PBF-2013.3.31-10Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark one)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 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
 
45-3763855 
27-2198168 
45-2685067

(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
One Sylvan Way, Second Floor
Parsippany, New Jersey
 
07054
(Address of principal executive offices)
 
(Zip Code)
(973) 455-7500
(Registrant’s telephone number, including area code)
 
 
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.
x  Yes    ¨  No
PBF Holding Company LLC
o Yes   x  No
PBF Finance Corporation
o Yes   x  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.
x  Yes    ¨  No
PBF Holding Company LLC
x  Yes    ¨  No
PBF Finance Corporation
x  Yes    o  No
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.
¨
 
¨
 
x
 
¨
PBF Holding Company LLC
¨
 
¨
 
x
 
¨
PBF Finance Corporation
o
 
o
 
x
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
PBF Energy Inc.
¨  Yes    x  No
PBF Holding Company LLC
¨  Yes    x  No
PBF Finance Corporation
o  Yes    x  No
As of May 3, 2013, PBF Energy Inc. had outstanding 23,613,835 shares of Class A common stock and 41 shares of Class B common stock. PBF Energy Inc. is the sole managing member of, and owner of an equity interest of approximately 24.4% 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 May 3, 2013. PBF Holding Company LLC has no common stock outstanding. As of May 3, 2013, PBF Finance Corporation had 100 shares of common stock outstanding, all of which were held by PBF Holding Company LLC.

PBF Finance Corporation meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
 
 


PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2013
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
ITEM 6.

Explanatory Note
This combined Form 10-Q 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 other 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 24.4% of the outstanding economic interests in, PBF Energy Company LLC ("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.
PBF Holding is an indirect subsidiary of PBF Energy, representing 100% of PBF Energy’s consolidated revenue for the three months ended March 31, 2013 and constituting 100% of PBF Energy’s revenue generating assets as of March 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.

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995, of expected future developments. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations, which we refer to as “cautionary statements,” are disclosed under “Item 1A. Risk Factors” and elsewhere in the Annual Reports on Form 10-K for the year ended December 31, 2012 for PBF Energy Inc. and PBF Holding Company LLC and our other filings with the Securities and Exchange Commission. All forward-looking information in this Quarterly Report on Form 10-Q and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
•
supply, demand, prices and other market conditions for our services;
•
 the effects of competition in our markets;
•
changes in currency exchange rates, interest rates and capital costs;
•
 adverse developments in our relationship with both our key employees and unionized employees;
•
our ability to operate our businesses efficiently, manage capital expenditures and costs (including general and administrative expenses) tightly and generate earnings and cash flow;
•
our substantial indebtedness described in our 2012 Annual Reports on Form 10-K and this Quarterly Report on Form 10-Q;
•
restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
•
our assumptions regarding payments arising under the tax receivable agreement and other arrangements relating to our organizational structure;
•
our expectations with respect to our acquisition activity;
•
our expectations with respect to our capital improvement projects including the development and expansion of our Delaware City crude unloading facility;
•
the possibility that we might reduce or not make further dividend payments;
•
our ability to retain key employees; and
•
the costs of being a public company, including Sarbanes-Oxley Act compliance.
    
We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q or as of the date as of which they are made. Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing.

3

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PBF ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(unaudited, in thousands, except share data)
 
March 31,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
404,088

 
$
285,884

Accounts receivable
662,846

 
503,796

Inventories
1,450,518

 
1,497,119

Deferred tax asset
5,635

 
7,717

Prepaid expense and other current assets
28,590

 
13,388

Total current assets
2,551,677

 
2,307,904

 
 
 
 
Property, plant, and equipment, net
1,658,291

 
1,635,587

Deferred tax assets
107,500

 
112,862

Deferred charges and other assets, net
191,605

 
197,349

Total assets
$
4,509,073

 
$
4,253,702

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
476,220

 
$
360,057

Accrued expenses
1,139,153

 
1,031,467

Payable to related parties pursuant to tax receivable agreement
1,007

 
1,007

Deferred revenue
212,347

 
210,543

Total current liabilities
1,828,727

 
1,603,074

 
 
 
 
Delaware Economic Development Authority loan
16,000

 
20,000

Long-term debt
711,548

 
709,980

Payable to related parties pursuant to tax receivable agreement
159,004

 
159,004

Other long-term liabilities
32,603

 
38,099

Total liabilities
2,747,882

 
2,530,157

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Equity:
 
 
 
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 23,613,835 shares outstanding at March 31, 2013, 23,571,221 shares outstanding, at December 31, 2012
24

 
24

Class B common stock, $0.001 par value, 1,000,000 shares authorized, 41 shares outstanding, at March 31, 2013 and December 31, 2012
—

 
—

Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding, at March 31, 2013 and December 31, 2012
—

 
—

Additional paid in capital
418,322

 
417,835

Retained earnings
6,278

 
1,956

Accumulated other comprehensive loss
(87
)
 
(61
)
Total PBF Energy Inc. equity
424,537

 
419,754

Noncontrolling interest
1,336,654

 
1,303,791

Total equity
1,761,191

 
1,723,545

Total liabilities and equity
$
4,509,073

 
$
4,253,702

 
 
