— Operating expenses totaled $812.7 million, or $4.92 per barrel of throughput, for the
year ended December 31, 2013 compared to $738.8 million, or $4.36 per barrel of throughput, for the year ended
December 31, 2012, an increase of $73.9 million, or 10.0%. The increase in operating expenses is mainly attributable
to an increase of approximately $41.3 million in energy and utilities costs, primarily driven by higher natural gas
prices, $11.0 million in increased personnel cost associated with higher headcount attributable to the Delaware rail
facility expansion, $8.0 million in repair and restart costs related to the Toledo fire described above, $14.3 million
in increased outside engineering and consulting fees related to refinery capital and maintenance projects, and $2.2
60
million in higher regulatory costs and taxes. Our operating expenses principally consist of salaries and employee
benefits, maintenance, energy and catalyst and chemicals costs at our refineries.
General and Administrative Expenses— General and administrative expenses totaled $104.3 million for the
year ended December 31, 2013, compared to $120.4 million for the year ended December 31, 2012, an decrease
of $16.1 million or 13.4%. The decrease in general and administrative expenses primarily relates to lower employee
compensation expense of $30.1 million, which is partially offset by $8.5 million of expense associated with the
change in our tax receivable agreement liability and $7.6 million in costs associated with being a public company.
Our general and administrative expenses are comprised of the personnel, facilities and other infrastructure costs
necessary to support our refineries.
General and administrative expenses for PBF Holding, which do not include the $8.5 million expense
associated with PBF Energy's tax receivable agreement liability, totaled $95.8 million for the year ended
December 31, 2013, compared to $120.4 million for the year ended December 31, 2012.
Gain on Sale of Assets— Gain on sale of assets for the year ended December 31, 2013 was $183.0 thousand
which related to the sale of railcars which were subsequently leased back, compared to a gain of $2.3 million for
the year ended December 31, 2012, for the sale of certain equipment at Paulsboro and Delaware City.
Depreciation and Amortization Expense— Depreciation and amortization expense totaled $111.5 million
for the year ended December 31, 2013, compared to $92.2 million for the year ended December 31, 2012, an
increase of $19.3 million. The increase was principally due to capital projects including the expansion of the crude
rail unloading facility completed in the first quarter of 2013 as well as new system implementations at the corporate
level during 2012.
Change in Fair Value of Catalyst Leases— Change in the fair value of catalyst leases represented a gain of
$4.7 million for the year ended December 31, 2013, compared to a loss of $3.7 million for the year ended
December 31, 2012. This gain 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 return or repurchase at fair market value on
the lease termination dates.
Change in Fair Value of Contingent Consideration— In 2013, there was no change in the fair value of
contingent consideration related to the Toledo refinery acquisition and the liability was paid in full in April 2013.
Interest Expense, net— Interest expense totaled $93.8 million for the year ended December 31, 2013,
compared to $108.6 million for the year ended December 31, 2012, a decrease of $14.8 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, financing
cost associated with the Inventory Intermediation Agreements, letter of credit fees associated with the purchase of
certain crude oils, and the amortization of deferred financing fees. The decrease in interest expense primarily relates
to lower interest costs associated with our credit facilities reflecting lower average outstanding borrowings, reduced
financing costs related to the termination of the Paulsboro Statoil supply agreement, and the $4.4 million write-
off of deferred financing costs in the first quarter of 2012 on debt that was repaid from the proceeds of our 2012
senior secured notes offering.
Income Tax Expense— As PBF LLC is a limited liability company treated as a "flow-through" entity for
income tax purposes, 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, PBF Energy’s consolidated financial statements
do not include a benefit or provision for income taxes for periods prior to the closing of our initial public offering
on December 18, 2012. However, PBF LLC generally made distributions to its 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
61
PBF Energy's allocable share of PBF LLC’s pre-tax income (loss), which was approximately 24.4% prior to the
June 2013 Secondary Offering and 40.9% subsequent to the June 2013 Secondary Offering. We do not recognize
any income tax expense or benefit related to the noncontrolling interest of the other members in PBF LLC (although,
as described elsewhere, we make tax distributions to all members of PBF LLC under the terms of its amended and
restated limited liability company agreement). PBF Energy's effective tax rate for the year ended December 31,
2013 was 29.7% reflecting tax benefit adjustments for discrete items related to changes in income tax provision
estimates based on our income tax returns and changes in our effective state tax rates.
PBF Holding, as a limited liability company treated as a "flow-through" entity for income tax purposes, did
not recognize a benefit or provision for income tax expense for the years ended December 31, 2013 and 2012.
Noncontrolling Interest— As a result of our initial public offering and the related reorganization transactions,
PBF Energy became 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 LLC held by members other than PBF Energy.
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 members other than PBF Energy. Noncontrolling interest
on the balance sheet represents the portion of net assets of PBF Energy attributable to the members of PBF LLC
other than PBF Energy, based on the relative equity interest held by such members. The noncontrolling interest
ownership percentage as of December 31, 2013 and December 31, 2012 was approximately 59.1% and 75.6%,
respectively. The carrying amount of the noncontrolling interest on our consolidated balance sheet attributable to
the noncontrolling interest is not equal to the noncontrolling interest ownership percentage due to the effect of
income taxes and related agreements that pertain solely to PBF Energy.
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 $0.08
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 year 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, 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
62
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—Gross refining 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 gross
refining 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 gross refining 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
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.
63
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 PBF LLC is a limited liability company treated as a "flow-through" entity for
income tax purposes, 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 make distributions to our 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
64
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 members of PBF LLC other than PBF Energy,
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 the members of PBF LLC other than PBF Energy, 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.
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
3
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.
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.
65
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, 2013, 2012 and 2011:
Net income attributable to PBF Energy Inc.
Add: IPO-related expenses(1)
Add: Net income attributable to the
noncontrolling interest(2)
Less: Income tax expense(3)
Adjusted pro forma net income
Diluted weighted-average shares outstanding of
PBF Energy Inc. (4)
Conversion of PBF LLC Series A Units (5)
Pro forma shares outstanding—diluted(6)
Adjusted pro forma net income (loss) per fully
exchanged, fully diluted shares outstanding
$
$
$
2013
39,540
$
—
174,545
(70,167)
143,918
$
Year Ended
December 31,
2012
1,956
$
8,187
802,081
(319,732)
492,492
$
2011
—
—
242,671
(95,758)
146,913
33,061,081
64,164,045
97,225,126
97,230,904
—
97,230,904
97,230,904
97,230,904
1.48
$
5.07
$
1.51
(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 by the members
of PBF LLC other than PBF Energy as if such members had fully exchanged their PBF LLC Series A Units
for shares of PBF Energy's Class A common stock.
(3) Represents an adjustment to apply PBF Energy's statutory tax rate of approximately 40.2% for the year
ended December 31, 2013 and 39.5% for the years ended December 31, 2012 and 2011 to the noncontrolling
interest. The adjustment assumes the full exchange of existing PBF LLC Series A Units as described in
(2) above.
(4) Represents weighted-average diluted shares outstanding assuming the conversion of all common stock
equivalents, including options and warrants for units of PBF LLC Series A Units and options for shares of
PBF Energy Class A common stock as calculated under the treasury stock method for the year ended
December 31, 2013. Common stock equivalents exclude the effects of options to purchase 1,320,000 and
682,500 shares of PBF Energy's Class A common stock because they are anti-dilutive for the years ended
December 31, 2013 and 2012, respectively.
(5) Represents an adjustment to weighted-average diluted shares to assume the full exchange of existing PBF
LLC Series A Units as described in (2) above.
(6) Diluted pro forma shares outstanding for 2011 reflect the same number of diluted shares outstanding for
2012 in order to present such pre-IPO period on a comparable basis.
Gross Refining Margin
Gross refining margin is defined as gross margin excluding depreciation and operating expense related to
the refineries. We believe gross refining 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 gross refining margin (revenue less cost of sales) to industry refining margin
benchmarks and crude oil prices as defined in the table below.
Gross refining 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. Gross refining margin presented by other companies may not be comparable to our presentation,
66
since each company may define this term differently. The following table presents a reconciliation of gross refining
margin to the most directly comparable GAAP financial measure, gross margin, on a historical basis, as applicable,
for each of the periods indicated:
2013
Year Ended December 31,
2012
2011
$
per barrel of
throughput
$
per barrel of
throughput
$
per barrel of
throughput
$ 436,867 $
2.64
$1,046,598 $
6.17
$ 417,962 $
3.07
812,652
4.92
738,824
4.36
635,517
98,622
0.60
8.16
84,187
0.50
51,696
$1,869,609 $
11.03
$1,105,175 $
5.12
0.40
8.59
Reconciliation of gross
margin to gross refining
margin:
Gross margin
Add:
Refinery operating
expense
Refinery depreciation
expense
Gross refining margin
$1,348,141 $
EBITDA and Adjusted EBITDA
Our management uses EBITDA (earnings before interest, income taxes, depreciation and amortization) and
Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period
on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall
expectations and for evaluating actual results against such expectations, and in communications with our board of
directors, creditors, analysts and investors concerning our financial performance. The Senior Secured Notes,
revolving credit facility and other contractual obligations also include similar measures as a basis for certain
covenants under those agreements which may differ from the Adjusted EBITDA definition described below.
EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and our computation
of EBITDA and Adjusted EBITDA may vary from others in our industry. In addition, Adjusted EBITDA contains
some, but not all, adjustments that are taken into account in the calculation of the components of various covenants
in the agreements governing the Senior Secured Notes and the ABL Revolving Credit Facility. EBITDA and
Adjusted EBITDA should not be considered as alternatives to operating income or net income (loss) as measures
of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be
considered, an alternative to cash flows from operations as a measure of liquidity. Adjusted EBITDA is defined
as EBITDA before equity-based compensation expense, gains (losses) from certain derivative activities and
contingent consideration and the non-cash change in the deferral of gross profit related to the sale of certain finished
products. Other companies, including other companies in our industry, may calculate Adjusted EBITDA differently
than we do, limiting its usefulness as a comparative measure. Adjusted EBITDA also has limitations as an analytical
tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Some of these limitations include that Adjusted EBITDA:
• does not reflect depreciation expense or our cash expenditures, or future requirements, for capital expenditures
or contractual commitments;
• does not reflect changes in, or cash requirements for, our working capital needs;
• does not reflect our interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt;
• does not reflect realized and unrealized gains and losses from hedging activities, which may have a substantial
impact on our cash flow;
67
• does not reflect certain other non-cash income and expenses; and
• excludes income taxes that may represent a reduction in available cash.
The following tables reconcile net (loss) income as reflected in our results of operations to EBITDA and Adjusted
EBITDA for the periods presented:
Reconciliation of net (loss) income to EBITDA:
Net income (1)
Add:Depreciation and amortization expense
Add: Interest expense, net
Add: Income tax expense (1)
EBITDA
Reconciliation of EBITDA to Adjusted EBITDA:
Year Ended December 31,
2013
2012
2011
$ 214,085
$
804,037
$
242,671
111,479
93,784
16,681
92,238
108,629
1,275
53,743
65,120
—
$ 436,029
$
1,006,179
$
361,534
EBITDA
$ 436,029
$
1,006,179
$
361,534
Stock based compensation
Change in tax receivable agreement liability
3,753
8,540
Non-cash change in fair value of catalyst lease obligations
(4,691)
Non-cash change in fair value of contingent consideration
—
Non-cash change in fair value of inventory repurchase
obligations
(12,985)
2,954
—
3,724
2,768
9,271
2,516
—
(7,316)
5,215
(1,396)
Non-cash deferral of gross profit on
finished product sales
Adjusted EBITDA
(31,329)
$ 399,317
19,177
$
1,044,073
$
(6,771)
353,782
——————————
(1) Net income for PBF Holding for the years ended December 31, 2013, 2012 and 2011 was $238,876, $805,312
and $242,671 respectively, which excludes $16,681 and $1,275 and $0 of income tax expense of PBF Energy,
respectively, and $8,540 of expense associated with the change in the tax receivable agreement liability for the
year ended December 31, 2013 and includes $423 of interest expense related to the intercompany notes payable
between PBF Holding and PBF Energy for the year ended December 31, 2013.
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.
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Cash Flow Analysis
Cash Flows from Operating Activities
Net cash provided by operating activities was $291.3 million for the year ended December 31, 2013 compared
to net cash provided by operating activities of $812.4 million for the year ended December 31, 2012. Our operating
cash flows for the year ended December 31, 2013 included our net income of $214.1 million, plus net non-cash
charges relating to depreciation and amortization of $118.0 million, change in deferred income taxes of $16.7
million, pension and other post retirement benefits costs of $16.7 million, change in the tax receivable agreement
liability of $8.5 million and stock-based compensation of $3.8 million, partially offset by the change in the fair
value of our inventory repurchase obligations of $20.5 million, changes in the fair value of our catalyst lease of
$4.7 million, and gain on sale of assets of $183 thousand. In addition, net changes in working capital reflected
uses of cash of $61.1 million driven by the timing of inventory purchases and collections of accounts receivables
as well as payments associated with the terminations of the MSCG offtake and Statoil supply agreements. 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 sales of assets 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.
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, 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.
Cash Flows from Investing Activities
Net cash used in investing activities was $313.3 million for the year ended December 31, 2013 compared
to net cash used in investing activities of $219.3 million for the year ended December 31, 2012. The net cash flows
used in investing activities for the year ended December 31, 2013 was comprised of capital expenditures totaling
$318.4 million, expenditures for turnarounds of $64.6 million, primarily at our Delaware City refinery, and
expenditures for other assets of $32.7 million, partially offset by $102.4 million in proceeds from the sale of railcars.
Net cash used in investing activities for the year ended December 31, 2012 consisted primarily of the 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, slightly offset by $3.4 million in proceeds from the sale of assets.
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. Net cash used in
investing 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.
Cash Flows from Financing Activities
Net cash used in financing activities was $187.0 million for the year ended December 31, 2013 compared
to $357.4 million for the year ended December 31, 2012. For the year ended December 31, 2013, net cash used in
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financing activities consisted primarily of distributions and dividends of $195.7 million, payments of contingent
consideration related to the Toledo acquisition of $21.4 million and $1.0 million for deferred financing costs offset
by $15.0 million of net proceeds from revolver borrowings, $14.3 million in proceeds from sale of catalyst and
$1.8 million exercise of Series A options and warrants of PBF Energy Company LLC. For the year ended
December 31, 2012, 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.
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 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.
The cash flow activity of PBF Holding is materially consistent with that discussed above, other than the
PBF Holding change in due to/due from related party of $14.7 million included in cash flows from operating
activities, as well as proceeds from intercompany notes payable of $31.8 million and distributions of $20.2 million
related to tax distributions paid to, or on behalf of, PBF Energy included in cash flows from financing activities.
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.
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, 2013, 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 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, 2013.
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
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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. The Revolving Loan was further
expanded to a maximum availability of $1.610 billion in November 2013. 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, 2013, we were in compliance with these
covenants.
As of December 31, 2013, the ABL Revolving Credit Facility provided for revolving loans of up to an
aggregate of $1.610 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 $1.610 billion. As of December 31, 2013, there were $15.0 million
outstanding borrowings under the ABL Revolving Credit Facility. Additionally, we had $441.4 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 is secured by: 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, 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.
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, 2013, our cash and cash equivalents totaled $77.0 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.
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Liquidity
As of December 31, 2013, our total liquidity was approximately $615.9 million, compared to total liquidity
of approximately $599.2 million as of December 31, 2012. Total liquidity is the sum of our cash and cash equivalents
plus the amount of availability under the ABL Revolving Credit Facility.
Working Capital
Working capital for PBF Energy at December 31, 2013 was $556.0 million, consisting of $2,200.5 million
in total current assets and $1,644.5 million in total current liabilities. 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 for PBF Holding at December 31, 2013 was $541.9 million, consisting of $2,175.0 million
in total current assets and $1,633.0 million in total current liabilities. Working capital at December 31, 2012 was
$686.8 million, consisting of $2,283.3 million in total current assets and $1,596.5 million in total current liabilities.
Crude and Feedstock Supply Agreements
We have acquired 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 was terminated effective March 31, 2013, at which time we began 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, similar to our purchases of other foreign waterborne
crudes, 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 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 Delaware City refinery and formerly
for the Paulsboro refinery, 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, 2013, the LIFO value of crude oil and feedstocks owned by Statoil included within
inventory on our balance sheet was $89.8 million. The corresponding accrued liability for such crude oil and
feedstocks was $89.8 million at that date.
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Product Offtake Agreements
Prior to the termination of our product offtake agreements on July 1, 2013, our Paulsboro and Delaware
City refineries sold their light finished products, certain intermediates and lube base oils to MSCG. Legal title
transferred to MSCG as the products left the process units and entered the refinery storage facilities. On a daily
basis MSCG, under a payment direction agreement, paid 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 was terminated effective March 31,
2013. Any shortfall or overage in the netting process was trued up between us and Statoil. Under generally accepted
accounting principles, we deferred the revenue on finished product sales and retain the inventory owned by MSCG
on our balance sheet until MSCG shipped the products out of our refinery storage facilities, which typically occurred
within an average of six days.
