PBF-2013.9.30.10Q


 
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: September 30, 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
x  Yes    ¨  No
PBF Finance Corporation
x  Yes    o  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    o  No
PBF Holding Company LLC
x  Yes    o  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 November 4, 2013, PBF Energy Inc. had outstanding 39,582,312 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 40.9% 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 November 4, 2013. PBF Holding Company LLC has no common stock outstanding. As of November 4, 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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
ITEM 1A.
Risk Factors
 
 
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 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"). 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 and nine months ended September 30, 2013 and constituting 100% of PBF Energy’s revenue generating assets as of September 30, 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 that involve risks 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” in this Quarterly Report on Form 10-Q and elsewhere in the Annual Reports on Form 10-K for the year ended December 31, 2012 of PBF Energy Inc., PBF Holding Company LLC and PBF Finance Corporation, which we refer to as our 2012 Annual Reports on Form 10-K, and in 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 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 described in our 2012 Annual Reports on Form 10-K and this Quarterly Report on Form 10-Q;
•
our arrangements with J. Aron expose us to J. Aron-related 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, and 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 facilities and status of an air permit to transfer crude to Paulsboro;
•
the possibility that we might reduce or not make further dividend payments;
•
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;

3


•
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 may change;
•
unanticipated developments may delay or negatively impact the planned MLP;
•
receipt of regulatory approvals and compliance with contractual obligations required in connection with the planned MLP;
•
the impact of the planned MLP on our relationships with our employees, customers and vendors and our credit rating and cost of funds; and
•
the possibility that the interests of our financial sponsors (funds affiliated with The Blackstone Group L.P. and First Reserve Management, L.P.) 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 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 also include estimates of the total amount of payments, including annual payments, under our tax receivable agreement. These estimates are 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 our Class A common stock as 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. See the following risks set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012: “We will be required to pay the holders of PBF LLC Series A Units for certain tax benefits we may claim arising in connection with our initial public offering and future exchanges of PBF LLC Series A Units for shares of our Class A Common Stock and related transactions, and the amounts we may pay could be significant.” and “In certain cases, payments by us under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement. These provisions may deter a change in control of our Company.”
Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. 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.

4

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 and per share data)
 
September 30,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
57,417

 
$
285,884

Accounts receivable
577,879

 
503,796

Inventories
1,472,637

 
1,497,119

Deferred tax asset
27,279

 
7,717

Prepaid expense and other current assets
56,133

 
13,388

Total current assets
2,191,345

 
2,307,904

 
 
 
 
Property, plant, and equipment, net
1,735,760

 
1,635,587

Deferred tax assets
200,282

 
112,862

Deferred charges and other assets, net
201,954

 
197,349

Total assets
$
4,329,341

 
$
4,253,702

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
563,922

 
$
360,057

Accrued expenses
1,042,539

 
1,031,467

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

 
1,007

Deferred revenue
1,882

 
210,543

Total current liabilities
1,609,350

 
1,603,074

 
 
 
 
Delaware Economic Development Authority loan
16,000

 
20,000

Long-term debt
722,565

 
709,980

Payable to related parties pursuant to tax receivable agreement
298,112

 
159,004

Other long-term liabilities
34,478

 
38,099

Total liabilities
2,680,505

 
2,530,157

 
 
 
 
Commitments and contingencies (Note 11)

 

 
 
 
 
Equity:
 
 
 
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 39,581,613 shares outstanding at September 30, 2013, 23,571,221 shares outstanding, at December 31, 2012
40

 
24

Class B common stock, $0.001 par value, 1,000,000 shares authorized, 41 shares outstanding, at September 30, 2013 and December 31, 2012
—

 
—

Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding, at September 30, 2013 and December 31, 2012
—

 
—

Additional paid in capital
659,661

 
417,835

(Accumulated deficit) / Retained earnings
(15,702
)
 
1,956

Accumulated other comprehensive loss
(3,495
)
 