 
 

See notes to condensed consolidated financial statements.
4

PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(unaudited, in thousands, except share and per share data)
 
 
Three months ended March 31,
 
2013
 
2012
Revenues
$
4,797,847

 
$
4,716,106

 
 
 
 
Cost and expenses:
 
 
 
Cost of sales, excluding depreciation
4,435,101

 
4,660,193

Operating expenses, excluding depreciation
206,015

 
188,143

General and administrative expenses
30,094

 
13,814

Gain on sale of assets
—

 
(2,503
)
Depreciation and amortization expense
26,532

 
20,542

 
4,697,742

 
4,880,189

 
 
 
 
Income (loss) from operations
100,105

 
(164,083
)
 
 
 
 
Other income (expense)
 
 
 
Change in fair value of contingent consideration
—

 
(692
)
Change in fair value of catalyst lease
(1,339
)
 
(6,348
)
Interest expense, net
(21,611
)
 
(31,408
)
Income (loss) before income taxes
77,155

 
(202,531
)
Income tax expense
(7,444
)
 
—

Net income (loss)
69,711

 
$
(202,531
)
Less: net income attributable to noncontrolling interest
58,305

 

Net income attributable to PBF Energy Inc.
$
11,406

 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding
 
 
 
Basic
23,589,687

 
 
Diluted
97,415,576

 
 
Net income available to Class A common stock per share:
 
 
 
Basic
$
0.48

 
 
Diluted
$
0.48

 
 
Dividend per common share
$
0.30

 
 
 
 
 
 









See notes to condensed consolidated financial statements.
5

PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(unaudited, in thousands)



 
Three months ended March 31,
 
2013
 
2012
Net income (loss)
$
69,711

 
$
(202,531
)
Other comprehensive:
 
 
 
Unrealized loss on available for sale securities
—

 
(3
)
Amortization of defined benefit plans unrecognized net gain (loss)
(108
)
 
17

Total other comprehensive income (loss)
(108
)
 
14

Comprehensive income (loss)
69,603

 
$
(202,517
)
Less: Comprehensive income attributable to noncontrolling interest
58,223

 

Comprehensive income attributable to PBF Energy Inc.
$
11,380

 


See notes to condensed consolidated financial statements.
6

PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(unaudited, in thousands)
 
Three months ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income (loss)
$
69,711

 
$
(202,531
)
Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Depreciation and amortization
28,142

 
21,752

Stock-based compensation
1,020

 
507

Change in fair value of catalyst lease obligation
1,339

 
6,348

Change in fair value of contingent consideration
—

 
692

Deferred income taxes
7,444

 
—

Non-cash change inventory repurchase obligations
(8,153
)
 
(19,690
)
Write-off of unamortized deferred financing fees
—

 
4,391

Pension and other post retirement benefits costs
4,182

 
2,443

Gain on disposition of property, plant and equipment
—

 
(2,503
)
 
 
 
 
Changes in current assets and current liabilities:
 
 
 
Accounts receivable
(159,050
)
 
(180,988
)
Inventories
22,060

 
54,144

Other current assets
(15,202
)
 
30,902

Accounts payable
116,163

 
62,886

Accrued expenses
150,707

 
(115,680
)
Deferred revenue
1,804

 
76,043

Other assets and liabilities
(9,101
)
 
(7,417
)
Net cash provided by (used in) operations
211,066

 
(268,701
)
 
 
 
 
Cash flow from investing activities:
 
 
 
Expenditures for property, plant and equipment
(56,152
)
 
(23,396
)
Expenditures for deferred turnarounds cost
(2,166
)
 
(14,041
)
Expenditures for other assets
(835
)
 
(4,890
)
Proceeds from sale of assets
—

 
3,211

Net cash used in investing activities
(59,153
)
 
(39,116
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from members' capital contributions to PBF Energy Company LLC (former controlling interest)
—

 
250

Distribution to PBF Energy Company LLC members
(25,892
)
 
—

Dividend payment
(7,084
)
 
—

Proceeds from 8.25% senior secured notes
—

 
665,806

Proceeds from long-term debt
—

 
255,000

Proceeds from catalyst lease
—

 
9,452

Repayment of long-term debt
—

 
(651,044
)
Deferred financing costs and other
(733
)
 
(15,558
)
Net cash (used in) provided by financing activities
(33,709
)
 
263,906

 
 
 
 
Net increase (decrease) in cash and cash equivalents
118,204

 
(43,911
)
Cash and equivalents, beginning of period
285,884

 
50,166

Cash and equivalents, end of period
$
404,088

 
$
6,255

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
         Conversion of Delaware Economic Development Authority loan to grant
$
4,000

 
$
—

         Accrued construction in progress
5,749

 
5,314

         Non-cash impact of inventory supply and offtake agreements on inventory and accrued expenses
24,541

 
244,055


See notes to condensed consolidated financial statements.
7

PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)

 
March 31,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
404,088

 
$
254,291

Accounts receivable
662,846

 
503,796

Due from related party
—

 
14,721

Inventories
1,450,518

 
1,497,119

Prepaid expense and other current assets
28,590

 
13,388

Total current assets
2,546,042

 
2,283,315

 
 