In addition, MSCG purchased 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 repurchased the
intermediates or lubes from MSCG. These purchases and sales occurred at the daily market price for the related
products and were netted in cost of sales at cost. The inventory of intermediates and lubes owned by MSCG
remained in inventory on our balance sheet and the net cash receipts result in a liability that was recorded at market
price for the volumes held in storage with any change in the market price being recorded in cost of sales.
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.
Inventory Intermediation Agreements
We entered into two separate Inventory Intermediation Agreements with J. Aron on June 26, 2013 which
commenced upon the termination of the product offtake agreements with MSCG. Pursuant to the Inventory
Intermediation Agreements, J. Aron purchases and holds title to all of the intermediate and finished products
produced by the Delaware City and Paulsboro refineries and delivered into our tanks at the refineries. Inventory
held outside the refineries may be purchased and owned by J. Aron under the Inventory Intermediation Agreements
upon the agreement of both parties. Furthermore, J. Aron agrees to sell the intermediate and finished products
back to us as they are discharged out of the refineries' tanks (or other locations outside the refineries as agreed
upon by both parties). We currently market and sell the finished products independently to third parties. We entered
into the Inventory Intermediation Agreements for the purpose of managing the Products inventory at the Delaware
City and Paulsboro refineries. They provide us with financial flexibility and improve our liquidity by allowing us
to monetize Products inventory in our tanks as they are produced prior to being sold to third parties.
Our accounts receivable increased from $503.8 million at December 31, 2012 to $596.6 million at December
31, 2013 and our deferred revenue decreased from $210.5 million at December 31, 2012 to $7.8 million at December
31, 2013 as a result of the termination of the MSCG offtake agreements and commencement of the J. Aron Inventory
Intermediation Agreements. Previously, under the MSCG offtake agreements, we sold substantially all of our East
Coast finished products to MSCG and received payment on the day of sale. We deferred the revenue on these
finished product sales until MSCG shipped the products out of our refinery storage facilities. Under the J. Aron
agreements no revenue is deferred as we sell finished products directly to third parties with varying payment terms
and recognize revenue as the products are shipped and title transfers to the customer. Similarly, accounts payable
increased from $360.1 million at December 31, 2012 to $402.3 million at December 31, 2013, primarily as a result
of the termination of the Statoil supply agreement at Paulsboro and our increased purchases of crude by rail delivered
to the East Coast.
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At December 31, 2013, the LIFO value of intermediates and finished products owned by J. Aron included
within inventory on our balance sheet was $378.3 million. The corresponding accrued liability for such
intermediates and finished products was $378.3 million at that date.
Capital Spending
Capital spending was $415.7 million for the year ended December 31, 2013, which primarily included safety
related enhancements and facility improvements at the refinery and the continued expansion of the rail unloading
facilities at our Delaware City refinery.
We are pursuing capital project opportunities designed to increase the profitability of our Toledo refinery.
These projects are expected to improve crude sourcing and flexibility, further diversify our product sales into higher
margin chemicals and improve the ULSD and total liquid yield from the Toledo refinery. We spent approximately
$30.7 million through December 31, 2013 related to these capital projects and estimate aggregate total capital
expenditures of approximately $85.0 million through the end of 2015.
Contractual Obligations and Commitments
The following table summarizes our material contractual payment obligations as of December 31, 2013:
Long-term debt (a)
Interest payments on debt facilities (a)
Delaware Economic Development
Authority Loan (b)
Operating Leases (c)
Purchase obligations (d):
Payments due by period
$
Total
743,589
423,417
Less than
1 year
26,887
$
1-3 Years
$ 41,202
3-5 Years
$
— $
More than
5 years
675,500
72,466
143,312
124,046
83,593
—
—
—
—
—
311,323
59,410
101,721
81,877
68,315
Crude Supply and Offtake Agreements
454,893
454,893
—
—
—
Other Supply and Capacity
Agreements
Construction obligations
Environmental obligations (e)
Pension and post-retirement obligations (f)
Tax receivable agreement obligations (g)
483,351
13,088
14,874
96,023
60,023
13,088
2,907
6,669
98,207
91,544
233,577
—
1,492
9,287
—
1,439
17,257
32,821
—
9,036
62,810
188,350
287,316
12,541
53,604
Total contractual cash obligations
$ 2,827,874
$ 708,884
$ 448,825
$ 348,984
$ 1,321,181
(a) Long-term Debt and Interest Payments on Debt Facilities
Long-term obligations represent (i) the repayment of the outstanding revolving credit agreement; (ii) the
repayment of indebtedness incurred in connection with the senior secured notes offering; and (iii) 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 obligations, 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, 2013. With the exception of our catalyst
leases and outstanding borrowings on the Revolver, we have no long-term debt maturing before 2020 as of
December 31, 2013.
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(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 in 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 and January 2013, we have entered into agreements to lease or purchase 5,900
crude railcars which will enable us to transport this crude to each of our refineries. Any such leases will commence
as the railcars are delivered. Of the 5,900 crude railcars, we recently purchased 717 railcars, and subsequently sold
them to a third party, which has leased the railcars back to us for periods of between four and six years.
(d) Purchase Obligations
We have obligations to repurchase crude oil, feedstocks, certain intermediates and refined products under
various crude supply and product offtake agreements with J. Aron 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, 2013.
(e) 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 $14.9
million as of December 31, 2013.
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.
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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.
(f) 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.”
(g) Tax Receivable Agreement Obligations
We used a portion of the proceeds from our IPO to purchase PBF LLC Series A Units from the the members
of PBF LLC other than PBF Energy. In addition, the members of PBF LLC other than PBF Energy 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 Secondary Offerings and exchanges, PBF Energy is 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 the members of PBF LLC other than PBF Energy
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, 2013 include the members of PBF LLC other than PBF Energy holding a 59.1%
interest and PBF Energy holding a 40.9% interest. The members of PBF LLC other than PBF Energy 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 exchanges 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 as of December 31, 2013. In addition, in January 2014, Blackstone and
First Reserve completed a secondary offering which is estimated to increase our tax receivable agreement liability
to $439.6 million as a result of the secondary offering and the corresponding tax benefits expected to be generated
in future years from this transaction.
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Tax distributions
PBF LLC is required to make periodic tax distributions to the members of PBF LLC, including PBF
Energy, pro rata in accordance with their respective percentage interests for such period (as determined under the
amended and restated limited liability company agreement of PBF LLC), subject to available cash and applicable
law and contractual restrictions (including pursuant to our debt instruments) and based on certain assumptions.
Generally, these tax distributions will be an amount equal to our estimate of the taxable income of PBF LLC for
the year multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and
local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account
the nondeductibility of certain expenses). If, with respect to any given calendar year, the aggregate periodic tax
distributions were less than the actual taxable income of PBF LLC multiplied by the assumed tax rate, PBF LLC
will make a “true up” tax distribution, no later than March 15 of the following year, equal to such difference, subject
to the available cash and borrowings of PBF LLC. As these distributions are conditional they have been excluded
from the table above.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of December 31, 2013, other than outstanding letters of credit
in the amount of approximately $441.4 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.”
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.
Prior to July 1, 2013, the Company’s Paulsboro and Delaware City refineries sold light finished products,
certain intermediates and lube base oils to MSCG under product offtake agreements with each refinery (the “Offtake
Agreements”). On a daily basis, MSCG purchased and paid for the refineries’ production of light finished products
as they were produced, delivered to the refineries’ storage tanks, and legal title passes to MSCG. Revenue on these
product sales was deferred until they were shipped out of the storage facility by MSCG.
Under the Offtake Agreements, the Company’s Paulsboro and Delaware City refineries also entered into
purchase and sale transactions of certain intermediates and lube base oils whereby MSCG purchased and paid for
the refineries’ production of certain intermediates and lube products as they were produced and legal title passed
to MSCG. The intermediate products were held in the refineries’ storage tanks until they were needed for further
use in the refining process. The intermediates may also have been sold to third parties. The refineries had the right
to repurchase lube products and do so to supply other third parties with that product. When the refineries needed
intermediates or repurchase lube products, the products were drawn out of the storage tanks, title passed back to
the refineries and MSCG was paid for those products. These transactions occurred at the daily market price for
the related products. These transactions were considered to be made in contemplation of each other and, accordingly,
did not result in the recognition of a sale when title passed from the refineries to MSCG. Inventory remained at
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cost and the net cash receipts result in a liability that was 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 expected to pay to repurchase the volumes held in storage.
While MSCG had legal title, it had 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 were shipped out of the storage facility. As
the exclusive vendor of intermediate products to the refineries, MSCG had the obligation to provide the intermediate
products to the refineries as they were needed. Accordingly, sales by MSCG to others were limited and only made
with the Company or its subsidiaries’ approval.
As of July 1, 2013, the Company terminated the Offtake Agreements for the Company’s Paulsboro and
Delaware City refineries. The Company entered into two separate Inventory Intermediation Agreements with J.
Aron on June 26, 2013 which commenced upon the termination of the product offtake agreements with MSCG.
Pursuant to the Inventory Intermediation Agreements, J. Aron purchases and holds title to all of the
intermediate and finished products produced by the Delaware City and Paulsboro refineries and delivered into the
Company's tanks at the refineries. All purchase and sale transactions under the Inventory Intermediation Agreements
are consummated at a benchmark market price adjusted for a specified product type differential. The sale and
purchase transactions under the Inventory Intermediation Agreements are considered to be made in contemplation
of each other and, accordingly, do not result in the recognition of a sale when title passes to J. Aron. The Products
inventory remains on our balance sheet at cost and the net cash receipts result in a liability that is recorded at market
price for the volume of Products inventory held in our refineries’ storage tanks with any change in the market price
recorded in costs of sales.
Furthermore, J. Aron agrees to sell the Products back to the Company as the Products are discharged out of
the refineries' tanks. J. Aron has the right to store the Products purchased in the Company's tanks under the Inventory
Intermediation Agreements and will retain these storage rights for the term of the agreements. Inventory held
outside the refineries may be owned by the Company or by J. Aron under the Inventory Intermediation Agreements.
The Company will market and sell the Products independently to third parties.
Our Delaware City refinery sells and purchases feedstocks under a supply agreement primarily with Statoil.
Statoil purchases the refinery’s production of certain feedstocks or purchases feedstocks from third parties on the
refinery’s behalf. Legal title to the feedstocks is held by Statoil and the feedstocks are held in the refinery’s 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 refinery to the counterparty.
Inventory remains at cost and the net cash receipts result in a liability. The Statoil crude supply agreement with
Paulsboro terminated effective March 31, 2013, at which time we began 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 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 Delaware City refinery acquires a portion of its crude oil from Statoil under our crude supply agreement
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 of the crude oil held by Statoil on our behalf
upon termination of the agreements. As a result of the purchase obligations, we record the inventory of crude oil
and feedstocks in the refinery’s 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
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for Paulsboro terminated effective March 31, 2013, at which time we began 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 acquisition 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.
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.
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All derivative instruments that are not designated as normal purchases 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 purchases 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
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, are recorded in general and administrative expense and may result in adjustments to our
income taxe expense and deferred tax assets and liabilities.
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Recent Accounting Pronouncements
There are no recently issued accounting pronouncements requiring adoption subsequent to December 31,
2013 that would have a significant impact on our results of operations or financial position.
Iran Sanctions Compliance Disclosure
Under the Iran Threat Reduction and Syrian Human Rights Act of 2012 ("ITRA"), which added Section 13
(r) of the Exchange Act, we are required to include certain disclosures in our periodic reports if we or any of our
“affiliates” knowingly engaged in certain specified activities during the period covered by the report. Because the
SEC defines the term “affiliate” broadly, it may include any entity controlled by us as well as any person or entity
that controls us or is under common control with us (“control” is also construed broadly by the SEC). Neither we
nor any of our controlled affiliates or subsidiaries have knowingly engaged in any transaction or dealing reportable
under Section 13(r) of the Exchange Act during the reporting period.
Funds affiliated with The Blackstone Group L.P. (“Blackstone”) are holders of approximately 26.8% of the
outstanding voting interests of PBF Energy as of December 31, 2013 and have nominated three of the current
directors on PBF Energy's Board of Directors. Accordingly, Blackstone may be deemed an “affiliate” of PBF
Energy, as that term is defined in Exchange Act Rule 12b-2. We received notice from Blackstone that it has included
the disclosures described below in its SEC filings pursuant to ITRA regarding one of its portfolio companies that
may be deemed to be affiliates of Blackstone. Because of the broad definition of “affiliate” in Exchange Act Rule
12b-2, these portfolio companies of Blackstone, through Blackstone's ownership of PBF Energy, may also be
deemed to be affiliates of ours. We have not independently verified the disclosures described in the following
paragraphs.
We have received notice from Blackstone that Travelport Limited ("Travelport"), which may be considered
an affiliate of Blackstone, as part of their global business in the travel industry, provides certain passenger travel
related GDS and airline IT services to Iran Air and certain airline IT services to Iran Air Tours. All of these services
are either exempt from applicable sanctions prohibitions pursuant to a statutory exemption in the International
Emergency Economic Powers Act permitting transactions ordinarily incident to travel or, to the extent not otherwise
exempt, specifically licensed by the U.S. Office of Foreign Assets Control (“OFAC”). Subject to any changes in
the exempt/licensed status of such activities, Travelport intends to continue these business activities, which are
directly related to and promote the arrangement of travel for individuals. Prior to and during the reporting period,
Travelport also provided airline IT services to Syrian Arab Airlines. These services were generally understood to
be permissible under the same statutory travel exemption. The services were terminated following the May 2013
action by OFAC to designate this airline as a Specially Designated Global Terrorist pursuant to the Global Terrorism
Sanctions Regulations.
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, natural gas, interest rates, or to capture market opportunities.
Commodity Price Risk
Our earnings, cash flow and liquidity are significantly affected by a variety of factors beyond our control,
including the supply of, and demand for, crude oil, other feedstocks, refined products and natural gas. The supply
of and demand for these commodities depend on, among other factors, changes in domestic and foreign economies,
weather conditions, domestic and foreign political affairs, planned and unplanned downtime in refineries, pipelines
and production facilities, production levels, the availability of imports, the marketing of competitive and alternative
fuels, and the extent of government regulation. As a result, the prices of these commodities can be volatile. Our
revenues fluctuate significantly with movements in industry refined product prices, our cost of sales fluctuates
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significantly with movements in crude oil and feedstock prices and our operating expenses fluctuate with
movements in the price of natural gas. We manage our exposure to these commodity price risks through our supply
and offtake agreements as well as through the use of various commodity derivative instruments.
Certain of our crude and feedstock supply agreements and products offtake agreements, reduce the time we
are exposed to market price fluctuations. For example, our crude and feedstock supply agreements with Statoil
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. The crude supply agreement with MSCG for our Toledo refinery allows us to price
and pay for our crude oil as it is processed at that refinery. In addition, the products offtake agreements with MSCG
for our Delaware City and Paulsboro refineries that were terminated effective July 1, 2013, allowed us to sell our
light finished products, certain intermediates and lube base oils as they were produced. Subsequent to termination
of the MSCG products offtake agreements, we independently sell and market our refined products to customers
on the spot market or through term agreements.
We may use non-trading derivative instruments to manage exposure to commodity price risks associated
with the purchase or sale of crude oil and feedstocks, finished products and natural gas outside of our supply and
offtake agreements. The derivative instruments we use include physical commodity contracts and exchange-traded
and over-the-counter financial instruments. We mark-to-market our commodity derivative instruments and
recognize the changes in their fair value in our statements of operations.
At December 31, 2013 and 2012, we had gross open commodity derivative contracts representing 43.2
million barrels and 10.5 million barrels, respectively, with an unrealized net (loss) gain of $(19.4) million and $1.4
million, respectively. The open commodity derivative contracts as of December 31, 2013 expire at various times
during 2014.
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 13.9 million barrels and 14.4 million barrels at December 31, 2013 and December 31, 2012,
respectively. The average cost of our hydrocarbon inventories was approximately $101.65 and $101.89 per barrel
on a LIFO basis at December 31, 2013 and December 31, 2012, 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.
Compliance Program Price Risk
We are exposed to market risks related to the volatility in the price of Renewable Identification Numbers
("RINs") required to comply with the Renewable Fuel Standard. Our overall RINs obligation is based on a
percentage of our domestic shipments of on-road fuels as established by the EPA. To the degree we are unable to
blend the required amount of biofuels to satisfy our RINs obligation, we must purchase RINs on the open market.
To mitigate the impact of this risk on our results of operations and cash flows we may purchase RINs when the
price of these instruments is deemed favorable.
Interest Rate Risk
During 2013, we amended the terms of our ABL Revolving Credit Facility to increase the size of our asset-
based revolving credit facility from $1.575 to $1.610 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 $16.1
million annually.
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We also have interest rate exposure in connection with our Statoil and MSCG crude oil agreements and J.