(61
)
Total PBF Energy Inc. equity
640,504

 
419,754

Noncontrolling interest
1,008,332

 
1,303,791

Total equity
1,648,836

 
1,723,545

Total liabilities and equity
$
4,329,341

 
$
4,253,702

 
 
 
 

See notes to condensed consolidated financial statements.
5


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 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
$
4,858,880

 
$
5,395,206

 
$
14,335,020

 
$
15,188,327

 
 
 
 
 
 
 
 
Cost and expenses:
 
 
 
 
 
 
 
Cost of sales, excluding depreciation
4,663,697

 
4,932,645

 
13,394,777

 
13,871,884

Operating expenses, excluding depreciation
192,647

 
179,035

 
601,245

 
537,880

General and administrative expenses
30,748

 
38,942

 
79,983

 
78,042

(Gain) loss on sale of assets
(48
)
 
20

 
(48
)
 
(2,430
)
Depreciation and amortization expense
27,435

 
24,455

 
81,530

 
67,419

 
4,914,479

 
5,175,097

 
14,157,487

 
14,552,795

 
 
 
 
 
 
 
 
(Loss) income from operations
(55,599
)
 
220,109

 
177,533

 
635,532

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

 
(692
)
 
—

 
(2,076
)
Change in fair value of catalyst lease
(2,363
)
 
(5,952
)
 
3,118

 
(6,929
)
Interest expense, net
(26,242
)
 
(26,901
)
 
(69,561
)
 
(86,753
)
(Loss) income before income taxes
(84,204
)
 
186,564

 
111,090

 
539,774

Income tax benefit
(19,311
)
 
—

 
(898
)
 
—

Net (loss) income
(64,893
)
 
$
186,564

 
111,988

 
$
539,774

Less: net (loss) income attributable to noncontrolling interest
(45,045
)
 
 
 
103,604

 
 
Net (loss) income attributable to PBF Energy Inc.
$
(19,848
)
 
 
 
$
8,384

 
 
 
 
 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding
 
 
 
 
 
 
 
Basic
39,575,429

 
 
 
30,094,946

 
 
Diluted
39,575,429

 
 
 
30,748,901

 
 
Net (loss) income available to Class A common stock per share:
 
 
 
 
 
 
 
Basic
$
(0.50
)
 
 
 
$
0.28

 
 
Diluted
$
(0.50
)
 
 
 
$
0.27

 
 
 
 
 
 
 
 
 
 
Dividends per common share
$
0.30

 
 
 
$
0.90

 
 
 
 
 
 
 
 
 
 





See notes to condensed consolidated financial statements.
6


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



 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Net (loss) income
$
(64,893
)
 
$
186,564

 
$
111,988

 
$
539,774

Other comprehensive income:
 
 
 
 

 

Unrealized gain on available for sale securities
13

 
2

 
7

 
2

Amortization of defined benefit plans unrecognized net loss
108

 
—

 
324

 
17

Total other comprehensive income
121

 
2

 
331

 
19

Comprehensive (loss) income
(64,772
)
 
$
186,566

 
112,319

 
$
539,793

Less: Comprehensive (loss) income attributable to noncontrolling interest
(45,004
)
 

 
103,800

 
 
Comprehensive (loss) income attributable to PBF Energy Inc.
$
(19,768
)
 

 
$
8,519

 
 

See notes to condensed consolidated financial statements.
7


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
(unaudited, in thousands)
 
Nine months ended September 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
111,988

 
$
539,774

Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Depreciation and amortization
86,417

 
71,144

Stock-based compensation
2,750

 
1,707

Change in fair value of catalyst lease obligation
(3,118
)
 
6,929

Change in fair value of contingent consideration
—

 
2,076

Deferred income taxes
(898
)
 
—

Change in tax receivable agreement liability
8,095

 
—

Non-cash change in inventory repurchase obligations
(13,362
)
 
5,126

Write-off of unamortized deferred financing fees
—

 
4,391

Pension and other post retirement benefits costs
12,654

 
9,513

Gain on disposition of property, plant and equipment
(48
)
 
(2,430
)
 
 
 
 
Changes in current assets and current liabilities:
 