 
 
Property, plant and equipment, net
1,658,291

 
1,635,587

Deferred charges and other assets, net
191,605

 
197,349

Total assets
$
4,395,938

 
$
4,116,251

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
476,220

 
$
360,057

Accrued expenses
1,138,452

 
1,025,918

Due to related parties
12,510

 
—

Deferred revenue
212,347

 
210,543

Total current liabilities
1,839,529

 
1,596,518

 
 
 
 
Delaware Economic Development Authority loan
16,000

 
20,000

Long-term debt
711,548

 
709,980

Other long-term liabilities
32,603

 
38,099

Total liabilities
2,599,680

 
2,364,597

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Equity:
 
 
 
Member's equity
930,631

 
930,098

Retained earnings
874,676

 
830,497

Accumulated other comprehensive loss
(9,049
)
 
(8,941
)
Total equity
1,796,258

 
1,751,654

Total liabilities and stockholders' equity
$
4,395,938

 
$
4,116,251


See notes to condensed consolidated financial statements.
8

PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 
 
Three months ended March 31,
 
2013
 
2012
Revenues
$
4,797,847

 
$
4,716,106

 
 
 
 
Costs and expenses:
 
 
 
Cost of sales, excluding depreciation
4,435,101

 
4,660,193

Operating expenses, excluding depreciation
206,015

 
188,143

General and administrative expenses
30,094

 
13,814

Gain on sale of assets
—

 
(2,503
)
Depreciation and amortization expense
26,532

 
20,542

 
4,697,742

 
4,880,189

 
 
 
 
Income (loss) from operations
100,105

 
(164,083
)
 
 
 
 
Other income (expense)
 
 
 
Change in fair value of contingent consideration
—

 
(692
)
Change in fair value of catalyst lease
(1,339
)
 
(6,348
)
Interest expense, net
(21,611
)
 
(31,408
)
Net income (loss)
$
77,155

 
$
(202,531
)
 
 
 
 

See notes to condensed consolidated financial statements.
9

PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
 

 
Three months ended March 31,
 
2013
 
2012
Net income (loss)
$
77,155

 
$
(202,531
)
Other comprehensive income:
 
 
 
Unrealized loss on available for
 
 
 
     sale securities
—

 
(3
)
Amortization of defined benefit plans
 
 
 
     unrecognized net gain (loss)
(108
)
 
17

Total other comprehensive income (loss)
(108
)
 
14

Comprehensive income (loss)
$
77,047

 
$
(202,517
)
 
 
 
 



See notes to condensed consolidated financial statements.
10

PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)  
 
Three months ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income (loss)
$
77,155

 
$
(202,531
)
Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Depreciation and amortization
28,142

 
21,752

Stock-based compensation
1,020

 
507

Change in fair value of catalyst lease obligation
1,339

 
6,348

Change in fair value of contingent consideration
—

 
692

Non-cash change in inventory repurchase obligations
(8,153
)
 
(19,690
)
Write-off of unamortized deferred financing fees
—

 
4,391

Pension and other post retirement benefit costs
4,182

 
2,443

Gain on disposition of property, plant and equipment
—

 
(2,503
)
 
 
 
 
Changes in current assets and current liabilities:
 
 
 
Accounts receivable
(159,050
)
 
(180,988
)
Due to/from related party
27,231

 
—

Inventories
22,060

 
54,144

Other current assets
(15,202
)
 
30,902

Accounts payable
116,163

 
62,886

Accrued expenses
155,069

 
(115,680
)
Deferred revenue
1,804

 
76,043

Other assets and liabilities
(9,101
)
 
(7,417
)
Net cash provided by (used in) operations
242,659

 
(268,701
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(56,152
)
 
(23,396
)
Expenditures for deferred turnarounds costs
(2,166
)
 
(14,041
)
Expenditures for other assets
(835
)
 
(4,890
)
Proceeds from sale of assets
—

 
3,211

Net cash used in investing activities
(59,153
)
 
(39,116
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from member's capital contributions
—

 
250

Proceeds from senior secured notes
—

 
665,806

Proceeds from long-term debt
—

 
255,000

Proceeds from catalyst lease
—

 
9,452

Distribution to members
(32,976
)
 
—

Repayment of long-term debt
—

 
(651,044
)
Deferred financing costs and other
(733
)
 
(15,558
)
Net cash (used in) provided by financing activities
(33,709
)
 
263,906

 
 
 
 
Net increase (decrease) in cash and cash equivalents
149,797

 
(43,911
)
Cash and equivalents, beginning of period
254,291

 
50,166

Cash and equivalents, end of period
$
404,088

 
$
6,255

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
         Conversion of Delaware Economic Development Authority loan to grant
$
4,000

 
$
—

         Accrued construction in progress
5,749

 
5,314

         Non-cash impact of inventory supply and offtake agreements on inventory and accrued expenses
24,541

 
244,055


See notes to condensed consolidated financial statements.
11
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, 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”). 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 initial public offering 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. PBF LLC, a Delaware limited liability company, 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 Holding and PBF Finance issued 8.25% Senior Secured Notes ("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.    