Aron Inventory Intermediation 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 counterparties. 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 29% and 10%, respectively, of our total sales for the year ended
December 31, 2013 and 57% and 10%, respectively, of our total sales for the year ended December 31, 2012.
Sunoco accounted for 10% of total trade accounts receivable as of December 31, 2013 and Statoil and Sunoco
accounted for 28% and 10% of accounts receivables, respectively, as of December 31, 2012.
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
Our management has evaluated, with the participation of our principal executive and principal financial
officers, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 as amended (the “Exchange Act”)) as of the end of the period covered by this
report, and has concluded that our disclosure controls and procedures are effective to provide reasonable assurance
that information required to be disclosed by us in the reports that we file or furnish under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms
including, without limitation, controls and procedures designed to ensure that information required to be disclosed
by us in the reports that we file or furnish under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosures.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control system is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles in the United States
of America. Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation.
Management assessed the effectiveness of our internal control over financial reporting as of December
31, 2013, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control — Integrated Framework (1992 framework). Based on such assessment, we conclude that as
of December 31, 2013, the Company’s internal control over financial reporting is effective.
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Auditor Attestation Report
Our independent registered public accounting firm has issued an attestation report on the effectiveness
of our internal control over financial reporting, which begins on page F-3 of this report.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended
December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
During the fourth quarter of 2013, the Board of Directors approved, based on the recommendation of the
Compensation Committee, equity awards under the Company’s 2012 Equity Incentive Plan of options to purchase
250,000 shares of Class A common stock to Thomas D. O’Malley, our Executive Chairman, and options to purchase
100,000 shares of Class A common stock to Thomas J. Nimbley, our Chief Executive Officer. Granted on October
29, 2013, the options have an exercise price of $26.08 (the closing stock price on the date of grant) and vest in
four equal annual installments commencing on the first anniversary of the date of grant, subject to acceleration
under certain circumstances set forth in the applicable award agreement.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
The information required under this Item will be contained in our 2014 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 2014 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 2014 Proxy Statement, incorporated
herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required under this Item will be contained in our 2014 Proxy Statement, incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this Item will be contained in our 2014 Proxy Statement, incorporated
herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Financial Statements. The consolidated financial statements of PBF Energy Inc., PBF Holding
Company LLC 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
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))
Description
3.2
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))
3.3
3.4
3.5
3.6
4.1
Certificate of Formation of PBF Holding Company LLC (Incorporated by reference to Exhibit 3.1
filed with PBF Holding Company LLC’s Registration Statement on Form S-4 (File No. 333-186007))
Limited Liability Company Agreement of PBF Holding Company LLC (Incorporated by reference to
Exhibit 3.2 filed with PBF Holding Company LLC’s Registration Statement on Form S-4 (File No.
333-186007))
Certificate of Incorporation of PBF Finance Corporation (Incorporated by reference to Exhibit 3.3
filed with PBF Holding Company LLC’s Registration Statement on Form S-4 (File No. 333-186007))
Bylaws of PBF Finance Corporation (Incorporated by reference to Exhibit 3.4 filed with PBF Holding
Company LLC’s Registration Statement on Form S-4 (File No. 333-186007))
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))
4.2
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))
10.1†
10.1.1
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))
86
Number
10.2†
10.2.1
10.2.2
10.2.3*
10.3†
10.3.1
10.4
10.4.1
10.5†
10.6†
10.7
10.8
Description
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))
Third Amendment to Amended and Restated Crude Oil Acquisition Agreement, dated as of January
15, 2014, by and between PBF Holding Company LLC and Morgan Stanley Capital Group Inc.
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))
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))
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))
Inventory Intermediation Agreement dated as of June 26, 2013 (as amended) between J. Aron &
Company and PBF Holding Company LLC and Paulsboro Refining Company LLC. (Incorporated by
reference to Exhibit 10.1 filed with PBF Energy Inc.'s June 30, 2013 Form 10-Q (File
No. 001-35764))
Inventory Intermediation Agreement dated as of June 26, 2013 (as amended) between J. Aron &
Company and PBF Holding Company LLC and Delaware City Refining Company LLC.
(Incorporated by reference to Exhibit 10.1 filed with PBF Energy Inc.'s June 30, 2013 Form 10-Q
(File No. 001-35764))
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))
87
Number
10.9
10.10
10.11**
10.12**
10.13**
10.14**
10.15**
10.16**
10.17
10.18**
10.19**
10.20**
12.1*
21.1*
23.1*
24.1*
24.2*
31.1*
Description
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))
Form of Restricted Stock Award Agreement for Directors under the PBF Energy Inc. 2012 Equity
Incentive Plan (Incorporated by reference to Exhibit 10.20 filed with PBF Energy Inc.’s December 31,
2012 Form 10-K (File No. 001-35764))
Computation of Ratios of Earnings to Fixed Charge of PBF Holding Company LLC.
Subsidiaries of PBF Energy Inc. and PBF Holding Company LLC.
Consent of Deloitte & Touche LLP
Power of Attorney of PBF Energy Inc. (included on signature page)
Power of Attorney of PBF Holding Company LLC (included on signature page)
Certification by Chief Executive Officer of PBF Energy Inc. pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
88
Number
31.2*
31.3*
31.4*
32.1*(1)
32.2*(1)
32.3*(1)
32.4*(1)
Description
Certification by Chief Financial Officer of PBF Energy Inc. 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 of PBF Holding Company LLC 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 of PBF Holding Company LLC 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 of PBF Energy Inc. 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 of PBF Energy Inc. pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by Chief Executive Officer of PBF Holding Company LLC 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 of PBF Holding Company LLC pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
——————————
*
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.
89
PBF ENERGY INC. AND PBF HOLDING COMPANY LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
PBF Energy Inc.
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations For the Years Ended December 31, 2013, 2012 and
2011
Consolidated Statements of Comprehensive Income For the Years Ended December 31,
2013, 2012 and 2011
Consolidated Statements of Changes in Equity For the Years Ended December 31, 2013,
2012 and 2011
Consolidated Statements of Cash Flows For the Years Ended December 31, 2013, 2012
and 2011
PBF Holding Company LLC
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations For the Years Ended December 31, 2013, 2012 and
2011
Consolidated Statements of Comprehensive Income For the Years Ended December 31,
2013, 2012 and 2011
Consolidated Statements of Changes in Equity For the Years Ended December 31, 2013,
2012 and 2011
Consolidated Statements of Cash Flows For the Years Ended December 31, 2013, 2012
and 2011
Notes to Consolidated Financial Statements
PBF Energy Inc.'s Quarterly Financial Data (Unaudited)
F-2
F- 5
F- 6
F- 7
F- 8
F- 9
F- 11
F- 12
F- 13
F- 14
F- 14
F- 17
F- 68
F- 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
PBF Energy Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets as of December 31, 2013 and 2012 of PBF Energy
Inc. and subsidiaries (the “Company”) and the related combined and consolidated statements of operations,
comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December
31, 2013 (combined and consolidated for 2012 and 2011 with PBF Energy Company LLC and subsidiaries). These
combined and consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 as of December 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2013 (combined and
consolidated for 2012 and 2011 with PBF Energy Company LLC and subsidiaries), in conformity with accounting
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company's internal control over financial reporting as of December 31, 2013, based on the criteria
established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated February 21, 2014 expressed an unqualified opinion on the
Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 21, 2014
F- 2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Stockholders and the Board of Directors of
PBF Energy Inc. and subsidiaries
We have audited the internal control over financial reporting of PBF Energy Inc. and subsidiaries (the "Company") as
of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial
reporting 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
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the
company's principal executive and principal financial officers, or persons performing similar functions, and effected
by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on
the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2013, based on the criteria established in Internal Control - Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements as of and for the year ended December 31, 2013 of the Company and
our report dated February 21, 2014 expressed an unqualified opinion on those financial statements.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 21, 2014
F- 3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Sole Member and Board of Directors of
PBF Holding Company LLC and subsidiaries
We have audited the accompanying consolidated balance sheets of PBF Holding Company LLC and subsidiaries (the
"Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations,
comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December
31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the 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 consolidated financial statements present fairly, in all material respects, the financial position of
PBF Holding Company LLC and subsidiaries as of December 31, 2013 and 2012, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 21, 2014
F- 4
PBF ENERGY INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Deferred tax asset
Prepaid expense and other current assets
Total current assets
Property, plant and equipment, net
Deferred tax assets
Deferred charges and other assets, net
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Payable to related parties pursuant to tax receivable agreement
Current portion of long-term debt
Deferred revenue
Total current liabilities
Delaware Economic Development Authority loan
Long-term debt
Payable to related parties pursuant to tax receivable agreement
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 14)
Equity:
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 39,665,473 shares
outstanding at December 31, 2013, 23,571,221 shares outstanding at December 31, 2012
Class B common stock, $0.001 par value, 1,000,000 shares authorized, 40 shares outstanding at
December 31, 2013, 41 shares outstanding at December 31, 2012
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding at
December 31, 2013 and 2012
Additional paid in capital
Retained earnings
Accumulated other comprehensive loss
Total PBF Energy Inc. equity
Noncontrolling interest
Total equity
Total liabilities and equity
December 31,
2013
December 31,
2012
$
76,970
$
596,647
1,445,517
25,529
55,843
285,884
503,796
1,497,119
7,717
13,388
$
$
2,200,506
2,307,904
1,781,589
169,234
262,479
1,635,587
112,862
197,349
4,413,808
$
4,253,702
402,293
$
1,209,881
12,541
12,029
7,766
1,644,510
12,000
723,547
274,775
43,720
360,057
1,031,467
1,007
—
210,543
1,603,074
20,000
709,980
159,004
38,099
2,698,552
2,530,157
40
—
—
657,499
3,579
(6,988)
654,130
1,061,126
1,715,256
$
4,413,808
$
24
—
—
417,835
1,956
(61)
419,754
1,303,791
1,723,545
4,253,702
See notes to consolidated financial statements.
F- 5
PBF ENERGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(in thousands, except share and per share data)
Year Ended December 31,
2013
2012
2011
Revenues
$
19,151,455
$
20,138,687
$
14,960,338
Cost and expenses:
Cost of sales, excluding depreciation
17,803,314
18,269,078
Operating expenses, excluding depreciation
General and administrative expenses
Gain on sale of assets
Acquisition related expenses
Depreciation and amortization expense
812,652
104,334
(183)
—
111,479
738,824
120,443
(2,329)
—
92,238
13,855,163
658,831
86,183
—
728
53,743
18,831,596
19,218,254
14,654,648
Income from operations
319,859
920,433
305,690
Other income (expense)
Change in fair value of contingent
consideration
Change in fair value of catalyst lease
Interest expense, net
Income before income taxes
Income tax expense
Net income
Less: net income attributable to
noncontrolling interest
—
4,691
(93,784)
230,766
16,681
214,085
174,545
Net income attributable to PBF Energy Inc. $
39,540
$
(5,215)
7,316
(65,120)
242,671
—
242,671
(2,768)
(3,724)
(108,629)
805,312
1,275
804,037
$
802,081
1,956
Weighted-average shares of Class A
common stock outstanding
Basic
Diluted
Net income available to Class A common
stock per share:
Basic
Diluted
Dividends per common share
32,488,369
33,061,081
23,570,240
97,230,904
$
$
$
1.22
1.20
1.20
$
$
$
0.08
0.08
—
See notes to consolidated financial statements.
F- 6
PBF ENERGY INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(in thousands)
Net income
$
214,085
$
804,037
$
242,671
Year Ended December 31,
2013
2012
2011
Other comprehensive (loss) income:
Unrealized (loss) gain on available for sale
securities
Net loss on pension and other postretirement
benefits
Total other comprehensive loss
Comprehensive income
(308)
(5,289)
(5,597)
208,488
2
5
(6,567)
(6,565)
797,472
$
(1,332)
(1,327)
241,344
Less: Comprehensive income attributable to
noncontrolling interest
Comprehensive income attributable to PBF Energy
Inc.
171,218
795,577
$
37,270
$
1,895
See notes to consolidated financial statements.
F- 7
PBF ENERGY INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(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
Loss
Former
Controlling
Interest
Equity
Noncontrolling
Interest
Total
Equity
— $
— $
— $
— $
(1,049)
$
459,710
$
— $ 458,661
Balance, January 1, 2011
— $
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
stock
Sale of Class A common
stock in initial public
offering, net of $42,109 in
issuance costs and
underwriters’ discount
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
—
—
—
—
—
—
—
—
—
23,567,686
—
—
—
3,535
—
Balance, December 31, 2012
23,571,221
Comprehensive income
Exercise of PBF Energy
Company LLC warrants and
options
Distributions to PBF Energy
Company LLC members
Stock based compensation
Dividends
Record effect of Secondary
Offering on deferred tax
assets and liabilities and tax
receivable agreement
obligation
Effects of Secondary
Offering
Exchange of PBF Energy
Company LLC Series A
Units for Class A common
stock
Noncontrolling Interest
—
—
—
60,392
—
—
15,950,000
83,860
—
Balance, December 31, 2013
39,665,473
$
—
—
—
—
—
—
—
—
—
—
24
—
—
—
—
—
24
—
—
—
—
—
—
16
—
—
40
—
—
—
—
—
—
—
—
39
—
—
—
—
2
—
41
—
—
—
—
—
—
—
(1)
—
40
—
—
—
—
(1,327)
—
—
242,671
408,397
2,516
(2,376)
1,113,294
—
—
—
—
241,344
408,397
2,516
1,110,918
1,956
(6,565)
792,076
10,005
797,472
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
88
—
—
570,627
—
(570,650)
—
(39,432)
—
457,202
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
191
(61)
417,835
1,956
—
39,540
(5,597)
—
—
2,444
—
—
—
—
(37,917)
(26,625)
263,845
—
—
—
—
—
—
—
—
—
—
—
(3,600)
—
2,270
—
—
—
—
—
—
—
13,107
(160,965)
2,866
—
—
—
—
—
—
13,107
(160,965)
2,954
—
—
570,651
(510)
—
(571,160)
—
—
(39,432)
8,689
(1,759,868)
1,293,977
—
—
—
—
(191)
1,303,791
1,723,545
174,545
208,488
1,757
1,757
(157,745)
(157,745)
1,309
3,753
—
(37,917)
—
(26,625)
(260,261)
—
(2,270)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
— $ 657,499
$
3,579
$
(6,988)
$
— $
1,061,126
$1,715,256
See notes to consolidated financial statements.
F- 8
PBF ENERGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(in thousands)
Year Ended December 31,
2013
2012
2011
$
214,085
$
804,037
242,671
Cash flows from operating activities:
Net income
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
Deferred income taxes
Change in tax receivable agreement liability
Non-cash change in inventory repurchase obligations
Write-off of unamortized deferred financing fees
Pension and other post retirement benefits costs
Gain on disposition of property, plant and equipment
Changes in current assets and current liabilities:
Accounts receivable
Inventories
Other current assets
Accounts payable
Accrued expenses
Deferred revenue
Other assets and liabilities
Net cash provided by operations
Cash flow from investing activities:
Acquisition of Toledo refinery, net of cash received from sale of assets
Expenditures for property, plant and equipment
Expenditures for deferred turnarounds cost
Expenditures for other assets
Proceeds from sale of assets
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from members' capital contributions to PBF Energy Company LLC (former controlling interest)
Exercise of Series A options and warrants of PBF Energy Company LLC, net
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
Dividend payments
Proceeds from Senior Secured Notes
Proceeds from long-term debt
Proceeds from catalyst lease
Proceeds from revolver borrowings
Repayments of revolver borrowings
Repayment of seller note inventory
Repayments 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 (decrease) increase in cash and cash equivalents
Cash and equivalents, beginning of period
Cash and equivalents, end of period
118,001
3,753
(4,691)
—
16,681
8,540
(20,492)
—
16,728
(183)
(92,851)
45,991
(42,455)
42,236
209,479
(202,777)
(20,716)
291,329
—
(318,394)
(64,616)
(32,692)
102,428
—
(313,274)
—
1,757
(157,745)
—
—
—
(37,917)
—
—
14,337
1,450,000
(1,435,000)
—
—
(21,357)
(1,044)
(186,969)
(208,914)
285,884
97,650
2,954
3,724
2,768
—
—
4,576
4,391
12,684
(2,329)
(187,544)
(80,097)
49,971
73,990
35,892
21,309
(31,543)
812,433
—
(175,900)
(38,633)
(8,155)
3,381
—
56,919
2,516
(7,316)
5,215
—
—
25,329
—
9,769
—
(279,315)
(512,054)
(56,953)
249,765
395,093
122,895
(5,252)
249,282
(168,156)
(488,721)
(62,823)
(23,339)
4,700
(854)
(219,307)
(739,193)
—
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
50,166
$
76,970
$
285,884
$
See notes to consolidated financial statements.