 
 
Accounts receivable
(74,083
)
 
(179,989
)
Inventories
31,165

 
85,179

Other current assets
(42,745
)
 
36,971

Accounts payable
203,865

 
(39,153
)
Accrued expenses
48,811

 
(56,404
)
Deferred revenue
(208,661
)
 
13,719

Other assets and liabilities
(20,249
)
 
(29,731
)
Net cash provided by operations
142,581

 
468,822

 
 
 
 
Cash flow from investing activities:
 
 
 
Expenditures for property, plant and equipment
(201,906
)
 
(102,004
)
Expenditures for deferred turnarounds cost
(15,859
)
 
(27,501
)
Expenditures for other assets
(10,584
)
 
(7,731
)
Proceeds from sale of assets
30,826

 
3,381

Net cash used in investing activities
(197,523
)
 
(133,855
)
 
 
 
 
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
(140,457
)
 
(15,081
)
Dividend payments
(26,042
)
 
—

Proceeds from 8.25% senior secured notes
—

 
665,806

Proceeds from long-term debt
—

 
430,000

Proceeds from catalyst lease
—

 
9,452

Proceeds from revolver borrowings
745,000

 
—

Repayments of revolver borrowings
(730,000
)
 
—

Repayments of long-term debt
—

 
(1,184,597
)
Payment of contingent consideration related to acquisition of Toledo refinery
(21,357
)
 
(103,642
)
Deferred financing costs and other
(669
)
 
(17,273
)
Net cash used in financing activities
(173,525
)
 
(215,085
)
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(228,467
)
 
119,882

Cash and equivalents, beginning of period
285,884

 
50,166

Cash and equivalents, end of period
$
57,417

 
$
170,048

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

 
$
—

         Accrued construction in progress
7,649

 
11,710

         Non-cash impact of inventory supply and offtake agreements on inventory and accrued expenses
6,683

 
48,180


See notes to condensed consolidated financial statements.
8


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

 
September 30,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
57,417

 
$
254,291

Accounts receivable
577,879

 
503,796

Due from related party
—

 
14,721

Inventories
1,472,637

 
1,497,119

Prepaid expense and other current assets
56,133

 
13,388

Total current assets
2,164,066

 
2,283,315

 
 
 
 
Property, plant and equipment, net
1,735,760

 
1,635,587

Deferred charges and other assets, net
201,954

 
197,349

Total assets
$
4,101,780

 
$
4,116,251

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
563,922

 
$
360,057

Accrued expenses
1,043,603

 
1,025,918

Deferred revenue
1,882

 
210,543

Total current liabilities
1,609,407

 
1,596,518

 
 
 
 
Delaware Economic Development Authority loan
16,000

 
20,000

Long-term debt
722,565

 
709,980

Intercompany notes payable
31,632

 
—

Other long-term liabilities
36,351

 
38,099

Total liabilities
2,415,955

 
2,364,597

 
 
 
 
Commitments and contingencies (Note 11)

 

 
 
 
 
Equity:
 
 
 
Member's equity
931,587

 
930,098

Retained earnings
762,848

 
830,497

Accumulated other comprehensive loss
(8,610
)
 
(8,941
)
Total equity
1,685,825

 
1,751,654

Total liabilities and equity
$
4,101,780

 
$
4,116,251


See notes to condensed consolidated financial statements.
9


PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
$
4,858,880

 
$
5,395,206

 
$
14,335,020

 
$
15,188,327

 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
Cost of sales, excluding depreciation
4,663,697

 
4,932,645

 
13,394,777

 
13,871,884

Operating expenses, excluding depreciation
192,647

 
179,035

 
601,245

 
537,880

General and administrative expenses
22,653

 
38,942

 
71,888

 
78,042

(Gain) loss on sale of assets
(48
)
 
20

 
(48
)
 
(2,430
)
Depreciation and amortization expense
27,435

 
24,455

 
81,530

 
67,419

 
4,906,384

 
5,175,097

 
14,149,392

 
14,552,795

 
 
 
 
 
 
 
 