Basis of Presentation
The unaudited condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented . All intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Annual Reports on Form 10-K for the year ended December 31, 2012 for PBF Energy Inc. and PBF Holding Company LLC. The results of operations for the three months ended March 31, 2013 are not indicative of the results to be expected for the full year.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 2013, the Company adopted changes issued by the FASB to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both gross information and net information about both 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

12
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

derivative instruments. As of March 31, 2013, the impact of offsetting assets and liabilities was not material to the Company and additional disclosure is not included in this Form 10-Q.

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 three months ended March 31, 2013, the impact of reclassification out of accumulated other comprehensive income was not material to the Company and additional disclosure is not included in this Form 10-Q.

3. NONCONTROLLING INTEREST OF PBF ENERGY
As a result of the PBF Energy IPO and the related reorganization transactions, PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, and records a noncontrolling interest for the economic interest in PBF Energy held by the 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 percentage as of March 31, 2013 and December 31, 2012 is calculated as follows:
 
 
Holders of
PBF LLC Series
A Units
 
Outstanding Shares
of PBF Energy
Class A
Common
Stock
 
Total *
December 31, 2012
72,972,131

 
23,571,221

 
96,543,352

 
75.6
%
 
24.4
%
 
100
%
March 31, 2013
72,972,131

 
23,613,835

 
96,585,966

 
75.6
%
 
24.4
%
 
100
%
——————————
*
Assumes all of the holders of PBF LLC Series A Units exchange their PBF LLC Series A Units for shares of PBF Energy’s Class A common stock on a one-for-one basis.
The following table summarizes the changes in equity for the controlling and noncontrolling interests of PBF Energy for the three months ended March 31, 2013:
 
 
PBF Energy Inc. Equity
 
Noncontrolling
Interest
 
Total Equity
Balance at January 1, 2013
$
419,754

 
$
1,303,791

 
$
1,723,545

Net income (loss)
11,406

 
58,305

 
69,711

Dividend and distributions
(7,084
)
 
(25,892
)
 
(32,976
)
Stock based compensation
487

 
533

 
1,020

Comprehensive loss
(26
)
 
(82
)
 
(108
)
Balance at March 31, 2013
$
424,537

 
$
1,336,654

 
$
1,761,191



13
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

4. INVENTORIES

Inventories consisted of the following:

March 31, 2013
 
Titled Inventory
 
Inventory Supply and Offtake Arrangements
 
Total
Crude oil and feedstocks
$
424,649

 
$
226,512

 
$
651,161

Refined products and blendstocks
355,286

 
411,369

 
766,655

Warehouse stock and other
32,702

 
—

 
32,702

 
$
812,637

 
$
637,881

 
$
1,450,518

 
December 31, 2012
 
Titled Inventory
 
Inventory Supply and Offtake Arrangements
 
Total
Crude oil and feedstocks
$
384,441

 
$
257,947

 
$
642,388

Refined products and blendstocks
405,545

 
417,865

 
823,410

Warehouse stock and other
31,321

 
—

 
31,321

 
$
821,307

 
$
675,812

 
$
1,497,119


Inventory under inventory supply and offtake arrangements includes crude oil stored at the Company’s Paulsboro and Delaware City refineries' storage facilities that the Company will purchase as it is consumed in connection with the crude supply agreements; feedstocks and blendstocks sold to counterparties that the Company will repurchase for further blending into finished products; lube products sold to a counterparty that the Company will repurchase; and light finished products sold to a counterparty in connection with the offtake agreement and stored in the Paulsboro and Delaware City refineries' storage facilities pending shipment by the counterparty.

At March 31, 2013 and December 31, 2012, the replacement value of inventories exceeded the LIFO carrying value by approximately $137,883 and $79,859, respectively.

5. DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets, net consisted of the following:
 
 
March 31,
2013
 
December 31,
2012
Deferred turnaround costs, net
$
74,844

 
$
78,128

Catalyst
64,071

 
66,377

Deferred financing costs, net
30,382

 
30,987

Restricted cash
12,116

 
12,114

Linefill
8,735

 
8,042

Intangible assets, net
997

 
1,085

Other
460

 
616

 
$
191,605

 
$
197,349


 

14
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

6. ACCRUED EXPENSES

PBF Energy
Accrued expenses consisted of the following:

 
March 31,
2013
 
December 31,
2012
Inventory supply and offtake arrangements
$
503,900

 
$
536,594

Inventory-related accruals
421,882

 
287,929

Customer deposits
47,734

 
26,541

Accrued transportation costs
25,369

 
20,338

Renewable energy credit obligations
23,646

 
—

Excise and sales tax payable
23,598

 
40,776

Fair value of contingent consideration for refinery acquisition
21,358

 
21,358

Accrued utilities
19,422

 
19,060

Accrued salaries and benefits
14,238

 
15,212

Accrued interest
8,924

 
22,764

Accrued construction in progress
5,749

 
16,481

Income taxes payable
1,275

 
1,275

Other
22,058

 
23,139

 
$
1,139,153

 

$1,031,467

 
 PBF Holding
Accrued expenses consisted of the following:

 
March 31,
2013
 
December 31,
2012
Inventory supply and offtake arrangements
$
503,900

 
$
536,594

Inventory-related accruals
421,882

 
287,929

Customer deposits
47,734

 
26,541

Accrued transportation costs
25,369

 
20,338

Renewable energy credit obligations
23,646

 
—

Excise and sales tax payable
23,598

 
36,414

Fair value of contingent consideration for refinery acquisition
21,358

 
21,358

Accrued utilities
19,422

 
19,060

Accrued salaries and benefits
14,238

 
15,212

Accrued interest
8,924

 
22,764

Accrued construction in progress
5,749

 
16,481

Other
22,632

 
23,227

 
$
1,138,452

 
$
1,025,918


The Company has the obligation to repurchase certain intermediates and lube products under its products offtake agreements with Morgan Stanley Capital Group Inc. (“MSCG”) that are held in the Company’s refinery storage tanks. A liability included in Inventory supply and offtake arrangements is recorded at market price for the volumes held in storage consistent with the terms of the offtake agreements with any change in the market price being recorded in costs of sales.  The liability represents the amount the Company expects to pay to repurchase the volumes held in storage.

15
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

The Company recorded a non-cash benefit of $15,904 and $3,659 related to this liability in the three months ended March 31, 2013 and 2012, respectively.

7. 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, the Company received confirmation from the Delaware Economic Development Authority that the Company had satisfied the conditions necessary for the first $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 $4,000 as the proceeds from the loan were used for capital projects.

8. 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 solely of its share (approximately 24.4% as of March 31, 2013) 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 condensed 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 condensed consolidated financial statements of operations consists of the following:
 
 
 
Three Months Ended
 
 
March 31, 2013
Current tax expense
 
$
—

Deferred tax expense
 
7,444

Total tax expense
 
$
7,444


PBF Energy’s effective tax rate for the three months ended March 31, 2013 was 39.5%.

PBF Energy has determined there are no material uncertain tax positions as of March 31, 2013.

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.





16
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

9. COMMITMENTS AND CONTINGENCIES

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 $11,369 recorded as of March 31, 2013 ($9,669 as of December 31, 2012) represents the present value of expected future costs discounted at a rate of 8%. 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 $12,116 and $12,114, acquired in the Paulsboro acquisition, is recorded as restricted cash in deferred charges and other assets, net as of March 31, 2013 and December 31, 2012, respectively.

In connection with the acquisition of the Delaware City assets, Valero remains responsible for certain pre-acquisition environmental obligations up to $20,000 and the predecessor to Valero in ownership of the refinery retains other historical obligations.

In connection with the Delaware City assets and Paulsboro refinery acquisitions, the Company and Valero purchased ten year, $75,000 environmental insurance policies to insure against unknown environmental liabilities at each site. In connection with the Toledo refinery acquisition, Sunoco remains responsible for environmental remediation for conditions that existed on the closing date for twenty years from March 1, 2011.

In 2010, 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 this specification. The mandate does not currently have a material impact on the Company's financial position or results of operations.

In addition, on June 1, 2012, the Environmental Protection Agency issued final amendments to the New Source Performance Standards (“NSPS”) for petroleum refineries, including standards for emissions of nitrogen oxides from process heaters and work practice standards and monitoring requirements for flares. The Company is evaluating the impact of the regulation and amended standards on its refinery operations. The Company cannot currently estimate the cost that may be incurred, if any, to comply by July 1, 2015 with the amended NSPS.

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 Company is evaluating the potential impact of these proposed Standards.

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 or results of operations.

PBF LLC Limited Liability Company Agreement
PBF LLC’s amended and restated limited liability company agreement provides for tax distributions to the members of PBF LLC, including PBF Energy, subject to available cash and applicable law and contractual restrictions (including pursuant to the Company’s debt instruments) and based on certain assumptions. Generally, these tax distributions will be an amount equal to the Company’s estimate of the taxable income of PBF LLC multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to an individual resident in New York City (subject to adjustment for certain non-deductible expenses). In order for PBF LLC to make tax distributions to its members, PBF LLC will cause PBF Holding to distribute these funds to PBF LLC.



17
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

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 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 24.4% interest as of March 31, 2013.

10. DIVIDENDS AND DISTRIBUTIONS

With respect to dividends and distributions paid during the three months ended March 31, 2013, PBF Holding paid $32,976 in distributions to PBF LLC. PBF LLC used $28,976 of this amount ($0.30 per unit) to make non-tax distributions to its members, of which $7,084 was distributed to PBF Energy and the balance was distributed to its other members. PBF Energy used this $7,084 to pay cash dividends of $0.30 per share of Class A common stock on March 15, 2013. PBF LLC used the remaining $4,000 from PBF Holding's distribution to make a tax distribution to its members, with $17 distributed to PBF Energy, on account of PBF LLC's 2012 taxable income for the pre-IPO and post-IPO periods that was not previously the subject of tax distributions for 2012.

11. EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost related to the Company’s defined benefit plans consisted of the following:

 
Three Months Ended
March 31,
Pension Benefits
2013
 
2012
Components of net period benefit cost:
 
 
 
Service cost
$
3,699

 
$
2,170

Interest cost
248

 
35

Expected return on plan assets
(138
)
 
(10
)
Amortization of prior service costs
3

 
3

Amortization of loss
105

 
14

Net periodic benefit cost
$
3,917

 
$
2,212




18
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

 
Three Months Ended
March 31,
Post Retirement Medical Plan
2013
 
2012
Components of net period benefit cost:
 
 
 
Service cost
$
181

 
$
135

Interest cost
84

 
95

Net periodic benefit cost
$
265

 
$
230


12. 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 March 31, 2013 and December 31, 2012.

 
As of March 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Money market funds
$
220,830

 
$
—

 
$
—

 
$
220,830

Commodity contracts
1,255

 
9,715

 
—

 
10,970

Liabilities:
 
 
 
 
 
 
 
Catalyst lease obligations
—

 
44,780

 
—

 
44,780

Derivatives included with inventory supply arrangement obligations
—

 
2,156

 
—

 
2,156

Contingent consideration for refinery acquisition
—

 
—

 
21,358

 
21,358


 
As of December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Money market funds
$
175,786

 
$
—

 
$
—

 
$
175,786

Commodity contracts
3,303

 
—

 
—

 
3,303

Derivatives included with inventory supply arrangement obligations
—

 
5,595

 
—

 
5,595

Liabilities:
 
 
 
 
 
 
 
Catalyst lease obligations
—

 
43,442

 
—

 
43,442

Commodity contracts
—

 
1,872

 
—

 
1,872

Contingent consideration for refinery acquisition
—

 
—

 
21,358

 
21,358


The valuation methods used to measure financial instruments at fair value are as follows:
•
Money market funds categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted market prices and included within cash and cash equivalents.
•
The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair value hierarchy

19
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

are measured at fair value using a market approach based upon future commodity prices for similar instruments quoted in active markets.
•
The derivatives included with inventory supply arrangement obligations and the catalyst lease obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based upon future commodity prices for similar instruments quoted in active markets.
•
The contingent consideration for refinery acquisition obligation at December 31, 2012 is categorized in Level 3 of the fair value hierarchy and is estimated using a discounted cash flow model based on management's estimate of the future cash flows of the Toledo refinery; a risk free rate of return of 0.16%; credit rate spread of 4.38%; and a discount rate of 4.54%. During the three months ended March 31, 2013, there was no change in fair value, as the obligation is known and was paid in full on April 30, 2013.

The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value hierarchy:
 
Three Months Ended
March 31,
 
2013
 
2012
Balance at beginning of period
$
21,358

 
$
122,232

Purchases
—

 
—

Settlements
—

 
—

Unrealized loss included in earnings
—

 
692

Transfers into Level 3
—

 
—

Transfers out of Level 3
—

 
—

Balance at end of period
$
21,358

 
$
122,924


There were no transfers between levels during the three months ended March 31, 2013 and 2012, respectively.

Fair value of debt
The table below summarizes the fair value and carrying value as of March 31, 2013 and December 31, 2012.

 
March 31, 2013
 
December 31, 2012
 
Carrying
value
 
Fair
 value
 
Carrying
 value
 
Fair
value
Senior secured notes (a)
$
666,768

 
$
703,968

 
$
666,538

 
$
700,963

Catalyst leases (b)
44,780

 
44,780

 
43,442

 
43,442

 
711,548

 
748,748

 
709,980

 
744,405

Less - Current maturities
—

 
—

 
—

 
—

Long-term debt
$
711,548

 
$
748,748

 
$
709,980

 
$
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) Catalyst leases are valued using a market approach based upon future commodity prices for similar instruments quoted in active markets and is classified as a Level 2 measurement.

13. 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. The Company was also party to an agreement that contained purchase obligations for certain volumes of stored intermediates inventory during the three months ended March 31, 2012, which was terminated during the first quarter of 2012. The purchase obligations related to crude oil and feedstocks are derivative instruments that have been designated as fair value hedges in order to hedge the commodity price volatility of certain refinery inventory. The fair value of these purchase obligation

20
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

derivatives is based on market prices of crude oil and intermediates in the future. The level of activity for these derivatives is based on the level of operating inventories.

As of March 31, 2013, there were 2,194,091 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. These volumes represent the notional value of the contract.

The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of March 31, 2013, there were 2,851,000 barrels of crude oil and 401,000 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 March 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:
 
 
March 31, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Accrued expenses
$
(2,156
)
December 31, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Accrued expenses
$
5,595

 
 
 
Derivatives not designated as hedging instruments:
 
 
March 31, 2013:
 
 
Commodity contracts
Accounts receivable
$
10,970

December 31, 2012:
 
 
Commodity contracts
Accounts receivable
$
1,431



21
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

The Company’s policy is to net the fair value of the derivatives included with inventory supply arrangement obligations against the liability related to inventory supply arrangements with the same counterparty as the legal right of offset exists.

The following tables provide information about the gain or loss recognized in income on these derivative instruments and the line items in the consolidated financial statements in which such gains and losses are reflected.