F- 9
PBF ENERGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(in thousands)
Supplemental cash flow disclosures
Non-cash activities:
Promissory not issued for Toledo refinery acquisition
Seller note issued for acquisition of inventory
Fair value of Toledo refinery contingent consideration
Conversion of Delaware Economic Development Authority loan to grant
Accrued construction in progress
Cash paid during year for:
Interest (including capitalized interest of $5,672, $6,697 and $13,027 in 2013, 2012 and 2011)
Income taxes
Year Ended December 31,
2013
2012
2011
$
— $
— $
—
—
8,000
33,747
92,848
1,065
—
—
—
16,481
89,233
—
200,000
299,645
117,017
—
5,909
67,020
—
See notes to consolidated financial statements.
F- 10
PBF HOLDING COMPANY LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable
Due from related party
Inventories
Prepaid expense and other current assets
Total current assets
Property, plant and equipment, net
Deferred charges and other assets, net
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Current portion of long-term debt
Deferred revenue
Total current liabilities
Delaware Economic Development Authority loan
Long-term debt
Intercompany notes payable
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 14)
Equity:
Member's equity
Retained earnings
Accumulated other comprehensive loss
Total equity
Total liabilities and equity
December 31,
2013
December 31,
2012
$
76,970
$
596,647
—
1,445,517
55,843
2,174,977
1,781,589
262,479
254,291
503,796
14,721
1,497,119
13,388
2,283,315
1,635,587
197,349
$
4,219,045
$
4,116,251
$
402,293
$
1,210,945
12,029
7,766
1,633,033
12,000
723,547
31,835
46,477
360,057
1,025,918
—
210,543
1,596,518
20,000
709,980
—
38,099
2,446,892
2,364,597
933,164
853,527
(14,538)
1,772,153
930,098
830,497
(8,941)
1,751,654
$
4,219,045
$
4,116,251
See notes to consolidated financial statements.
F- 11
PBF HOLDING COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Year ended December 31,
2013
2012
2011
Revenues
$
19,151,455
$
20,138,687
$
14,960,338
Costs and expenses:
Cost of sales, excluding depreciation
17,803,314
18,269,078
13,855,163
Operating expenses, excluding depreciation
General and administrative expenses
Gain on sale of assets
Acquisition related expenses
Depreciation and amortization expense
812,652
95,794
(183)
—
111,479
738,824
120,443
(2,329)
—
92,238
658,831
86,183
—
728
53,743
18,823,056
19,218,254
14,654,648
Income from operations
328,399
920,433
305,690
Other income (expense)
Change in fair value of contingent consideration
Change in fair value of catalyst lease
Interest expense, net
Net income
—
4,691
(94,214)
238,876
$
(2,768)
(3,724)
(108,629)
805,312
$
(5,215)
7,316
(65,120)
242,671
$
See notes to consolidated financial statements.
F- 12
PBF HOLDING COMPANY LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
$
238,876
$
805,312
$
242,671
Year ended December 31,
2012
2011
2013
Other comprehensive income (loss):
Unrealized (loss) gain on available for sale
securities
Net loss on pension and other postretirement
benefits
Total other comprehensive loss
Comprehensive income
(308)
2
5
(5,289)
(5,597)
233,279
$
(6,567)
(6,565)
798,747
$
(1,332)
(1,327)
241,344
$
See notes to consolidated financial statements.
F- 13
PBF HOLDING COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS)
Member’s
Equity
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Balance at January 1, 2011
$
516,231
$
Member contributions
Stock based compensation
Net income
Other comprehensive income
Balance at December 31, 2011
Member distributions
Stock based compensation
Net income
Other comprehensive income
Balance at December 31, 2012
Member distributions
Member contribution
Stock based compensation
Net income
Other comprehensive income
Balance at December 31, 2013
$
408,397
2,516
—
—
927,144
—
2,954
—
—
930,098
—
1,757
1,309
—
—
933,164
$
(1,049) $
—
(56,521) $
—
—
—
(1,327)
(2,376)
—
—
—
(6,565)
(8,941)
—
—
—
—
(5,597)
(14,538) $
—
242,671
—
186,150
(160,965)
—
805,312
—
830,497
(215,846)
—
—
238,876
—
853,527
Total
458,661
408,397
2,516
242,671
(1,327)
1,110,918
(160,965)
2,954
805,312
(6,565)
1,751,654
(215,846)
1,757
1,309
238,876
(5,597)
$ 1,772,153
See notes to consolidated financial statements.
F- 14
PBF HOLDING COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
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 on disposition of property, plant and equipment
Changes in current assets and current liabilities:
Accounts receivable
Due to/from related party
Inventories
Other current assets
Accounts payable
Accrued expenses
Deferred revenue
Other assets and liabilities
Net cash provided by operations
Cash flows from investing activities:
Acquisition of Toledo refinery, net of cash received for sale of assets
Expenditures for property, plant and equipment
Expenditures for deferred turnarounds costs
Expenditures for other assets
Proceeds from sale of assets
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from revolver borrowings
Proceeds from intercompany notes payable
Proceeds from member's capital contributions
Proceeds from Senior Secured Notes
Proceeds from long-term debt
Proceeds from catalyst lease
Distributions to members
Repayment of seller note for inventory
Repayments of revolver borrowings
Repayments 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 (decrease) increase in cash and cash equivalents
Cash and equivalents, beginning of period
Cash and equivalents, end of period
Years Ended December 31,
2013
2012
2011
$
238,876
$
805,312
$
242,671
118,001
3,753
(4,691)
—
(20,492)
—
16,728
(183)
(92,851)
14,721
45,991
(42,455)
42,236
214,817
(202,777)
(20,403)
311,271
—
(318,394)
(64,616)
(32,692)
102,428
—
97,650
2,954
3,724
2,768
4,576
4,391
12,684
(2,329)
(187,544)
(14,721)
(80,097)
49,971
73,990
30,343
21,309
(31,544)
793,437
—
(175,900)
(38,633)
(8,155)
3,381
—
56,919
2,516
(7,316)
5,215
25,329
—
9,768
—
(279,315)
—
(512,054)
(56,953)
249,765
395,093
122,895
(5,251)
249,282
(168,156)
(488,721)
(62,823)
(23,339)
4,700
(854)
(313,274)
(219,307)
(739,193)
1,450,000
31,835
1,757
—
—
14,337
(215,846)
—
(1,435,000)
—
—
—
665,806
430,000
9,452
(160,965)
—
—
—
—
408,397
—
488,894
18,624
—
(299,645)
—
—
(1,184,597)
(220,401)
(21,357)
(1,044)
(175,318)
(177,321)
254,291
(103,642)
(26,059)
(370,005)
204,125
50,166
$
76,970
$
254,291
$
—
(11,249)
384,620
(105,291)
155,457
50,166
See notes to consolidated financial statements.
F- 15
PBF HOLDING COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
Years Ended December 31,
2013
2012
2011
Supplemental cash flow disclosures
Non-cash activities:
Promissory not issued for Toledo refinery acquisition
$
— $
— $
Seller note issued for acquisition of inventory
Fair value of Toledo refinery contingent consideration
Conversion of Delaware Economic Development Authority loan to grant
Accrued construction in progress
Cash paid during year for:
—
—
8,000
33,747
—
—
—
16,481
200,000
299,645
117,017
—
5,909
Interest (including capitalized interest of $5,672, $6,697 and $13,027 in 2013, 2012 and 2011)
92,848
89,233
67,020
See notes to consolidated financial statements.
F- 16
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
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"), a Delaware limited liability company. Prior to completion of its IPO,
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 cover offering expenses. As a result of the IPO and related reorganization transactions, PBF Energy became
the sole managing member of PBF LLC with a controlling 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's members other than PBF
Energy. 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. Effective with the completion of the PBF
Energy IPO and related reorganization transactions, PBF LLC became a minority-owned, controlled and
consolidated subsidiary of PBF Energy.
On June 12, 2013, funds affiliated with The Blackstone Group L.P., or Blackstone, and First Reserve Management,
L.P., or First Reserve completed a public offering of 15,950,000 shares of Class A common stock at a price of
$27.00 per share, less underwriting discounts and commissions, in a secondary public offering (the "Secondary
Offering"). In connection with the Secondary Offering, Blackstone and First Reserve exchanged 15,950,000 Series
A Units of PBF LLC for an equivalent number of shares of Class A common stock of PBF Energy, which reduced
Blackstone and First Reserve's holdings in PBF LLC from 70.1% to 53.6% at the time of the offering. The holders
of PBF LLC Series B Units, which include certain executive officers of PBF Energy, had the right to receive a
portion of the proceeds of the sale of the PBF Energy Class A common stock by Blackstone and First Reserve.
PBF Energy did not receive any proceeds from the Secondary Offering. PBF Energy incurred approximately $1,388
of expenses, included in general and administrative expenses, in connection with the Secondary Offering during
the year ended December 31, 2013 for which it was reimbursed by PBF LLC in accordance with the PBF LLC
amended and restated limited liability company agreement.
PBF LLC, together with its consolidated subsidiaries, owns and operates oil refineries and related facilities in
North America. PBF Holding Company LLC ("PBF Holding") is a wholly-owned subsidiary of PBF LLC. PBF
Finance Corporation ("PBF Finance") is a wholly-owned subsidiary of PBF Holding. PBF Holding and PBF
Finance issued 8.25% Senior Secured Notes due 2020 ("Senior Secured Notes") in 2012, which were subsequently
registered under the Securities Act of 1933, as amended. 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. Collectively, PBF Energy and subsidiaries, including PBF Holding,
are referred to hereinafter as the "Company".
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.
F- 17
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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 members of PBF LLC other than PBF Energy”). 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 members of PBF LLC
other than PBF Energy 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, 2013, there were 57,201,674 PBF LLC Series A Units held
by parties other than PBF Energy which upon exercise of the right to exchange would exchange for 57,201,674
shares of PBF Energy Class A common stock. In addition, as of that date, there were options and warrants to acquire
909,499 PBF LLC Series A Units outstanding, that upon exercise, could be exchanged for 909,499 shares of PBF
Energy Class A common stock.
Initial Public Offering and Secondary 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 $571,200 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
financial sponsors, which were then reclassified as PBF LLC Series C Units. The remaining proceeds from the
initial public offering in the amount of $41,600 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.
Additionally, on June 12, 2013, Blackstone and First Reserve completed a public offering of 15,950,000 shares of
PBF Energy Class A common stock at a price of $27.00 per share, less underwriting discounts and commissions,
in a secondary public offering. All of the shares were sold by funds affiliated with Blackstone and First Reserve.
In connection with this offering, Blackstone and First Reserve exchanged 15,950,000 Series A Units of PBF LLC
for an equivalent number of shares of PBF Energy Class A common stock.
Noncontrolling Interest
As a result of the PBF Energy IPO and the related reorganization transactions on December 18, 2012, PBF Energy
became the sole managing member of, and had a controlling interest in, PBF LLC which represented 24.4% of the
F- 18
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
outstanding units. 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. In connection with the Secondary Offering, Blackstone and First
Reserve exchanged 15,950,000 Series A Units of PBF LLC for an equivalent number of shares of Class A common
stock of PBF Energy, which increased PBF Energy's interest in PBF LLC to approximately 40.9% as of December
31, 2013.
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 members of PBF LLC other than PBF Energy. 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 members of PBF LLC other than PBF Energy. Noncontrolling
interest on the consolidated balance sheets represents the portion of net assets of PBF Energy attributable to the
members of PBF LLC other than PBF Energy. The noncontrolling interest ownership percentages of PBF Energy
are calculated as follows:
December 18, 2012
December 31, 2012
June 12, 2013
December 31, 2013
Outstanding
Shares
of PBF Energy
Class A
Common
Stock
Holders of
PBF LLC Series
A Units
Total *
72,974,072
23,567,686
96,541,758
75.6%
24.4%
100%
72,972,131
75.6%
57,027,225
59.0%
57,201,674
59.1%
23,571,221
24.4%
39,563,835
41.0%
39,665,473
40.9%
96,543,352
100%
96,591,060
100%
96,867,147
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.
Comprehensive income includes net income and other comprehensive income (loss) 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 of PBF Energy for the year ended December 31, 2013:
Net income
Other comprehensive income (loss):
Unrealized loss on available for sale securities
Amortization of defined benefit plans unrecognized
net loss
Total other comprehensive loss
Total comprehensive income
Attributable to
PBF Energy Inc.
39,540
$
Noncontrolling
Interest
Total
$
174,545
$
214,085
(126)
(182)
(308)
(2,144)
(2,270)
37,270
$
(3,145)
(3,327)
171,218
$
(5,289)
(5,597)
208,488
$
The following table summarizes the allocation of total comprehensive income of PBF Energy between the
controlling and noncontrolling interests for the year ended December 31, 2012:
F- 19
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Net income
Other comprehensive income (loss):
Unrealized gain on available for sale securities
Amortization of defined benefit plans unrecognized
net loss
Total other comprehensive loss
Total comprehensive income
Tax Receivable Agreement
Attributable to
PBF Energy Inc.
1,956
$
Noncontrolling
Interest
Total
$
802,081
$
804,037
—
2
2
(61)
(61)
1,895
$
(6,506)
(6,504)
795,577
$
(6,567)
(6,565)
797,472
$
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 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
or PBF Holding. In general, PBF Energy expects to obtain funding for these payments by causing PBF Holding
to distribute cash to PBF LLC, which will then distribute this cash, generally as tax distributions, on a pro-rata
basis to its owners. Such owners include PBF Energy, which holds a 40.9% interest as of December 31, 2013.
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.
F- 20
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Reclassification
Certain amounts previously reported in the Company's consolidated financial statements for the year ended
December 31, 2012 have been reclassified to conform to the 2013 presentation.
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, 2013, Morgan Stanley Capital Group Inc. (“MSCG”) and Sunoco, Inc. (R&M)
(“Sunoco”) accounted for 29% and 10% of the Company’s revenues, respectively. As of December 31, 2013,
Sunoco accounted for 10% of accounts receivable.
For the year ended December 31, 2012, MSCG and Sunoco accounted for 57% and 10% of the Company’s revenues,
respectively. As of December 31, 2012, 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.
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.
Prior to June 30, 2013, the Company’s Paulsboro and Delaware City refineries sold 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 purchased and paid for the refineries’ production of light finished products
as they were produced, delivered to the refineries’ storage tanks, and legal title passed to MSCG. Revenue on
these product sales was deferred until they shipped out of the storage facility by MSCG.
Under the Offtake Agreements, the Company’s Paulsboro and Delaware City refineries also entered into purchase
and sale transactions of certain intermediates and lube base oils whereby MSCG purchased and paid for the
refineries’ production of certain intermediates and lube products as they were produced and legal title passed to
MSCG. The intermediate products were held in the refineries’ storage tanks until they were needed for further use
in the refining process. The intermediates may also have been sold to third parties. The refineries had the right to
repurchase lube products and did so to supply other third parties with that product. When the refineries needed
intermediates or lube products, the products were drawn out of the storage tanks, title passed back to the refineries
and MSCG was paid for those products. These transactions occurred at the daily market price for the related
products. These transactions were considered to be made in contemplation of each other and, accordingly, did not
result in the recognition of a sale when title passed from the refineries to MSCG. Inventory remained at cost and
F- 21
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
the net cash receipts resulted in a liability that was 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 represented the amount the Company
expected to pay to repurchase the volumes held in storage.
While MSCG had legal title, it had the right to encumber and/or sell these products and any such sales by MSCG
resulted in sales being recognized by the refineries when products were shipped out of the storage facility. As the
exclusive vendor of intermediate products to the refineries, MSCG had the obligation to provide the intermediate
products to the refineries as they were needed. Accordingly, sales by MSCG to others were limited and only made
with the Company or its subsidiaries’ approval.
As of July 1, 2013, the Company terminated the Offtake Agreements for the Company’s Paulsboro and Delaware
City refineries. The Company entered into two separate inventory intermediation agreements (“Inventory
Intermediation Agreements”) with J. Aron & Company ("J. Aron") on June 26, 2013 which commenced upon the
termination of the product offtake agreements with MSCG.
Pursuant to the Inventory Intermediation Agreements, J. Aron purchases and holds title to all of the intermediate
and finished products (the "Products") produced by the Delaware City and Paulsboro refineries and delivered into
the Company's tanks at the refineries. All purchase and sale transactions under the Inventory Intermediation
Agreements are consummated at a benchmark market price adjusted for a specified product type differential. The
sale and purchase transactions under the Inventory Intermediation Agreements are considered to be made in
contemplation of each other and, accordingly, do not result in the recognition of a sale when title passes to J. Aron.
The Products inventory remains on the Company's balance sheet at cost and the net cash receipts result in a liability
that is recorded at market price for the volume of Products inventory held in the Company's refineries’ storage
tanks with any change in the market price recorded in costs of sales.
Furthermore, J. Aron sells the Products back to the Company as the Products are discharged out of the refineries'
tanks. J. Aron has the right to store the Products purchased in the Company's tanks under the Inventory
Intermediation Agreements and will retain these storage rights for the term of the agreements. Inventory held
outside the refineries may be owned by the Company or by J. Aron under the Inventory Intermediation Agreements.
The Company markets and sells the Products independently to third parties.