(Loss) income from operations
(47,504
)
 
220,109

 
185,628

 
635,532

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

 
(692
)
 
—

 
(2,076
)
Change in fair value of catalyst lease
(2,363
)
 
(5,952
)
 
3,118

 
(6,929
)
Interest expense, net
(26,363
)
 
(26,901
)
 
(69,712
)
 
(86,753
)
Net (loss) income
$
(76,230
)
 
$
186,564

 
$
119,034

 
$
539,774

 
 
 
 
 
 
 
 

See notes to condensed consolidated financial statements.
10


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

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2013
 
2012
 
2013
 
2012
Net (loss) income
$
(76,230
)
 
$
186,564

 
$
119,034

 
$
539,774

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain on available for sale
     securities
13

 
2

 
7

 
2

Amortization of defined benefit plans
      unrecognized net loss
108

 
—

 
324

 
17

Total other comprehensive income
121

 
2

 
331

 
19

Comprehensive (loss) income
$
(76,109
)
 
$
186,566

 
$
119,365

 
$
539,793

 
 
 
 
 
 
 
 



See notes to condensed consolidated financial statements.
11

PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Nine months ended September 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
119,034

 
$
539,774

Adjustments to reconcile net income to net cash provided by operations:
 
 
 
Depreciation and amortization
86,417

 
71,144

Stock-based compensation
2,750

 
1,707

Change in fair value of catalyst lease obligation
(3,118
)
 
6,929

Change in fair value of contingent consideration
—

 
2,076

Non-cash change in inventory repurchase obligations
(13,362
)
 
5,126

Write-off of unamortized deferred financing fees
—

 
4,391

Pension and other post retirement benefit costs
12,654

 
9,513

Gain on disposition of property, plant and equipment
(48
)
 
(2,430
)
 
 
 
 
Changes in current assets and current liabilities:
 
 
 
Accounts receivable
(74,083
)
 
(179,989
)
Due to/from related party
14,721

 
—

Inventories
31,165

 
85,179

Other current assets
(42,745
)
 
36,971

Accounts payable
203,865

 
(39,153
)
Accrued expenses
52,513

 
(56,404
)
Deferred revenue
(208,661
)
 
13,719

Other assets and liabilities
(18,375
)
 
(29,731
)
Net cash provided by operations
162,727

 
468,822

 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(201,906
)
 
(102,004
)
Expenditures for deferred turnarounds costs
(15,859
)
 
(27,501
)
Expenditures for other assets
(10,584
)
 
(7,731
)
Proceeds from sale of assets
30,826

 
3,381

Net cash used in investing activities
(197,523
)
 
(133,855
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from revolver borrowings
745,000

 
—

Proceeds from intercompany notes payable
31,632

 
—

Proceeds from member's capital contributions
—

 
250

Proceeds from 8.25% senior secured notes
—

 
665,806

Proceeds from long-term debt
—

 
430,000

Proceeds from catalyst lease
—

 
9,452

Distributions to members
(186,684
)
 
(15,081
)
Repayments of revolver borrowings
(730,000
)
 
—

Repayments of long-term debt
—

 
(1,184,597
)
Payment of contingent consideration related to acquisition of Toledo refinery
(21,357
)
 
(103,642
)
Deferred financing costs and other
(669
)
 
(17,273
)
Net cash used in financing activities
(162,078
)
 
(215,085
)
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(196,874
)
 
119,882

Cash and equivalents, beginning of period
254,291

 
50,166

Cash and equivalents, end of period
$
57,417

 
$
170,048

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

 
$
—

         Accrued construction in progress
7,649

 
11,710

         Non-cash impact of inventory supply and offtake agreements on inventory and accrued expenses
6,683

 
48,180


See notes to condensed consolidated financial statements.
12
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED 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, PBF Energy 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"). All of the shares were sold by funds affiliated with The Blackstone Group L.P., or Blackstone, and First Reserve Management, L.P., or First Reserve. 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, resulting in a divestiture of approximately 16.6% of Blackstone and First Reserve's holdings in PBF LLC. 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 nine months ended September 30, 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.    