Description
Location of Gain or (Loss) Recognized in
 Income on Derivatives
Gain or (Loss)
Recognized in
Income on Derivatives
Derivatives designated as hedging instruments:
 
 
For the three months ended March 31, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(7,751
)
For the three months ended March 31, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
16,009

Derivatives not designated as hedging instruments:
 
 
For the three months ended March 31, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
—

Commodity contracts
Cost of sales
$
18,678

For the three months ended March 31, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(8
)
Commodity contracts
Cost of sales
$
26,918

Hedged items designated in fair value hedges:
 
 
For the three months ended March 31, 2013:
 
 
Crude oil and feedstock inventory
Cost of sales
$
2,888

For the three months ended March 31, 2012:
 
 
Crude oil and feedstock inventory
Cost of sales
$
(12,739
)

Ineffectiveness related to the Company's fair value hedges resulted in a loss of $4,863 for the three months ended March 31, 2013 and gain of $3,876 for the three months ended March 31, 2012, respectively. Gains and losses due to ineffectiveness were excluded from the assessment of hedge effectiveness.


22
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

14. NET INCOME PER SHARE OF PBF ENERGY
For the period subsequent to the IPO, the following table sets forth the computation of basic and diluted net income per common share attributable to PBF Energy:

Basic Earnings Per Share:
 
Numerator for basic net income per Class A common share-net income attributable to PBF Energy
$
11,406

Denominator for basic net income per Class A common share-weighted average shares
23,589,687

Basic net income attributable to PBF Energy per Class A common share
$
0.48

 
 
Diluted Earnings Per Share:
 
Numerator:
 
Net income attributable to PBF Energy
$
11,406

Plus: Net income attributable to noncontrolling interest (1)
58,305

Less: Income tax on net income attributable to noncontrolling interest (2)
(23,025
)
Numerator for diluted net income per Class A common share
$
46,686

 
 
Denominator:
 
Denominator for basic net income per Class A common share-weighted average shares
23,589,687

Effect of dilutive securities:
 
Conversion of PBF LLC Series A Units (3)
72,972,131

Common stock equivalents (4)
853,758

Denominator for diluted net income per common share-adjusted weighted average shares
97,415,576

Diluted net income attributable to PBF Energy per Class A common share
$
0.48

 
——————————
(1)
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 Series A Units for shares of PBF Energy's Class A common stock.
(2)
Represents an adjustment to reflect PBF Energy's current effective corporate tax rate of approximately 39.5% applied to all periods presented. The adjustment assumes the full exchange of existing PBF LLC Series A Units as described in (1) above.
(3)
Represents an adjustment to weighted-average diluted shares to assume the full exchange of existing PBF LLC Series A Units as described in (1) above.
(4)
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 57,500 shares of PBF Energy Class A common stock because they are anti-dilutive.

15. SUBSEQUENT EVENTS

On April 11, 2013 and May 6, 2013, PBF Holding made cash distributions to PBF LLC in the amount of $21,031 and $5,546, respectively. PBF LLC subsequently made tax distributions of $21,031 and $5,546 to its members relating to the three months ended March 31, 2013 and the post-IPO period from December 18, 2012 to December 31, 2012, respectively, pursuant to the terms of PBF LLC's amended and restated limited liability company agreement. PBF Energy's share of such tax distributions was $5,136 and $1,354, respectively.



23
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

16. CONDENSED 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 which 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 the Company, 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 Corporation. For purposes of the following footnote, PBF Finance Corporation is referred to as “Co-Issuer.” The notes are fully and unconditionally guaranteed jointly and severally by the 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.

24
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING

CONDENSED CONSOLIDATING BALANCE SHEET

 
March 31, 2013
 
Issuer
 
Guarantors Subsidiaries
 
Non-Guarantors Subsidiaries
 
Combining and Consolidated Adjustments
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
302,901

 
$
101,187

 
$
—

 
$
—

 
$
404,088

Accounts receivable
350,506

 
312,340

 
—

 
—

 
662,846

Inventories
717,071

 
733,447

 
—

 
—

 
1,450,518

Other current assets
23,637

 
4,953

 
—

 
—

 
28,590

Due from related parties
8,370,946

 
10,480,686

 
—

 
(18,851,632
)
 
—

Total current assets
9,765,061

 
11,632,613

 
—

 
(18,851,632
)
 
2,546,042

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
32,114

 
1,626,177

 
—

 
—

 
1,658,291

Investment in subsidiaries
1,427,015

 
—

 
—

 
(1,427,015
)
 
—

Deferred charges and other assets, net
30,624

 
160,981

 
—

 
—

 
191,605

Total assets
$
11,254,814

 
$
13,419,771

 
$
—

 
$
(20,278,647
)
 
$
4,395,938

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
237,276

 
$
238,944

 
$
—

 
$
—

 
$
476,220

Accrued expenses
523,317

 
615,135

 
—

 
—

 
1,138,452

Deferred revenue
—

 
212,347

 
—

 
—

 
212,347

Due to related parties
8,027,994

 
10,836,155

 
—

 
(18,851,639
)
 
12,510

Total current liabilities
8,788,587

 
11,902,581

 
—

 
(18,851,639
)
 