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 refinery. 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. The Company terminated its supply agreement with Statoil for
its Paulsboro refinery in March 2013.
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, 2013 and 2012.
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.
F- 22
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The Company’s Delaware City refinery acquires a portion of its crude oil from Statoil under the Crude Supply
Agreements as did the Paulsboro refinery prior to the termination of its crude supply agreement with Statoil in
March 2013. 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 Paulsboro crude supply
agreement also included an obligation 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 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 acquisition
agreement (the “Toledo Crude Oil Acquisition Agreement”). Under the Toledo Crude Oil Acquisition 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 Acquisition 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
Railcars
5-25 years
5-25 years
25-40 years
3-15 years
20 years
50 years
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).
F- 23
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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.
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
F- 24
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
granted by PBF LLC to certain employees, Series B units of PBF LLC that were granted to certain members of
management and restricted PBF LLC Series A Units and restricted PBF Energy Class A common stock granted 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 PBF Energy’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 . members of PBF LLC other than PBF Energy 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 $310,132 as of December 31, 2013, 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. PBF Energy 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.
As PBF Holding 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.
The Federal and state tax returns for all years since inception (March 1, 2008) are subject to examination by the
respective tax authorities.
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, if applicable under the if converted method, 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- 25
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Pension and Other Post-Retirement Benefits
The Company 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 and refined product
purchase obligations are measured and recorded at fair value using Level 2 inputs on a recurring basis, based on
observable market prices.
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.
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
F- 26
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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
On January 1, 2013, the Company adopted changes issued by the Financial Accounting Standards Board ("FASB")
to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose gross and net
information about instruments and transactions eligible for offset in the statement of financial position and
instruments and transactions subject to an agreement similar to a master netting arrangement. The enhanced
disclosures will enable users of an entity's financial statements to understand and evaluate the effect or potential
effect of master netting arrangements on an entity's financial position, including the effect or potential effect of
rights of setoff associated with certain financial instruments and derivative instruments. As of December 31, 2013
and 2012, the impact of offsetting assets and liabilities was not material to the Company and additional disclosure
is not included in the Company's consolidated financial statements.
On January 1, 2013, the Company adopted changes issued by the FASB to the reporting of amounts reclassified
out of accumulated other comprehensive income. These changes require an entity to report the effect of significant
reclassifications out of accumulated other comprehensive income on the respective line items in net income if the
amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not
required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-
reference other disclosures that provide additional detail about those amounts. These requirements are to be applied
to each component of accumulated other comprehensive income. For the years ended December 31, 2013, 2012
and 2011, the impact of reclassification out of accumulated other comprehensive income was not material to the
Company and additional disclosure is not included in the Company's consolidated financial statements.
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 were 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 was 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 and $21,357 in April 2013
related to the amount of contingent consideration earned in 2011 and 2012, respectively.
F- 27
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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 21. 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
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
$
$
$
$
The Company’s consolidated financial statements for the years ended December 31, 2013, 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, 2011, 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, 2011, 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.
Actual results for March 1, 2011 to December 31, 2011
Supplemental pro forma for January 1, 2011 to December 31, 2011
Revenues
Net Income
$
$
6,113,055
15,961,529
$
$
489,243
328,142
F- 28
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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, 2013
Titled
Inventory
Inventory
Supply and
Offtake
Arrangements
518,599
$
89,837
$
425,033
33,762
378,286
—
Total
608,436
803,319
33,762
977,394
$
468,123
$
1,445,517
$
$
December 31, 2012
Titled
Inventory
Inventory
Supply and
Offtake
Arrangements
384,441
$
257,947
$
405,545
31,321
417,865
—
Total
642,388
823,410
31,321
821,307
$
675,812
$
1,497,119
$
$
Inventory under inventory supply and offtake arrangements includes the inventory held in the Company’s refineries'
storage facilities in connection with the Crude Supply Agreements, Offtake Agreements and Inventory
Intermediation Agreements.
At December 31, 2013 and December 31, 2012, the replacement value of inventories exceeded the LIFO carrying
value by approximately $78,407 and $79,859, 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
F- 29
December 31,
2013
December 31,
2012
$
$
61,780
1,658,256
25,577
54,496
166,565
1,966,674
(185,085)
1,781,589
$
$
61,780
1,484,727
11,073
38,657
145,525
1,741,762
(106,175)
1,635,587
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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, 2013, 2012
and 2011 was $79,413, $64,947 and $39,968, respectively. The Company capitalized $5,672 and $6,697 in interest
during 2013 and 2012, respectively, in connection with construction in progress.
6. DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets, net consisted of the following:
Deferred turnaround costs, net
Catalyst
Deferred financing costs, net
Restricted cash
Linefill
Intangible assets, net
Other
December 31,
2013
December 31,
2012
$
119,383
$
88,964
26,541
12,117
9,636
653
5,185
78,128
66,377
30,987
12,114
8,042
1,085
616
$
262,479
$
197,349
The Company recorded amortization expense related to deferred turnaround costs, catalyst and intangible assets
of $32,066, $27,291 and $13,776 for the years ended December 31, 2013, 2012 and 2011 respectively.
Intangible assets, net was comprised of permits and emission credits as follows:
Gross amount
Accumulated amortization
Net amount
December 31,
2013
December 31,
2012
$
$
3,597
(2,944)
653
$
$
3,597
(2,512)
1,085
F- 30
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
7. ACCRUED EXPENSES
PBF Energy
Accrued expenses consisted of the following:
Inventory-related accruals
Inventory supply and offtake arrangements
Excise and sales tax payable
Accrued construction in progress
Accrued transportation costs
Accrued utilities
Customer deposits
Accrued interest
Renewable energy credit obligations
Accrued salaries and benefits
Income taxes payable
Fair value of contingent consideration for refinery acquisition
Other
PBF Holding
Accrued expenses consisted of the following:
Inventory-related accruals
Inventory supply and offtake arrangements
Excise and sales tax payable
Accrued construction in progress
Accrued transportation costs
Accrued utilities
Customer deposits
Accrued interest
Renewable energy credit obligations
Accrued salaries and benefits
Fair value of contingent consideration for refinery acquisition
Other
December 31,
2013
December 31,
2012
$
533,012
$
454,893
42,814
33,747
29,762
25,959
23,621
22,570
15,955
10,799
—
—
16,749
287,929
536,594
40,776
16,481
20,338
19,060
26,541
22,764
—
15,212
1,275
21,358
23,139
$
1,209,881
$
1,031,467
December 31,
2013
December 31,
2012
$
533,012
$
454,893
42,814
33,747
29,762
25,959
23,621
22,570
15,955
10,799
—
17,813
287,929
536,594
36,414
16,481
20,338
19,060
26,541
22,764
—
15,212
21,358
23,227
$
1,210,945
$
1,025,918
The Company has the obligation to repurchase certain intermediates and finished products that are held in the
Company’s refinery storage tanks in accordance with the Inventory Intermediation Agreements with J. Aron
commencing in July 2013. As of December 31, 2013, a liability included in Inventory supply and offtake
F- 31
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
arrangements is recorded at market price for the J. Aron owned inventory held in the Company's storage tanks
under the Inventory Intermediation Agreements, with any change in the market price being recorded in costs of
sales.
Prior to July 1, 2013, the Company had the obligation to repurchase certain intermediates and lube products under
its Offtake Agreements that were held in the Company’s refinery storage tanks. A liability included in Inventory
supply and Offtake Arrangements was 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 recorded in costs of sales. The liability
represented the amount the Company expected to pay to repurchase the volumes held in storage. The Company
recorded a non-cash benefit of $20,248 and a non-cash charge of $11,619 related to this liability in the years ended
December 31, 2013 and 2012, respectively.
The Company is subject to obligations to purchase Renewable Identification Numbers ("RINs") required to comply
with the Renewable Fuels Standard. The Company's overall RINs obligation is based on a percentage of domestic
shipments of on-road fuels as established by the Environmental Protection Agency ("EPA"). To the degree the
Company is unable to blend the required amount of biofuels to satisfy our RINs obligation, RINs must be purchased
on the open market to avoid penalties and fines. The Company records its RINs obligation on a net basis in Accrued
expenses when its RINs liability is greater than the amount of RINs earned and purchased in a given period and
in Prepaid expenses and other current assets when the amount of RINs earned and purchased is greater than the
RINs liability.
8. DELAWARE ECONOMIC DEVELOPMENT AUTHORITY LOAN
In June 2010, in connection with the Delaware City acquisition, the Delaware Economic Development Authority
(the “Authority”) granted 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 Company recorded the loan as a long-term
liability pending approval from the Authority that it has met the requirements to convert the remaining loan balance
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 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 maintain certain employment levels, all as defined in the
agreement. In February 2013 and October 2013, the Company received confirmation from the Authority that the
Company had satisfied the conditions necessary for the first and second $4,000 tranche of the loan to be converted
to a grant. As a result of the grant conversion, property, plant and equipment, net was reduced by $8,000 as of
December 31, 2013, as the proceeds from the loan were used for capital projects.
9. CREDIT FACILITY AND LONG-TERM DEBT
Revolving Loan
In October 2012, PBF Holding amended and restated its asset based revolving credit agreement (“Revolving Loan”)
to a maximum availability of $1,575,000 and extended the maturity date to October 26, 2017. In addition, 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 0.50%, all depending on the Company’s debt rating. The Revolving
Loan was further expanded to a maximum availability of $1,610,000 in November 2013.
F- 32
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Advances under the Revolving Loan cannot exceed the lesser of $1,610,000 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, 2013.
All obligations under the Revolving Loan 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 PBF Holding and the subsidiary guarantors (subject to certain exceptions). The lien of the Revolving
Loan is secured by: 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, 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.
At December 31, 2013, PBF Holding had $15,000 outstanding loans and standby letters of credit of $441,368
issued under the Revolving Loan. At December 31, 2012, PBF Holding had no outstanding loans of and standby
letters of credit of $449,652 issued under the Revolving Loan.
Senior Secured Notes
On February 9, 2012, PBF Holding completed the offering of $675,000 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 in connection with
the offering which were subsequently sold to third parties in 2013.
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). 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, 2013.
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
F- 33
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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 major commercial banks 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 with a one year term that was amended in
December 2012 to extend the maturity date to November 2013. Proceeds from the lease were $9,453. The annual
lease fee under these leases for 2012 and 2013 was $267 and $262. Upon maturity, the Company entered into a
new Paulsboro catalyst lease effective on December 5, 2013 with a three year term. The annual lease fee is $180,
which is based on a fixed annual interest rate of 1.95%, payable quarterly.
The Toledo catalyst lease was entered into effective July 1, 2011 with 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 is payable quarterly and will be reset annually based on current market conditions. The lease fee for the first
one year period was $997. The lease fee for the second one year period beginning July 2012 and for the third one
year period beginning July 2013 was $967 and $810, respectively, payable quarterly. The Toledo catalyst lease is
included in Long-term debt as of December 31, 2013 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.
Additionally, in November 2013, the Company entered into an eight month bridge lease for additional catalyst for
the Company's Toledo refinery in connection with its planned turnaround in 2014. Proceeds from the lease were
$12,034. The lease fee is $150, based on a fixed annual interest rate of 1.85%, payable at maturity. The lease
matures on July 28, 2014.
The Delaware City catalyst lease was entered into in October 2010 with a three year term. Proceeds from the lease
were $17,474, net of $266 in facility fees. The lease fee was payable quarterly and reset annually based on current
market conditions. The lease fee for the first, second, and third one year periods beginning in October 2010 was
$1,076, $946 and $1,048, respectively. Upon maturity of the lease, the Company entered into a new Delaware City
catalyst lease which was effective October 17, 2013 and has a three year term. Incremental proceeds from the new
lease were $2,223. The lease fee is payable annually based on a fixed annual interest rate of 1.96%. The lease fee
for the three year period beginning in October 2013 is $322. On November 21, 2013 the Company amended the
lease to also include palladium catalyst. The lease fee for the palladium is payable annually at a fixed annual
interest rate of 1.85%. The annual lease fee for the three year period beginning in October 2013 is $30.
Long-term debt outstanding consisted of the following:
Senior Secured Notes
Revolving Loan
Catalyst leases
Less—Current maturities
Long-term debt
December 31, 2013
December 31, 2012
$
$
667,487
15,000
53,089
735,576
(12,029)
723,547
$
$
666,538
—
43,442
709,980
—
709,980
F- 34
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Debt Maturities
Debt maturing in the next five years and thereafter is as follows:
Year Ending
December 31,
2014
2015
2016
2017
2018
Thereafter
$
$
26,887
—
26,202
15,000
—
667,487
735,576
10. INTERCOMPANY NOTES PAYABLE
During 2013, PBF Holding entered into notes payable with PBF Energy and PBF LLC for an aggregate principal
amount of $31,835. The notes have an interest rate of 2.5% and a five year term but may be prepaid in whole or
in part at any time, at the option of the PBF Holding, without penalty or premium.
11. OTHER LONG-TERM LIABILITIES
PBF Energy
Other long-term liabilities consisted of the following:
Defined benefit pension plan liabilities
Post retiree medical plan
Environmental liabilities
Other
PBF Holding
Other long-term liabilities consisted of the following:
Defined benefit pension plan liabilities
Post retiree medical plan
Environmental liabilities
Other
F- 35
December 31,
2013
December 31,
2012
$
$
28,300
8,225
7,195
—
43,720
$
$
19,983
9,730
7,303
1,083
38,099
December 31,
2013
December 31,
2012
$
$
28,300
8,225
7,195
2,757
46,477
$
$
19,983
9,730
7,303
1,083
38,099
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
12. 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, 2013, 2012 and 2011, the Company incurred charges
of $646, $903 and $462, 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, 2013, 2012 and 2011, the Company
incurred charges of $1,274, $1,030, and $821, respectively, related to use of this airplane.
As of December 31, 2013, each of Blackstone and First Reserve, the Company’s financial sponsors, had received
the full return of its aggregate amount invested in PBF LLC Series A Units. As a result, pursuant to the amended
and restated limited liability company agreement of PBF LLC, the holders of PBF LLC Series B Units are entitled
to an interest in the amounts received by Blackstone and First Reserve in excess of their original investment in the
form of PBF LLC distributions and from the shares of PBF Energy Class A Common Stock issuable to Blackstone
and First Reserve (for their own account and on behalf of the holders of PBF LLC Series B Units) upon an exchange,
and the proceeds from the sale of such shares. Such proceeds received by Blackstone and First Reserve are distributed
to the holders of the PBF LLC Series B Units in accordance with the distribution percentages specified in the PBF
LLC amended and restated limited liability company agreement. The total amount distributed to the PBF LLC
Series B Unit holders for the year ended December 31, 2013 was $6,427. There were no amounts distributed to
PBF LLC Series B Unit holders prior to 2013.
13. COMMITMENTS AND CONTINGENCIES
Lease and Other Commitments
The Company leases office space, office equipment, refinery facilities and equipment, and railcars under non-
cancelable operating leases, with terms ranging from one to twenty years, subject to certain renewal options as
applicable. Total rent expense was $70,581, $41,563, and $29,233 for the years ended December 31, 2013, 2012
and 2011, 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
$38,383, $30,335 and $30,773 under these supply agreements for the years ended December 31, 2013, 2012 and
2011, 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,
2014
2015
2016
2017
2018
Thereafter
$
$
81,358
73,481
72,424
62,918
56,483
93,937
440,601
F- 36
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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 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.
Environmental Matters
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 refinery acquisition, the Company assumed certain environmental remediation
obligations. The environmental liability of $9,869 recorded as of December 31, 2013 ($9,669 as of December 31,
2012) represents the present value of expected future costs discounted at a rate of 8%. At December 31, 2013 the
undiscounted liability is $14,874 and the Company expects to make aggregate payments for this liability of $5,838
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 $12,117 and $12,114, acquired in the Paulsboro acquisition, is recorded as restricted cash in deferred charges
and other assets, net as of December 31, 2013 and December 31, 2012, respectively.
In connection with the acquisition of the Delaware City assets, Valero Energy Corporation ("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 acquisition of the Delaware City assets and the Paulsboro refinery, 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 and the obligations transition to us over twenty years
from March 1, 2011.
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. Other states have laws with various
implementation dates that also require lower levels of sulfur in heating oils. Not all of the heating oil we currently
produce meets these specifications. The Company has made and is continuing to make certain processing
improvements to shift conventional heating oil production to ultra-low sulfur heating oil and ultra-low sulfur diesel
in order to comply with these new mandates. The Company plans to continue increasing ultra-low sulfur distillate
production over the next several years while marketing conventional heating oil in states where regulations have
not changed. The mandate and other requirements do not currently have a material impact on the Company's
financial position, results of operations or cash flows.
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. The Company has evaluated the impact of the regulation
and amended standards on its refinery operations and currently does not expect the cost to comply by July 1, 2015
with the amended NSPS to be material.
F- 37
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The Company is aware that the EPA has drafted the proposed Tier 3 Motor Vehicle Emission and Fuel Standards.