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 of the Company for the periods presented. Certain amounts reported in prior years have been reclassified to conform to the current year presentation. 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

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

by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the financial statements included in the Annual Reports on Form 10-K for the year ended December 31, 2012 of PBF Energy Inc., PBF Holding Company LLC and PBF Finance Corporation. The results of operations for the three and nine months ended September 30, 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 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 September 30, 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 and nine months ended September 30, 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 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 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%.

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 September 30, 2013, June 12, 2013 (the completion date of the Secondary Offering) 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
%
June 12, 2013
57,027,225

 
39,563,835

 
96,591,060

 
59.0
%
 
41.0
%
 
100
%
September 30, 2013
57,237,488

 
39,581,613

 
96,819,101

 
59.1
%
 
40.9
%
 
100
%

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

——————————
*
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 nine months ended September 30, 2013:
 
 
PBF Energy Inc. Equity
 
Noncontrolling
Interest
 
Total Equity
Balance at January 1, 2013
$
419,754

 
$
1,303,791

 
$
1,723,545

Net income
8,384

 
103,604

 
111,988

Dividend and distributions
(26,042
)
 
(140,457
)
 
(166,499
)
Record deferred tax asset and liabilities and tax receivable agreement associated with Secondary Offering
(23,654
)
 
—

 
(23,654
)
Record allocation of non controlling interest upon completion of Secondary Offering
260,243

 
(260,243
)
 
—

Stock-based compensation
1,636

 
1,114

 
2,750

Exercise of PBF LLC options and warrants, net
—

 
375

 
375

Other comprehensive income
167

 
164

 
331

Exchange of PBF LLC Series A Units for Class A common stock
16

 
(16
)
 
—

Balance at September 30, 2013
$
640,504

 
$
1,008,332

 
$
1,648,836


4. INVENTORIES
Inventories consisted of the following:

September 30, 2013
 
Titled Inventory
 
Inventory Supply and Offtake Arrangements
 
Total
Crude oil and feedstocks
$
541,097

 
$
95,371

 
$
636,468

Refined products and blendstocks
471,289

 
331,626

 
802,915

Warehouse stock and other
33,254

 
—

 
33,254

 
$
1,045,640

 
$
426,997

 
$
1,472,637

 
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


The inventory offtake agreements at the Paulsboro and Delaware City refineries were terminated on July 1, 2013 and separate inventory intermediation agreements for these refineries became effective upon the termination (see Note 5 Inventory Intermediation Agreements).

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


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 counterparties in connection with the offtake and intermediation agreements and stored in the Paulsboro and Delaware City refineries' storage facilities.

At September 30, 2013 and December 31, 2012, the replacement value of inventories exceeded the LIFO carrying value by approximately $72,689 and $79,859, respectively.

5. INVENTORY INTERMEDIATION AGREEMENTS
On June 26, 2013, the Company entered into Inventory Intermediation Agreements (the “Intermediation Agreements”) with J. Aron & Company (“J. Aron”), a subsidiary of The Goldman Sachs Group, Inc., to support the operations of the Paulsboro and Delaware City refineries (the "Refineries"). Pursuant to the Intermediation Agreements, J. Aron purchased all of the finished and intermediate products (collectively the “Products”) located at the Refineries immediately subsequent to the termination of the product offtake agreements. Pursuant to the terms of the Intermediation Agreements which expire on July 1, 2015, J. Aron has agreed to purchase the Products produced and delivered into the Refineries’ storage tanks on a daily basis. J. Aron further agreed to sell to us on a daily basis the Products delivered out of the Refineries’ storage tanks. The net amount of all J. Aron daily purchases and sales with PBF will be provisionally invoiced weekly with a monthly true-up invoice issued for any price, volume, or fee adjustments ten business days after the calendar month end. We entered into the Intermediation Agreements for the purpose of managing the Products inventory at the Refineries, which provides us with financial flexibility and improves our liquidity by allowing us to monetize Products inventory in our tanks as they are produced prior to being sold to third parties.
Title to Products purchased by J.Aron passes upon delivery into the Refineries’ storage tanks and title to Products purchased by us passes upon discharge out of the Refineries’ storage tanks. J. Aron owns and has title to all of the Products stored in the tanks (or in other locations outside the refineries as agreed upon by both parties) while custody remains with us. The Company incurred fees of $3.1 million in connection with the Intermediation Agreements during the three and nine month periods ended September 30, 2013, which are included as a component of interest expense in the condensed consolidated statement of income.
Upon the expiration or termination of the Intermediation Agreements, we are obligated to purchase from J. Aron all volumes of Products located in the Refineries’ storage tanks. All purchase and sale transactions under the Intermediation Agreements are consummated at a benchmark market price adjusted for a specified product type differential. The sale and purchase transactions under the 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. At September 30, 2013, there were 3.2 million barrels of inventory stored in the Company's tanks at the Refineries that were owned by J. Aron. The Company recorded liabilities associated with purchase of this inventory of $366.7 million in accrued expenses as of September 30, 2013.