1,839,529

 
 
 
 
 
 
 
 
 
 
Delaware Economic Development Authority loan
—

 
16,000

 
—

 
—

 
16,000

Long-term debt
666,768

 
44,780

 
—

 
—

 
711,548

Other long-term liabilities
3,208

 
29,395

 
—

 
—

 
32,603

Total liabilities
9,458,563

 
11,992,756

 
—

 
(18,851,639
)
 
2,599,680

 
 
 
 
 
 
 
 
 
 
Commitments and contingencies

 

 

 

 

 
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
 
Member's equity
930,631

 
664,640

 
—

 
(664,640
)
 
930,631

Retained earnings (accumulated deficit)
874,669

 
763,937

 
—

 
(763,930
)
 
874,676

Accumulated other comprehensive loss
(9,049
)
 
(1,562
)
 
—

 
1,562

 
(9,049
)
Total equity
1,796,251

 
1,427,015

 
—

 
(1,427,008
)
 
1,796,258

Total liabilities and equity
$
11,254,814

 
$
13,419,771

 
$
—

 
$
(20,278,647
)
 
$
4,395,938


25
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING

CONDENSED CONSOLIDATING BALANCE SHEET

 
December 31, 2012
 
Issuer
 
Guarantors Subsidiaries
 
Non-Guarantors Subsidiaries
 
Combining and Consolidated Adjustments
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
241,926

 
$
12,365

 
$
—

 
$
—

 
$
254,291

Accounts receivable
306,999

 
196,797

 
—

 
—

 
503,796

Inventories
664,225

 
832,894

 
—

 
—

 
1,497,119

Other current assets
8,835

 
4,553

 
—

 
—

 
13,388

Due from related parties
6,770,893

 
8,105,364

 
—

 
(14,861,536
)
 
14,721

Total current assets
7,992,878

 
9,151,973

 
—

 
(14,861,536
)
 
2,283,315

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
28,200

 
1,607,387

 
—

 
—

 
1,635,587

Investment in subsidiaries
945,622

 
—

 
—

 
(945,622
)
 
—

Deferred charges and other assets, net
31,081

 
166,268

 
—

 
—

 
197,349

Total assets
$
8,997,781

 
$
10,925,628

 
$
—

 
$
(15,807,158
)
 
$
4,116,251

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
197,624

 
$
162,433

 
$
—

 
$
—

 
$
360,057

Accrued expenses
363,536

 
662,382

 
—

 
—

 
1,025,918

Deferred revenue
—

 
210,543

 
—

 
—

 
210,543

Due to related parties
6,016,505

 
8,845,031

 
—

 
(14,861,536
)
 
—

Total current liabilities
6,577,665

 
9,880,389

 
—

 
(14,861,536
)
 
1,596,518

 
 
 
 
 
 
 
 
 
 
Delaware Economic Development Authority loan
—

 
20,000

 
—

 
—

 
20,000

Long-term debt
666,538

 
43,442

 
—

 
—

 
709,980

Other long-term liabilities
1,924

 
36,175

 
—

 
—

 
38,099

Total liabilities
7,246,127

 
9,980,006

 
—

 
(14,861,536
)
 
2,364,597

 
 
 
 
 
 
 
 
 
 
Commitments and contingencies

 

 

 

 

 
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
 
 
 
 
 
Member's equity
930,098

 
664,108

 
—

 
(664,108
)
 
930,098

Retained earnings (accumulated deficit)
830,497

 
283,076

 
—

 
(283,076
)
 
830,497

Accumulated other comprehensive loss
(8,941
)
 
(1,562
)
 
—

 
1,562

 
(8,941
)
Total equity
1,751,654

 
945,622

 
—

 
(945,622
)
 
1,751,654

Total liabilities and equity
$
8,997,781

 
$
10,925,628

 
$
—

 
$
(15,807,158
)
 
$
4,116,251


26
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)

16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended March 31, 2013
 
Issuer
 
Guarantors Subsidiaries
 
Non-Guarantors Subsidiaries
 
Combining and Consolidated Adjustments
 
Total
 
 
 
 
 
 
 
 
 
 
Revenues
$
3,053,792

 
$
3,513,490

 
$
—

 
$
(1,769,435
)
 
$
4,797,847

 
 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
 
Cost of sales, excluding depreciation
3,407,534

 
2,797,002

 
—

 
(1,769,435
)
 
4,435,101

Operating expenses, excluding depreciation
—

 
206,015

 
—

 
—

 
206,015

General and administrative expenses
26,445

 
3,649

 
—

 
—

 
30,094

Depreciation and amortization expense
2,823

 
23,709

 
—

 
—

 
26,532

 
3,436,802

 
3,030,375

 
—

 
(1,769,435
)
 
4,697,742

 
 
 
 
 
 
 
 
 
 
Income (loss) from operations
(383,010
)
 
483,115

 
—

 
—

 
100,105

 
 
 
 
 
 
 
 
 
 
Other income (expenses)
 
 
 
 
 
 
 
 
 
Equity in earnings (loss) of subsidiaries
480,866

 
—

 
—

 
(480,866
)
 
—

Change in fair value of catalyst lease