The draft Standards are in the formal public comment period at this time. The gasoline currently manufactured
by the Company's refineries does not meet a portion of the proposed requirements, specifically as related to meeting
the proposed 10 ppm annual average gasoline sulfur requirement. The EPA has included potential options in other
portions of the proposed Standards that the Company's gasoline products may meet if adopted in the final
rulemaking. The Company is continuing to evaluate the potential impact of these proposed Standards.
On June 14, 2013, two administrative appeals were filed by the Sierra Club and Delaware Audubon regarding a
permit Delaware City Refining Company LLC (“Delaware City Refining”) obtained to allow loading of crude oil
onto barges. The appeals allege that both the loading of crude oil onto barges and the operation of the Delaware
City rail unloading terminal violate Delaware’s Coastal Zone Act. The first appeal is Number 2013-1 before the
State Coastal Zone Industrial Control Board (the “CZ Board”), and the second appeal is before the Environmental
Appeals Board and appeals Secretary’s Order No. 2013-A-0020. The CZ Board held a hearing on the first appeal
on July 16, 2013, and ruled in favor of Delaware City Refining and the State of Delaware and dismissed Appellants’
appeal for lack of standing. Sierra Club and Delaware Audubon have appealed that decision to the Delaware
Superior Court, New Castle County, Case No. N13A-09-001 ALR, and Delaware City Refining and the State have
filed cross-appeals. Briefs are due to be filed in this appeal in the first quarter of 2014 but no date has been set for
a decision by the Superior Court. A hearing on the second appeal before the Environmental Appeals Board, case
no. 2013-06, was held on January 13, 2014, and the Board ruled in favor of Delaware City Refining and the State
and dismissed the appeal for lack of jurisdiction. A written decision from the Board is pending, after which the
Appellants will again have the right to appeal the decision to Superior Court. If the Appellants in one or both of
these matters ultimately prevail, the outcome may have an adverse material effect on the Company's earnings.
The Company is also currently subject to certain other existing environmental claims and proceedings. The
Company believes that there is only a remote possibility that future costs related to any of these other known
contingent liability exposures would have a material impact on its financial position, results of operations or cash
flows.
PBF LLC Limited Liability Company Agreement
The holders of limited liability company interests in PBF LLC, including PBF Energy, generally have to include
for purposes of calculating their U.S. federal, state and local income taxes their share of any taxable income of
PBF LLC. Taxable income of PBF LLC generally is allocated to the holders of PBF LLC units (including PBF
Energy) pro rata in accordance with their respective share of the net profits and net losses of PBF LLC. In general,
PBF LLC is required to make periodic tax distributions to the members of PBF LLC, including PBF Energy, pro
rata in accordance with their respective percentage interests for such period (as determined under the amended and
restated limited liability company agreement of PBF LLC), subject to available cash and applicable law and
contractual restrictions (including pursuant to our debt instruments) and based on certain assumptions. Generally,
these tax distributions will be an amount equal to our estimate of the taxable income of PBF LLC for the year
multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local
income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the
nondeductibility of certain expenses). If, with respect to any given calendar year, the aggregate periodic tax
distributions were less than the actual taxable income of PBF LLC multiplied by the assumed tax rate, PBF LLC
will make a “true up” tax distribution, no later than March 15 of the following year, equal to such difference, subject
to the available cash and borrowings of PBF LLC.
Tax Receivable Agreement
PBF Energy entered into a tax receivable agreement with the PBF LLC Series A and PBF LLC Series B Unit
holders (the “Tax Receivable Agreement”) that provides for the payment by PBF Energy to such persons of 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)
increases in tax basis, as described below, and (ii) certain other tax benefits related to entering into the Tax
F- 38
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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 purchases or exchanges of PBF LLC Series A Units for shares of PBF Energy's
Class A common stock 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: (i) PBF Energy
exercises its right to terminate the Tax Receivable Agreement, (ii) PBF Energy breaches any of its material
obligations under the Tax Receivable Agreement or (iii) certain changes of control occur, in which case all
obligations under the Tax Receivable Agreement 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
or PBF Holding. In general, PBF Energy expects to obtain funding for these payments by causing PBF Holding
to distribute cash to PBF LLC, which will then distribute this cash, generally as tax distributions, on a pro-rata
basis to its owners. Such owners include PBF Energy, which holds a 40.9% interest as of December 31, 2013.
14. 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.
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 the members of PBF LLC other than PBF Energy 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. These allocations are made on a pro rata basis with PBF LLC Series
C Units. PBF LLC Series A unit holders do not have voting rights.
F- 39
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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.
Information about the issued classes of PBF LLC units for the years ended December 31, 2013, 2012 and 2011,
is as follows:
Balance—January 1, 2011
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 common
stock of PBF Energy Inc.
Balance—December 31, 2012
Issuances of restricted stock
Exercise of warrants and options
Secondary offering transaction
Balance—June 12, 2013
Issuances of restricted stock
Exercise of warrants and options
Exchange of Series A Units for Class A common
stock of PBF Energy Inc.
Balance—December 31, 2013
Series A Units
Series B Units
Series C Units
51,393,114
—
40,864,698
92,257,812
23,904
2,661,636
94,943,352
(21,967,686)
—
(3,535)
72,972,131
—
5,094
(15,950,000)
57,027,225
—
258,309
(83,860)
57,201,674
950,000
50,000
—
1,000,000
—
—
1,000,000
—
—
—
1,000,000
—
—
—
1,000,000
—
—
—
1,000,000
—
—
—
—
—
—
—
21,967,686
1,600,000
3,535
23,571,221
42,614
—
15,950,000
39,563,835
17,778
—
83,860
39,665,473
The warrants and options exercised in the table above include both non-compensatory and compensatory PBF LLC
Series A warrants and options.
F- 40
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
PBF Holding Capital Structure
At December 31, 2013 and 2012, PBF LLC was the sole member of PBF Holding.
15. 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,
2013
2012
2011
$
$
779
530
2,444
3,753
$
$
1,589
1,277
88
2,954
$
$
1,135
1,381
—
2,516
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-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 PBF LLC Series A compensatory warrants were granted
during the year ended December 31, 2011. 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 Company did not issue PBF LLC Series A Units compensatory warrants or options in 2013.
The estimated fair value of compensatory PBF LLC Series A warrants and options granted during the years ended
December 31, 2012 and 2011 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
Years Ended December 31,
2012
2011
6.00
55.00%
1.00%
0.91%
$
12.55
$
5.75
40.00%
1.06%
2.43%
10.00
F- 41
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The following table summarizes activity for PBF LLC Series A compensatory warrants and options for the years
ended December 31, 2013, 2012 and 2011:
Number of
PBF LLC
Series A
Compensatory
Warrants
and Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life
(in years)
Stock-based awards, outstanding January 1, 2011
Granted
Exercised
Forfeited
Outstanding at December 31, 2011
Granted
Exercised
Forfeited
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2013
Exercisable and vested at December 31, 2013
Exercisable and vested at December 31, 2012
Expected to vest at December 31, 2013
691,320
1,171,759
(25,000)
(2,500)
1,835,579
205,000
(849,186)
(6,667)
1,184,726
—
(301,979)
(41,668)
841,079
545,247
608,039
841,079
$
$
$
$
$
$
$
10.00
10.00
10.00
10.00
10.00
12.55
10.00
10.00
10.44
—
10.11
11.27
10.52
10.24
10.00
10.52
9.74
10.00
—
—
8.99
10.00
—
—
8.23
—
—
—
7.40
7.23
8.00
7.40
The total estimated fair value of PBF LLC Series A warrants and options granted in 2012 and 2011 was $1,207
and $2,116, respectively, and the weighted average fair value per unit was $5.89 and $1.81, respectively. The total
intrinsic value of stock options outstanding and exercisable at December 31, 2013, was $17,612 and $11,569,
respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2013, 2012,
and 2011 was $4,298, $13,112, and $0, respectively.
Unrecognized compensation expense related to PBF LLC Series A warrants and options at December 31, 2013
was $595, which will be recognized in 2014 and 2015.
As of December 31, 2013 and 2012, 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, 2013 and 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 vested in equal annual installments on each of the first three anniversaries of the grant
date, subject to accelerated vesting upon certain events. The Series B Units fully vested during the year ended
December 31, 2013.
F- 42
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The following table summarizes activity for PBF LLC Series B Units for the years ended December 31, 2013,
2012 and 2011:
Number of
PBF LLC
Series B units
Weighted
Average
Grant Date
Fair Value
Non-vested units at January 1, 2011
Allocated
Vested
Forfeited
Non-vested units at December 31, 2011
Allocated
Vested
Forfeited
Non-vested units at December 31, 2012
Allocated
Vested
Forfeited
Non-vested units at December 31, 2013
PBF Energy options
$
$
712,500
50,000
(262,500)
—
500,000
—
(250,000)
—
250,000
—
(250,000)
—
— $
$
5.11
5.11
5.11
—
5.11
—
5.11
—
5.11
—
5.11
—
—
The Company grants awards of its Class A common stock under the 2012 Equity Incentive Plan which authorizes
the granting of various stock and stock-related awards to employees, prospective employees and non-employees.
Awards include options to purchase shares of Class A common stock and restricted Class A common stock that
vest over a period determined by the plan.
A total of 697,500 and 682,500 options to purchase shares of PBF Energy Class A common stock were granted to
certain employees and management of the Company in the year ended December 31, 2013 and 2012, respectively.
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 years ended December 31, 2013 and 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,
2013
December 31,
2012
6.25
52.1%
4.43%
1.53%
$
27.79
$
6.25
51.0%
3.01%
0.89%
26.00
F- 43
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The following table summarizes activity for PBF Energy options for the year ended December 31, 2013 and 2012.
There were no options granted, exercised or forfeited prior to 2012.
Stock-based awards, outstanding at January 1, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
Outstanding at December 31, 2013
Exercisable and vested at December 31, 2013
Exercisable and vested at December 31, 2012
Expected to vest at December 31, 2013
Number of
PBF Energy
Class A
Common
Stock Options
$
$
Weighted
Average
Exercise Price
—
26.00
—
—
26.00
27.79
—
25.36
26.97
26.00
—
26.97
— $
682,500
—
—
682,500
697,500
—
(60,000)
1,320,000
158,125
$
— $
$
1,320,000
Weighted
Average
Remaining
Contractual
Life
(in years)
—
10.00
—
—
9.95
10.00
—
—
9.33
8.95
—
9.33
The total estimated fair value of PBF Energy options granted in 2013 and 2012 was $6,499 and $6,327 and the
weighted average per unit value was $9.32 and $9.27. The total intrinsic value of stock options outstanding and
exercisable at December 31, 2013, was $6,756 and $863, respectively.
Unrecognized compensation expense related to PBF Energy options at December 31, 2013 was $10,140, which
will be recognized from 2014 through 2017.
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
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 $10,450, $9,969
and $7,204 for the years ended December 31, 2013, 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 and Toledo employees became eligible to participate
in the Company’s defined benefit plans as of the respective acquisition dates. The union Delaware City employees
F- 44
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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. The Post Retirement Medical Plan was amended
during 2013 to include all corporate employees.
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, 2013 and 2012 were as
follows:
Change in benefit obligation:
Benefit obligation at beginning of year
$
30,215
$
11,409
$
9,730
$
8,912
Pension Plans
Post Retirement
Medical Plan
2013
2012
2013
2012
Service cost
Interest cost
Plan amendments
Benefit payments
Actuarial loss (gain)
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Employer contributions
Fair value of plan assets at end of year
Reconciliation of funded status:
Fair value of plan assets at end of year
Less benefit obligations at end of year
Funded status at end of year
$
$
$
$
$
14,794
11,437
992
—
(663)
8,012
53,350
10,232
33
(663)
15,448
$
$
502
—
(48)
6,916
30,215
4,758
422
(48)
5,100
$
$
726
334
(860)
(51)
(1,654)
8,225
$
— $
—
(51)
51
25,050
$
10,232
$
— $
633
395
—
(21)
(189)
9,730
—
—
(21)
21
—
$
25,050
53,350
(28,300) $
$
10,232
30,215
(19,983) $
— $
8,225
(8,225) $
—
9,730
(9,730)
The accumulated benefit obligations for the Company’s Pension Plans exceed the fair value of the assets of those
plans at December 31, 2013 and 2012. The accumulated benefit obligation for the defined benefit plans
approximated $45,005 and $24,555 at December 31, 2013 and 2012, respectively.
F- 45
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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
$
2014
2015
2016
2017
2018
Years 2019-2024
$
6,493
3,758
4,922
7,123
9,161
58,480
176
278
329
445
528
4,330
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 $15,500 to the Company’s Pension Plans during 2014.
The components of net periodic benefit cost were as follows for the years ended December 31, 2013, 2012 and
2011:
Pension Benefits
Post Retirement
Medical Plan
2013
2012
2011
2013
2012
2011
Components of net period
benefit cost:
Service cost
Interest cost
Expected return on plan
assets
Amortization of prior
service cost
Amortization of actuarial
loss
$
14,794
$
11,437
$
8,678
$
992
502
(550)
(323)
11
421
11
30
140
(38)
11
56
$
726
334
$
633
395
—
—
—
—
—
—
Net periodic benefit cost
$
15,668
$
11,657
$
8,847
$
1,060
$
1,028
$
540
381
—
—
—
921
The pre-tax amounts recognized in other comprehensive income (loss) for the years ended December 31, 2013,
2012 and 2011 were as follows:
Prior service costs (credits)
Net actuarial loss (gain)
Amortization of losses and prior
service cost
Total changes in other
comprehensive loss (income)
Pension Benefits
Post Retirement
Medical Plan
2013
2012
2011
2013
2012
2011
$
— $
— $
— $
(860) $
— $
8,235
6,817
661
(1,654)
(189)
(432)
(41)
(67)
—
—
—
738
—
$
7,803
$
6,776
$
594
$
(2,514) $
(189) $
738
F- 46
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The pre-tax amounts in accumulated other comprehensive loss as of December 31, 2013 and 2012 that have not
yet been recognized as components of net periodic costs were as follows:
Prior service (costs) credits
Net actuarial (loss) gain
Total
Pension Benefits
Post Retirement
Medical Plan
2013
2012
2013
2012
$
$
(92) $
(16,419)
(16,511) $
(103) $
(8,306)
(8,409) $
860
1,126
1,986
$
$
—
(528)
(528)
The following pre-tax amounts included in accumulated other comprehensive loss as of December 31, 2013 are
expected to be recognized as components of net period benefit cost during the year ended December 31, 2014:
Amortization of prior service costs (credits)
Amortization of net actuarial loss (gain)
Total
Pension Benefits
Post Retirement
Medical Plan
$
$
11
889
900
$
$
(81)
(21)
(102)
The weighted average assumptions used to determine the benefit obligations as of December 31, 2013 and 2012
were as follows:
Discount rate
Rate of compensation increase
Pension Benefits
Post Retirement Medical Plan
2013
2012
2013
2012
4.55%
4.64%
3.45%
4%
4.55%
—
3.45%
—
The discount rate assumptions used to determine the defined benefit and Post Retirement Medical plans obligations
as of December 31, 2013 and 2012 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,
2013, 2012 and 2011 were as follows:
Discount rate
Expected long-term rate of return
on plan assets
Rate of compensation increase
Pension Benefits
Post Retirement Medical Plan
2013
2012
2011
2013
2012
2011
3.45%
4.45%
5.25%
3.45%
4.45%
5.25%
3.50%
4%
4.25%
4%
4.25%
4%
—
—
—
—
—
—
F- 47
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The assumed health care cost trend rates as of December 31, 2013 and 2012 were as follows:
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
Post Retirement
Medical Plan
2013
2012
6.8%
4.5%
2027
7.0%
4.5%
2027
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
1%
Decrease
$
$
159
907
(135)
(794)
The tables below present the fair values of the assets of the Company’s Qualified Plan as of December 31, 2013
and 2012 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.
Equities:
Domestic equities
Developed international equities
Emerging market equities
Global low volatility equities
Fixed-income
Government securities:
Vanguard Intermediate-Term Treasury Fund
Cash and cash equivalents
Total
Fair Value Measurements Using
Quoted Prices in Active Markets
(Level 1)
December 31,
2013
2012
$
$
7,603
3,685
1,775
2,132
9,855
—
—
25,050
$
$
—
—
—
—
—
10,232
—
10,232
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, 2013, the plan's target allocations for plan assets are 60% invested
in equity securities and 40% fixed income investments. Equity securities include international stocks and a blend
of U.S. growth and value stocks of various sizes of capitalization. Fixed income securities include bonds and notes
issued by the U.S. government and its agencies, corporate bonds, and mortgage-backed securities. The aggregate
asset allocation is reviewed on an annual basis.
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.