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

6. DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets, net consisted of the following:
 
 
September 30,
2013
 
December 31, 2012
Deferred turnaround costs, net
$
77,656

 
$
78,128

Catalyst
68,374

 
66,377

Deferred financing costs, net
27,929

 
30,987

Restricted cash
12,116

 
12,114

Linefill
9,636

 
8,042

Intangible assets, net
761

 
1,085

Other
5,482

 
616

 
$
201,954

 
$
197,349


 
7. ACCRUED EXPENSES
PBF Energy
Accrued expenses consisted of the following:

 
September 30,
2013
 
December 31, 2012
Inventory-related accruals
$
445,753

 
$
287,929

Inventory supply and offtake arrangements
439,264

 
536,594

Excise and sales tax payable
27,651

 
40,776

Accrued transportation costs
23,979

 
20,338

Accrued interest
9,041

 
22,764

Accrued utilities
16,622

 
19,060

Customer deposits
28,104

 
26,541

Accrued salaries and benefits
5,995

 
15,212

Accrued construction in progress
7,649

 
16,481

Income taxes payable
—

 
1,275

Fair value of contingent consideration for refinery acquisition
—

 
21,358

Other
38,481

 
23,139

 
$
1,042,539

 
$
1,031,467

 

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

 PBF Holding
Accrued expenses consisted of the following:

 
September 30,
2013
 
December 31,
2012
Inventory-related accruals
$
445,753

 
$
287,929

Inventory supply and offtake arrangements
439,264

 
536,594

Excise and sales tax payable
27,651

 
36,414

Accrued transportation costs
23,979

 
20,338

Accrued interest
9,041

 
22,764

Accrued utilities
16,622

 
19,060

Customer deposits
28,104

 
26,541

Accrued salaries and benefits
5,995

 
15,212

Accrued construction in progress
7,649

 
16,481

Fair value of contingent consideration for refinery acquisition
—

 
21,358

Other
39,545

 
23,227

 
$
1,043,603

 
$
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 Intermediation Agreements with J. Aron commencing in July 2013 (see Note 5 Inventory Intermediation Agreements). As of September 30, 2013, a liability included in Inventory supply and offtake arrangements is recorded at market price for the J. Aron owned inventory held in the Company's storage tanks under the 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 products offtake agreements with Morgan Stanley Capital Group Inc. (“MSCG”) 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 $0 and $20,248 related to this liability in the three and nine months ended September 30, 2013, respectively. The Company recorded a non-cash charge of $30,249 and $17,309 related to this liability in the three and nine months ended September 30, 2012, respectively.

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, the Company received confirmation from the 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 of September 30, 2013, as the proceeds from the loan were used for capital projects.


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

In October 2013, the Company received confirmation from the Delaware Economic Development Authority that the Company had satisfied the conditions necessary for the second $4,000 tranche of the loan to be converted to a grant.