F- 48
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
17. 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:
Year Ended December 31,
2013
16,973,239
746,396
468,315
357,580
332,725
260,181
13,019
19,151,455
$
$
2012
17,878,957
705,373
517,921
272,220
370,420
380,747
13,049
20,138,687
$
$
$
$
2011
13,182,234
344,311
525,095
—
441,638
430,435
36,625
14,960,338
Gasoline and distillates
Chemicals
Lubricants
Clarified slurry oil
Asphalt and residual oils
Liquefied petroleum gases
Other
18. INCOME TAXES
PBF Energy
For periods following PBF Energy’s IPO, PBF Energy is required to file federal and applicable state corporate
income tax returns and recognizes income taxes on its pre-tax income, which to-date has consisted primarily of
its share (approximately 24.4% prior to the Secondary Offering and approximately 40.9% subsequent to the
Secondary Offering) of PBF LLC’s pre-tax income. PBF LLC is organized as a limited liability company which
is treated as a "flow-through" entity for income tax purposes and therefore is not subject to income taxes. As a
result, the PBF Energy consolidated financial statements do not reflect a benefit or provision for income taxes for
PBF LLC for periods prior to the IPO or any benefit or provision for income taxes on the pre-tax income or loss
attributable to the noncontrolling interest in PBF LLC.
The income tax provision in the PBF Energy consolidated financial statements of operations consists of the
following:
Current expense:
Federal
State
Total current
Deferred expense:
Federal
State
Total deferred
Total provision for income taxes
Year Ended
December 31,
2013
Year Ended
December 31,
2012
$
$
— $
—
—
15,406
1,275
16,681
16,681
$
—
—
—
1,134
141
1,275
1,275
F- 49
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The difference between the PBF Energy’s effective income tax rate and the United States statutory rate is reconciled
below:
Provision at Federal statutory rate
Increase (decrease) attributable to flow-through of certain tax
adjustments:
State income taxes (net of federal income tax)
Non deductible/nontaxable items
Adjustment to deferred tax assets and liabilities for change in
tax rates due to business mix
Other
Effective tax rate
Year Ended
December 31,
2013
Year Ended
December 31,
2012
35.0 %
35.0%
5.0 %
7.0 %
(14.5)%
(2.8)%
29.7 %
4.4%
—%
—%
0.1%
39.5%
A summary of the components of deferred tax assets and deferred tax liabilities 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
December 31, 2013
December 31, 2012
$
$
310,132
14,327
21,423
345,882
—
345,882
140,330
9,390
1,399
151,119
181,257
6,087
9,503
196,847
—
196,847
69,088
6,534
646
76,268
Net deferred tax assets (liabilities)
$
194,763
$
120,579
PBF Energy has federal and state income tax net operating loss carry forwards of $37,139 and $23,641, respectively,
which will expire at various dates from 2022 through 2033.
F- 50
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
Income tax years that remain subject to examination by material jurisdictions, where an examination has not already
concluded are all years including and subsequent to:
United States
Federal
New Jersey
Michigan
Delaware
Indiana
Pennsylvania
New York
2012
2012
2012
2012
2012
2012
2012
PBF Energy does not have any unrecognized tax benefits.
PBF Holding
PBF Holding is a limited liability company treated as a "flow-through" entity for income tax purposes. Accordingly
there is no benefit or provision for federal or state income tax in the accompanying PBF Holding financial statements.
F- 51
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
19. NET INCOME PER SHARE OF PBF ENERGY
The following table sets forth the computation of basic and diluted net income (loss) per Class A common share
attributable to PBF Energy for the periods subsequent to the IPO:
Basic Earnings Per Share:
Numerator for basic net income per Class A common share net income
attributable to PBF Energy
Denominator for basic net income per Class A common share-weighted
average shares
Basic net income attributable to PBF Energy per Class A common share
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 per Class A common share (1)
Numerator for diluted net income per Class A common share net income
attributable to PBF Energy (1)
Denominator (1):
Denominator for basic net income per Class A common share-weighted
$
$
$
$
Year Ended December 31,
2013
2012
39,540
$
1,956
32,488,369
23,570,240
1.22
$
0.08
39,540
$
—
—
1,956
10,005
(3,948)
39,540
$
8,013
average shares
Effect of dilutive securities:
Conversion of PBF LLC Series A Units
Common stock equivalents (2)
Denominator for diluted net income per common share-adjusted
weighted average shares
Diluted net income attributable to PBF Energy per Class A common
share
——————————
32,488,369
23,570,240
—
72,972,131
572,712
688,533
33,061,081
97,230,904
$
1.20
$
0.08
(1) The diluted earnings per share calculation for the year ended December 31, 2012, 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. For the year ended
December 31, 2013, the potential conversion of 64,164,045 PBF LLC Series A Units was excluded
from the denominator in computing diluted net income per share because including them would have
had an antidilutive effect. As the PBF LLC Series A Units were not included, the numerator used in
the calculation of diluted net income per share was equal to the numerator used in the calculation of
basic net income per share and does not include the net income and related income tax expense
associated with the potential conversion of the PBF LLC Series A Units.
F- 52
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
(2) Represents an adjustment to weighted-average diluted shares outstanding to assume the full exchange
of common stock equivalents, including options and warrants for PBF LLC Series A Units and options
for shares of PBF Energy Class A common stock. Common stock equivalents excludes the effects of
options to purchase 1,320,000 and 682,500 shares of PBF Energy Class A common stock because they
are anti-dilutive for the years ended December 31, 2013 and 2012, respectively.
20. 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, 2013 and 2012.
December 31, 2013
Level 1
Level 2
Level 3
Total
Assets:
Money market funds
Non-qualified pension plan assets
Commodity contracts
Derivatives included with inventory
intermediation agreement
obligations
Liabilities:
Commodity contracts
Derivatives included with inventory
supply arrangement obligations
Catalyst lease obligations
Assets:
Money market funds
Commodity contracts
Derivatives included with inventory
supply arrangement obligations
Liabilities:
Catalyst lease obligations
Commodity contracts
Contingent consideration for refinery
acquisition
$
5,857
$
— $
— $
—
6,681
6,016
—
—
—
5,857
4,905
10,933
6,016
6,989
23,365
30,354
177
53,089
—
—
177
53,089
December 31, 2012
Level 1
Level 2
Level 3
Total
$
175,786
$
3,303
— $
—
— $
175,786
—
—
—
—
3,303
5,595
43,442
1,872
5,595
43,442
1,872
—
21,358
21,358
4,905
4,252
—
—
—
—
—
—
—
—
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.
• Non-qualified pension plan 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 and included within deferred
charges and other assets, net.
F- 53
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
• 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 commodity contracts categorized in Level 3 of the fair value hierarchy consist of commodity price
swap contracts that relate to forecasted purchases of crude oil for which quoted forward market prices
are not readily available due to market illiquidity. The forward price used to value these swaps was derived
using broker quotes, prices from other third party sources and other available market based data.
• The derivatives included with inventory supply arrangement obligations, derivatives included with
inventory intermediation agreement obligations and the catalyst lease obligations are categorized in Level
2 of the fair value hierarchy and are measured at fair value using a market approach based upon 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%. During the year ended December 31, 2013,
there was no change in fair value, as the obligation was known and was paid in full on April 30, 2013.
The table below summarizes the changes in fair value measurements of contingent consideration for refinery
acquisition 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
Balance at end of period
Year Ended December 31,
2013
2012
$
21,358
$
122,232
—
(21,358)
—
—
—
—
(103,642)
2,768
—
—
$
— $
21,358
The table below summarizes the changes in fair value measurements of commodity contracts 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
Balance at end of period
F- 54
Year Ended December 31,
2013
2012
$
$
— $
—
24,678
(48,043)
—
—
(23,365) $
—
—
—
—
—
—
—
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
There were no transfers between levels during the years ended December 31, 2013 and 2012, respectively.
Fair value of debt
The table below summarizes the fair value and carrying value as of December 31, 2013 and 2012.
December 31, 2013
Fair
value
Carrying
value
December 31, 2012
Carrying
value
Fair
value
Senior Secured Notes (a)
$
667,487
$
697,568
$
666,538
$
700,963
Revolver (b)
Catalyst leases (c)
Less - Current maturities
Long-term debt
15,000
53,089
735,576
12,029
723,547
$
15,000
53,089
765,657
12,029
753,628
$
—
43,442
709,980
—
709,980
$
—
43,442
744,405
—
744,405
$
(a) 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.
(b) The estimated fair value approximates carrying value, categorized as a Level 2 measurement, as these borrowings
bear interest based upon short-term floating market interest rates.
(c) Catalyst leases are valued using a market approach based upon commodity prices for similar instruments quoted
in active markets and are categorized as a Level 2 measurement. The Company has elected the fair value option
for accounting for its catalyst lease repurchase obligations as the Company's liability is directly impacted by the
change in fair value of the underlying catalyst.
21. DERIVATIVES
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. In
addition, the Company entered into Inventory Intermediation Agreements commencing in July 2013 that contain
purchase obligations for certain volumes of intermediates and refined products. The Company was also party to
an agreement that contained purchase obligations for certain volumes of stored intermediates inventory during the
year ended December 31, 2012, which was terminated during the first quarter of 2012. The purchase obligations
related to crude oil, feedstocks, intermediates and refined products under these agreements are derivative
instruments that have been designated as fair value hedges in order to hedge the commodity price volatility of
certain refinery inventory. The fair value of these purchase obligation derivatives is based on market prices of
crude oil and refined products in the future. The level of activity for these derivatives is based on the level of
operating inventories.
As of December 31, 2013, there were 838,829 barrels of crude oil and feedstocks (2,529,447 barrels at December 31,
2012) outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at
December 31, 2012) outstanding under these derivative instruments not designated as hedges. As of December 31,
2013, there were 3,274,047 barrels of intermediates and refined products (no barrels at December 31, 2012)
outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at
December 31, 2012) outstanding under these derivative instruments not designated as hedges. These volumes
represent the notional value of the contract.
F- 55
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
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, 2013, there were
43,199,000 barrels of crude oil and no barrels of refined products (9,234,000 and 1,310,000, respectively, as of
December 31, 2012), outstanding under short and long term 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,
2013 and December 31, 2012 and the line items in the consolidated balance sheet in which the fair values are
reflected.
Description
Balance Sheet
Location
Fair Value
Asset/
(Liability)
Derivatives designated as hedging instruments:
December 31, 2013:
Derivatives included with inventory supply arrangement obligations
Derivatives included with the inventory intermediation agreement
obligations
December 31, 2012:
Derivatives included with inventory supply arrangement obligations
Derivatives included with the inventory intermediation agreement
obligations
Derivatives not designated as hedging instruments:
December 31, 2013:
Commodity contracts
December 31, 2012:
Commodity contracts
Accrued expenses $
(177)
Accrued expenses $
6,016
Accrued expenses $
5,595
Accrued expenses $
—
Accrued expenses $
(19,421)
Accounts
receivable
$
1,431
The Company’s policy is to net the fair value of the derivatives included with inventory supply arrangement
obligations and inventory intermediation agreement obligations against the liabilities related to inventory supply
arrangements and inventory intermediation agreements with the same counterparty as the legal right of offset exists.
F- 56
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
The following tables provide information about the gain or loss recognized in income on these derivative instruments
and the line items in the consolidated financial statements in which such gains and losses are reflected.
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
Gain or (Loss)
Recognized in
Income on
Derivatives
Description
Derivatives designated as hedging instruments:
For the year ended December 31, 2013:
Derivatives included with inventory supply arrangement obligations
Derivatives included with the inventory intermediation agreement
obligations
For the year ended December 31, 2012:
Derivatives included with inventory supply arrangement obligations
For the year ended December 31, 2011
Cost of sales
Cost of sales
Cost of sales
Derivatives included with inventory supply arrangement obligations
Cost of sales
Derivatives not designated as hedging instruments:
For the year ended December 31, 2013:
Derivatives included with inventory supply arrangement obligations
Commodity contracts
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
Hedged items designated in fair value hedges:
For the year ended December 31, 2013:
Crude oil and feedstock inventory
Intermediate and refined product inventory
For the year ended December 31, 2012:
Crude oil and feedstock inventory
For the year ended December 31, 2011
Crude oil and feedstock inventory
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
Cost of sales
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(5,773)
6,016
7,060
(6,076)
—
(88,962)
(8)
34,778
2,829
5,604
(1,491)
(6,016)
(4,704)
6,558
Ineffectiveness related to the Company's fair value hedges resulted in a loss of $7,264 and gains of $2,356 and
$482 for the years ended December 31, 2013, 2012 and 2011, respectively, recorded in cost of sales. Gains and
losses due to ineffectiveness, resulting from the difference in the forward and spot rates of the underlying crude
inventory related to the derivatives included with inventory supply arrangement obligations, were excluded from
the assessment of hedge effectiveness.
F- 57
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
22. SUBSEQUENT EVENTS
Secondary Offering
On January 6, 2014, Blackstone and First Reserve completed a public offering of 15,000,000 shares of our Class
A common stock at a price of $28.00 per share, less underwriting discounts and commissions, in a secondary public
offering. All of the shares were sold by funds affiliated with Blackstone and First Reserve. In connection with
this offering, Blackstone and First Reserve exchanged 15,000,000 Series A Units of PBF LLC for an equivalent
number of shares of our Class A common stock, which increased PBF Energy's interest in PBF LLC to approximately
56.4%. Completion of the January 2014 Secondary Offering is estimated to increase our tax receivable agreement
liability to $439.6 million due to the tax benefit expected to be generated as a result of the exchange in connection
with the secondary offering and the corresponding tax benefits expected to be generated in future years from this
transaction.
Dividend Declared
On February 11, 2014, 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 14, 2014 to Class A common stockholders of record
at the close of business on March 4, 2014.
Related Party
On January 31, 2014, the Company entered into a consulting services agreement with Donald F. Lucey, the former
Executive Vice President, Commercial, to provide consulting services relating to commercial operations.
Compensation for the services performed will include an annual retainer of $10 per calendar year paid quarterly
in arrears and a daily rate of $2 for days actually engaged in performing services, with partial days prorated. Mr.
Lucey will also receive severance compensation and be entitled to continued vesting in any outstanding equity
awards granted to him under the Company's equity incentive plans, consistent with the terms of those plans. The
consulting service agreement expires on December 31, 2016, subject to certain early termination rights.
F- 58
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
PBF Services Company, Delaware City Refining Company LLC, Delaware Pipeline Company LLC, PBF Power
Marketing LLC, Paulsboro Refining Company LLC, Paulsboro Natural Gas Pipeline Company LLC, Toledo
Refining Company LLC and PBF Investments LLC are 100% owned subsidiaries of PBF Holding and serve as
guarantors of the obligations under the Senior Secured Notes. These guarantees are full and unconditional and
joint and several. For purposes of the following footnote, PBF Holding is referred to as “Issuer.” The indenture
dated February 9, 2012, among PBF Holding, PBF Finance, the guarantors party thereto and Wilmington Trust,
National Association, governs subsidiaries designated as “Guarantor Subsidiaries.” PBF Logistics LP, PBF Rail
Logistics Company LLC and Delaware City Terminaling Company LLC are consolidated subsidiaries of the
Company that are not guarantors of the Senior Secured Notes.
The Senior Secured Notes were co-issued by PBF Finance. For purposes of the following footnote, PBF Finance
is referred to as “Co-Issuer.” The Co-Issuer has no independent assets or operations.
The following supplemental combining and consolidating financial information reflects the Issuer’s separate
accounts, the combined accounts of the Guarantor Subsidiaries, the combining and consolidating adjustments and
eliminations and the Issuer’s consolidated accounts for the dates and periods indicated. For purposes of the following
combining and consolidating information, the Issuer’s Investments in its subsidiaries and the Guarantor
Subsidiaries’ investments in its subsidiaries are accounted for under the equity method of accounting.
PBF Holding has determined that a correction to the previously presented 2012 consolidating financial information
presented in the following statements was necessary to reflect intercompany transactions between the Issuer and
the Guarantor Subsidiaries. During the year ended December 31, 2012, sales to third parties were made and recorded
by the Issuer, but the product sold was owned and delivered by the Guarantor Subsidiaries which recorded the
related cost of sales. For that year ended, correcting entries totaling approximately $2,469,911 has been reflected
in the consolidating information. In order to record the intercompany sale of product on the Guarantor Subsidiaries
and an equal amount of cost of sales on the Issuer, a correcting entry was recorded for $1,909,976. There was an
additional correcting entry for $559,935 to record the intercompany sale of product on the Issuer as a result of a
refinement to the allocation of costs between the Issuer and the Guarantor Subsidiaries. These costs were initially
transferred to the Guarantor Subsidiaries by reducing cost of sales on the Issuer rather than the recording of an
intercompany sale. All such intercompany activity was then eliminated in consolidation and, therefore, had no
effect on the PBF Holding’s reported consolidated financial statements. The effect of these adjustments increased
net income of the Guarantor Subsidiaries by $1,909,976 for the year ended December 31, 2012. On the Issuer,
there was an increase in revenues of $559,935 and an increase in cost of sales of $2,469,911 resulting in a decrease
to income from operations of $1,909,976. That decrease to income from operations was completely offset by the
increase in the Issuer’s equity in the earnings of the Guarantor Subsidiaries. The adjustments mentioned above
also affected the respective entities’ intercompany receivable/payable accounts and the Issuer’s investment in
subsidiaries account by $1,909,976 at December 31, 2012.
F- 59
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING BALANCE SHEET
December 31, 2013
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining and
Consolidating
Adjustments
Total
ASSETS
Current assets:
Cash and cash equivalents
$
76,179
$
791
$
— $
— $
76,970
Accounts receivable
Inventories
Prepaid expense and other current
assets
Due from related parties
Total current assets
588,385
818,007
8,262
627,510
49,251
11,807,063
13,338,885
6,592
16,600,151
17,243,306
Property, plant and equipment, net
60,746
1,720,843
Investment in subsidiaries
Deferred charges and other assets, net
3,584,622
27,923
—
234,556
—
—
—
—
—
—
—
—
—
—
—
(28,407,214)
596,647
1,445,517
55,843
—
(28,407,214)
2,174,977
—
1,781,589
(3,584,622)
—
—
262,479
Total assets
$
17,012,176
$
19,198,705
$
— $
(31,991,836) $ 4,219,045
$
307,612
$
94,681
$
— $
— $
402,293
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Current portion of long-term debt
Deferred revenue
Due to related parties
Total current liabilities
606,388
—
7,766
604,557
12,029
—
13,589,263
14,511,029
14,817,951
15,529,218
Delaware Economic Development
Authority loan
Long-term debt
Intercompany notes payable
Other long-term liabilities
—
682,487
31,835
14,672
12,000
41,060
—
31,805
Total liabilities
15,240,023
15,614,083
Commitments and contingencies
Equity:
Member's equity
Retained earnings
Accumulated other comprehensive
loss
Total equity
933,164
853,527
667,173
2,915,720
(14,538)
1,729
1,772,153
3,584,622
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,407,214)
1,210,945
12,029
7,766
—
(28,407,214)
1,633,033
—
—
—
—
12,000
723,547
31,835
46,477
(28,407,214)
2,446,892
(667,173)
(2,915,720)
933,164
853,527
(1,729)
(14,538)
(3,584,622)
1,772,153
Total liabilities and equity
$
17,012,176
$
19,198,705
$
— $
(31,991,836) $ 4,219,045
F- 60
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING BALANCE SHEET
December 31, 2012
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining
and
Consolidating
Adjustments
Total
ASSETS
Current assets:
Cash and cash equivalents
$
241,926
$
12,365
$
— $
— $
254,291
Accounts receivable
Inventories
Prepaid expense and other current
assets
Due from related parties
Total current assets
306,999
664,225
8,835
6,770,893
7,992,878
196,797
832,894
4,553
10,015,340
11,061,949
Property, plant and equipment, net
28,200
1,607,387
Investment in subsidiaries
Deferred charges and other assets, net
2,855,598
31,081
—
166,268
—
—
—
—
—
—
—
—
—
—
—
(16,771,512)
503,796
1,497,119
13,388
14,721
(16,771,512)
2,283,315
—
1,635,587
(2,855,598)
—
—
197,349
Total assets
$ 10,907,757
$ 12,835,604
$
— $
(19,627,110) $ 4,116,251
$
197,624
$
162,433
$
— $
— $
360,057
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Due to related parties
Total current liabilities
363,536
—
7,926,481
8,487,641
662,382
210,543
8,845,031
9,880,389
Delaware Economic Development
Authority loan
Long-term debt
Other long-term liabilities
—
666,538
1,924
20,000
43,442
36,175
Total liabilities
9,156,103
9,980,006
Commitments and contingencies
Equity:
Member's equity
Retained earnings
Accumulated other comprehensive
loss
Total equity
930,098
830,497
664,108
2,193,052
(8,941)
(1,562)
1,751,654
2,855,598
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,025,918
210,543
(16,771,512)
—
(16,771,512)
1,596,518
—
—
—
20,000
709,980
38,099
(16,771,512)
2,364,597
(664,108)
(2,193,052)
930,098
830,497
1,562
(8,941)
(2,855,598)
1,751,654
Total liabilities and equity
$ 10,907,757
$ 12,835,604
$
— $
(19,627,110) $ 4,116,251
F- 61
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2013
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining and
Consolidating
Adjustments
Total
Revenues
$16,190,178
$ 7,641,498
$
— $
(4,680,221) $ 19,151,455
—
—
—
—
—
—
—
—
—
—
(4,680,221)
17,803,314
—
—
—
812,652
95,794
(183)
—
(4,680,221)
111,479
18,823,056
—
328,399
(722,673)
—
—
—
4,691
(94,214)
238,876
— $
(722,673) $
— $
(724,930) $
233,279
Costs and expenses:
Cost of sales, excluding
depreciation
Operating expenses,
excluding depreciation
General and administrative
expenses
(Gain) loss on sale of asset
Depreciation and amortization
expense
16,486,851
5,996,684
(482)
813,134
82,284
(388)
13,510
205
12,856
98,623
16,581,121
6,922,156
Income (loss) from
operations
(390,943)
719,342
Other income (expense):
Equity in earnings of
subsidiaries
Change in fair value of
catalyst lease
Interest expense, net
Net income (loss)
Comprehensive Income (Loss)
722,673
—
—
(92,854)
238,876
233,279
$
$
4,691
(1,360)
722,673
724,930
$
$
$
$
F- 62
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2012
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining
and
Consolidating
Adjustments
Total
Revenues
$ 7,622,924
$ 16,141,408
$
— $
(3,625,645) $20,138,687
—
—
—
—
—
—
—
—
—
—
—
(3,625,645)
18,269,078
—
—
—
738,824
120,443
(2,329)
—
(3,625,645)
92,238
19,218,254
—
920,433
(1,921,040)
—
—
—
—
(2,768)
(3,724)
(108,629)
805,312
— $
(1,921,040) $
— $
(1,921,267) $
798,747
Costs and expenses:
Cost of sales, excluding
depreciation
Operating expenses, excluding
depreciation
General and administrative
expenses
Loss on sale of asset
Depreciation and amortization
expense
8,537,996
13,356,727
—
738,824
105,135
—
15,308
(2,329)
8,051
84,187
8,651,182
14,192,717
(Loss) income from
operations
(1,028,258)
1,948,691
Other income (expense):
Equity in earnings (loss) of
subsidiaries
Change in fair value of
contingent consideration
Change in fair value of catalyst
lease
Interest expense, net
Net income (loss)
Comprehensive Income (Loss)
1,921,040
—
—
—
(87,470)
805,312
(2,768)
(3,724)
(21,159)
$ 1,921,040
798,747
$ 1,921,267
$
$
$
$
F- 63
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31, 2011
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining
and
Consolidating
Adjustments
Total
Revenues
$
— $ 14,960,338
$
— $
— $ 14,960,338
Costs and expenses:
Cost of sales, excluding
depreciation
Operating expenses,
excluding depreciation
General and administrative
expenses
Acquisition related expenses
Depreciation and
amortization expense
— 13,855,163
—
658,831
72,667
517
2,047
75,231
13,516
211
51,696
14,579,417
(Loss) income from
operations
(75,231)
380,921
Other income (expense):
Equity in earnings (loss) of
subsidiaries
Change in fair value of
catalyst lease
Change in fair value of
contingent consideration
Interest expense, net
Net income (loss)
Comprehensive Income
(Loss)
$
$
326,170
—
—
(8,268)
—
7,316
(5,215)
(56,852)
—
—
—
—
—
—
—
—
—
—
—
— 13,855,163
—
—
—
—
658,831
86,183
728
53,743
— 14,654,648
—
305,690
(326,170)
—
—
—
—
7,316
(5,215)
(65,120)
242,671
242,671
$
326,170
$
— $
(326,170) $
241,344
$
326,175
$
— $
(326,175) $
241,344
F- 64
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF CASH FLOW
Year Ended December 31, 2013
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining
and
Consolidating
Adjustments
Total
Cash flows from operating activities:
Net income
$
238,876
$
722,673
$
— $
(722,673) $
238,876
Adjustments to reconcile net income to net cash
provided by operating activities:
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 on disposition of property, plant and equipment
Equity in earnings of subsidiaries
Changes in current assets and current liabilities:
Accounts receivable
Amounts due to/from related parties
Inventories
Other current assets
Accounts payable
Accrued expenses
Deferred revenue
Other assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
19,296
—
—
—
—
—
4,575
(388)
(722,673)
(281,386)
626,623
(153,782)
(40,416)
109,988
222,194
7,766
(1,140)
29,533
98,705
3,753
(4,691)
—
(20,492)
—
12,153
205
—
188,535
(611,902)
199,773
(2,039)
(67,752)
(7,377)
(210,543)
(19,263)
281,738
Expenditures for property, plant and equipment
(127,653)
(190,741)
Expenditures for refinery turnarounds costs
Expenditures for other assets
Proceeds from sale of assets
Net cash used in investing activities
—
—
102,428
(25,225)
(64,616)
(32,692)
—
(288,049)
Cash flows from financing activities:
Proceeds from revolver borrowings
Proceeds from intercompany notes payable
Proceeds from member's capital contributions
Proceeds from catalyst lease
Distribution to members
Repayments of revolver borrowings
Payment of contingent consideration related to
acquisition of Toledo refinery
Deferred financing costs and other
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and equivalents, beginning of period
1,450,000
31,835
—
—
(215,846)
(1,435,000)
—
(1,044)
(170,055)
(165,747)
241,926
—
—
1,757
14,337
—
—
(21,357)
—
(5,263)
(11,574)
12,365
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
722,673
—
—
—
—
—
—
—
—
—
—
—
—
—
—
118,001
3,753
(4,691)
—
(20,492)
—
16,728
(183)
—
(92,851)
14,721
45,991
(42,455)
42,236
214,817
(202,777)
(20,403)
311,271
(318,394)
(64,616)
(32,692)
102,428
(313,274)
— $
1,450,000
—
—
—
—
—
—
—
—
—
—
31,835
1,757
14,337
(215,846)
(1,435,000)
(21,357)
(1,044)
(175,318)
(177,321)
254,291
76,970
Cash and equivalents, end of period
$
76,179
$
791
$
— $
— $
F- 65
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF CASH FLOW
Year Ended December 31, 2012
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Combining
and
Consolidating
Adjustments
Total
Cash flows from operating activities:
Net income
$
805,312
$
1,921,040
$
— $
(1,921,040)
$
805,312
Adjustments to reconcile net income to net cash provided
by operating activities:
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 on disposition of property, plant and equipment
13,466
84,184
—
—
—
—
4,391
2,125
—
2,954
3,724
2,768
4,576
—
10,559
(2,329)
—
Equity in earnings of subsidiaries
(1,921,040)
Changes in current assets and current liabilities:
Accounts receivable
Amounts due to/from related parties
(306,999)
119,455
1,736,986
(1,751,707)
Inventories
Other current assets
Accounts payable
Accrued expenses
Deferred revenue
Other assets and liabilities
Net cash provided by operating activities
(664,225)
78
193,151
419,735
—
(9,023)
273,957
Cash flows from investing activities:
Expenditures for property, plant and equipment
(16,546)
Expenditures for refinery turnarounds costs
Expenditures for other assets
Proceeds from sale of assets
—
—
—
584,128
49,893
(119,161)
(389,392)
21,309
(22,521)
519,480
(159,354)
(38,633)
(8,155)
3,381
Net cash used in investing activities
(16,546)
(202,761)
Cash flows from financing activities:
Proceeds from Senior Secured Notes
Proceeds from long-term debt
Proceeds from catalyst lease
Distributions to members
Repayments of long-term debt
Payment of contingent consideration related to
acquisition of Toledo refinery
Deferred financing costs and other
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and equivalents, beginning of period
665,806
430,000
—
(160,965)
(823,749)
(103,642)
(26,059)
(18,609)
238,802
3,124
—
—
9,452
—
(360,848)
—
—
(351,396)
(34,677)
47,042
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,921,040
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
97,650
2,954
3,724
2,768
4,576
4,391
12,684
(2,329)
—
(187,544)
(14,721)
(80,097)
49,971
73,990
30,343
21,309
(31,544)
793,437
(175,900)
(38,633)
(8,155)
3,381
(219,307)
665,806
430,000
9,452
(160,965)
(1,184,597)
(103,642)
(26,059)
(370,005)
204,125
50,166
Cash and equivalents, end of period
$
241,926
$
12,365
$
— $
— $
254,291
F- 66
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
23. CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONSOLIDATING STATEMENT OF CASH FLOW
Year Ended December 31, 2011
Issuer
Guarantors
Subsidiaries
Non-
Guarantors
Subsidiaries
Combining
and
Consolidated
Adjustments
Total
Cash flows from operating activities
Net income (loss)
$
242,671
$
326,170
$
— $
(326,170)
$
242,671
Adjustments to reconcile net income to net
cash from operating activities:
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
Pension and other post retirement benefit costs
Equity in earnings of subsidiaries
Changes in operating assets and liabilities, net of effects of
acquisitions
Accounts receivable
Inventories
Other current assets
Accounts payable
Accrued expenses
Deferred revenue
Other assets and liabilities
Net cash from operating activities
Cash flows from investing activities
Acquisition of the Toledo Refinery, net of cash received
for sale of assets
Expenditures for property, plant and equipment
Expenditures for refinery turnarounds costs
Expenditures for other assets
Proceeds from sale of assets
Amounts due to/from related parties
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from member contributions
Proceeds from long-term debt
Proceeds from catalyst lease
Repayments of long-term debt
Repayment of seller note for inventory
Amounts due to/from related parties
Deferred financing costs and other
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and equivalents, beginning of period
4,877
—
—
—
—
1,241
(326,170)
—
—
(8,896)
4,456
46,724
—
(1,029)
(36,126)
—
(17,202)
—
—
—
(750,630)
—
(767,832)
408,397
470,000
—
(201,250)
—
(10,737)
666,410
(137,548)
140,672
52,042
2,516
(7,316)
5,215
25,329
8,527
—
(279,315)
(512,054)
(48,057)
245,309
348,369
122,895
(4,222)
285,408
(168,156)
(471,519)
(62,823)
(23,339)
4,700
—
(854)
(721,991)
—
18,894
18,624
(19,151)
(299,645)
750,630
(512)
468,840
32,257
14,785
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
326,170
—
—
—
—
—
—
—
—
—
—
—
—
—
750,630
—
750,630
—
—
—
—
—
(750,630)
—
(750,630)
—
—
Cash and equivalents, end of period
$
3,124
$
47,042
$
— $
— $
F- 67
56,919
2,516
(7,316)
5,215
25,329
9,768
—
(279,315)
(512,054)
(56,953)
249,765
395,093
122,895
(5,251)
249,282
(168,156)
(488,721)
(62,823)
(23,339)
4,700
—
(854)
(739,193)
408,397
488,894
18,624
(220,401)
(299,645)
—
(11,249)
384,620
(105,291)
155,457
50,166
PBF ENERGY INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
The following table summarizes quarterly financial data for the years ended December 31, 2013 and 2012
(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
Revenues
Income (loss) from operations
Net income (loss)
Net income attributable to PBF Energy Inc.
Earnings per common share -assuming
dilution
$
$
$
2013 Quarter Ended
March 31
4,797,847
100,105
69,711
11,406
$
June 30
4,678,293
133,027
107,170
16,826
$
September 30
4,858,880
(55,599)
(64,893)
(19,848)
$
December 31
4,816,435
142,326
102,097
31,156
0.48
$
0.61
$
(0.50) $
0.76
2012 Quarter Ended
March 31
4,716,106
(164,083)
(202,532)
$
June 30
5,077,015
579,506
555,742
$
September 30
5,395,206
220,109
186,564
December 31 (a)
4,950,360
$
284,901
264,263
1,956
$
0.08
(a) On December 12, 2012, PBF Energy Inc. completed an initial public offering which closed on
December 18, 2012.
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 21, 2014
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/ Wayne Budd
(Wayne Budd)
/s/ Martin J. Brand
(Martin J. Brand)
Chief Executive Officer
(Principal Executive Officer)
February 21, 2014
Senior Vice President, Chief Financial Officer
February 21, 2014
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
February 21, 2014
Executive Chairman of the
February 21, 2014
Board of Directors
Director
Director
Director
Director
February 21, 2014
February 21, 2014
February 21, 2014
February 21, 2014
Signature
/s/ Timothy H. Day
(Timothy H. Day)
/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)
Title
Director
Director
Director
Director
Director
Date
February 21, 2014
February 21, 2014
February 21, 2014
February 21, 2014
February 21, 2014
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 HOLDING COMPANY LLC
(Registrant)
By:
/s/ Thomas J. Nimbley
(Thomas J. Nimbley)
Chief Executive Officer
(Principal Executive Officer)
Date: February 21, 2014
POWER OF ATTORNEY
Each of the officers and directors of PBF Holding Company LLC, 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/ Michael D. Gayda
(Michael D. Gayda)
/s/ Jeffrey Dill
(Jeffrey Dill)
Chief Executive Officer
(Principal Executive Officer)
February 21, 2014
Senior Vice President, Chief Financial Officer
February 21, 2014
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
February 21, 2014
February 21, 2014
February 21, 2014
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