9. 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% 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 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 September 30, 2013
 
Nine Months Ended September 30, 2013
Current tax benefit
 
$
(1,744
)
 
$
—

Deferred tax benefit
 
(17,567
)
 
(898
)
Total tax benefit
 
$
(19,311
)
 
$
(898
)

The difference between the Company’s income tax benefit and the income tax provision computed by applying the United States statutory rate and the difference between the Company’s effective income tax rate and the United States statutory rate are reconciled below:
 
 
 
Three Months Ended September 30, 2013
 
Nine Months Ended September 30, 2013
Provision at Federal statutory rate
 
$
(13,693
)
 
35.0
 %
 
$
2,620

 
35.0
 %
Increase (decrease) attributable to flow-through of certain tax adjustments:
 
 
 
 

 
 
 
 
State income taxes (net federal income tax)
 
(1,917
)
 
4.9
 %
 
367

 
4.9
 %
Non deductible/nontaxable items
 
2,377

 
(6.1
)%
 
2,438

 
32.6
 %
Adjustment to deferred tax assets and liabilities for change in tax rates due to business mix
 
(4,983
)
 
12.7
 %
 
(4,983
)
 
(66.6
)%
Other
 
(1,095
)
 
2.8
 %
 
(1,340
)
 
(17.9
)%
Total
 
$
(19,311
)
 
49.3
 %
 
$
(898
)
 
(12.0
)%

PBF Energy has determined there are no material uncertain tax positions as of September 30, 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.


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

10. INTERCOMPANY NOTES PAYABLE
As of September 30, 2013, PBF Holding entered into notes payable with PBF Energy and PBF LLC for an aggregate principal amount of $31,632. 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. 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 $10,426 recorded as of September 30, 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 September 30, 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, Inc. (R&M) ("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 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 Environmental Protection Agency ("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.

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 an air 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 Refining

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

double-loop rail terminal violate Delaware’s Coastal Zone Act.  A hearing on the first appeal before the State Coastal Zone Industrial Control Board occurred on July 16, 2013, and the board ruled in favor of Delaware City Refining dismissing the 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 filed cross-appeals.  No schedule has yet been set for the appeal in Superior Court.  A hearing on the second appeals before the Environmental Appeals Board, case no. 2013-06, has been scheduled for January 21, 2014 with motions to dismiss scheduled to be heard on December 10, 2013.

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 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 September 30, 2013.


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

12. DIVIDENDS AND DISTRIBUTIONS
With respect to dividends and distributions paid during the nine months ended September 30, 2013, PBF Holding paid $186,684 in distributions to PBF LLC. PBF LLC used $86,936 of this amount in total to make three separate non-tax distributions of $0.30 per unit ($0.90 per unit in total) to its members, of which $26,042 was distributed to PBF Energy and the balance was distributed to its other members on March 15, 2013, June 7, 2013 and August 21, 2013. PBF Energy used this $26,042 to pay three separate cash dividends of $0.30 per share of Class A common stock on March 15, 2013, June 7, 2013 and August 21, 2013. PBF LLC used the remaining $99,748 from PBF Holding's distribution to make tax distributions to its members during the nine months ended September 30, 2013, with $20,185 distributed to PBF Energy, of which $1,065 was paid by PBF LLC directly to the applicable taxing authorities on behalf of PBF Energy.

13. 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 September 30,
 
Nine Months Ended September 30,
Pension Benefits
2013
 
2012
 
2013
 
2012
Components of net period benefit cost:
 
 
 
 
 
 
 
Service cost
$
3,699

 
$
2,860

 
$
11,096

 
$
8,578

Interest cost
248

 
125

 
744

 
376

Expected return on plan assets
(138
)
 
(81
)
 
(414
)
 
(243
)
Amortization of prior service costs
3

 
3

 
9

 
8

Amortization of loss
105

 
8

 
315

 
23

Net periodic benefit cost
$
3,917

 
$
2,915

 
$
11,750

 
$
8,742



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Post Retirement Medical Plan
2013
 
2012
 
2013
 
2012
Components of net period benefit cost:
 
 
 
 
 
 
 
Service cost
$
181

 
$
205

 
$
544

 
$
475

Interest cost
84

 
106

 
251

 
296

Net periodic benefit cost
$
265

 
$
311

 
$
795

 
$
771




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

14. 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 September 30, 2013 and December 31, 2012.

 
As of September 30, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Money market funds
$
5,856

 
$
—

 
$
—

 
$
5,856

Commodity contracts
8,319

 
—

 
—

 
8,319

Derivatives included with intermediation agreement obligations
—

 
29,563

 
—

 
29,563

Liabilities:
 
 
 
 
 
 
 
Commodity contracts
—

 
14,587

 
—

 
14,587

Derivatives included with inventory supply arrangement obligations
—

 
1,291

 
—

 
1,291

Catalyst lease obligations
—

 
40,323

 
—

 
40,323

 
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 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, derivatives included with 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 three and nine months ended September 30, 2013, there was no change in fair value, as the obligation was known and was paid in full on April 30, 2013.

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


The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value hierarchy:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Balance at beginning of period
$
—

 
$
122,924

 
$
21,358

 
$
122,232

Purchases
—

 
—

 
—

 
—

Settlements
—

 
(103,643
)
 
(21,358
)
 
(103,643
)
Unrealized loss included in earnings
—

 
692

 
—

 
1,384

Transfers into Level 3
—

 
—

 
—

 
—

Transfers out of Level 3
—

 
—

 
—

 
—

Balance at end of period
$
—

 
$
19,973

 
$
—

 
$
19,973


There were no transfers between levels during the three and nine months ended September 30, 2013 and 2012, respectively.
Fair value of debt
The table below summarizes the fair value and carrying value as of September 30, 2013 and December 31, 2012.

 
September 30, 2013
 
December 31, 2012
 
Carrying
value
 
Fair
 value
 
Carrying
 value
 
Fair
value
Senior secured notes (a)
$
667,242

 
$
684,918

 
$
666,538

 
$
700,963

Revolver (b)
15,000

 
15,000

 
—

 
—

Catalyst leases (c)
40,323

 
40,323

 
43,442

 
43,442

Long-term debt
$
722,565

 
$
740,241

 
$
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) 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.



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

15. 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 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 nine months ended September 30, 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 September 30, 2013, there were 928,846 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 September 30, 2013, there were 3,240,579 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.

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 September 30, 2013, there were 38,156,010 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 September 30, 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:
 
 
September 30, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Accrued expenses
$
(1,291
)
Derivatives included with the intermediation agreement obligations
Accrued expenses
$
29,563

December 31, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Accrued expenses
$
5,595

Derivatives included with the intermediation agreement obligations
Accrued expenses
$
—

 
 
 
Derivatives not designated as hedging instruments:
 
 
September 30, 2013:
 
 
Commodity contracts
Accrued expenses
$
(6,269
)
December 31, 2012:
 
 
Commodity contracts
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 intermediation agreements 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.

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

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 September 30, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(4,015
)
Derivatives included with the intermediation agreement obligations
Cost of sales
$
29,563

For the three months ended September 30, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
12,519

Derivatives included with the intermediation agreement obligations
Cost of sales
$
—

For the nine months ended September 30, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(6,886
)
Derivatives included with the intermediation agreement obligations
Cost of sales
$
29,563

For the nine months ended September 30, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
12,192

Derivatives included with the intermediation agreement obligations
Cost of sales
$
—

 
 
 
Derivatives not designated as hedging instruments:
 
 
For the three months ended September 30, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
—

Commodity contracts
Cost of sales
$
(23,843
)
For the three months ended September 30, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
—

Commodity contracts
Cost of sales
$
3,029

For the nine months ended September 30, 2013:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
—

Commodity contracts
Cost of sales
$
(9,894
)
For the nine months ended September 30, 2012:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(8
)
Commodity contracts
Cost of sales
$
30,636

 
 
 
Hedged items designated in fair value hedges:
 
 
For the three months ended September 30, 2013:
 
 
Crude oil and feedstock inventory
Cost of sales
$
3,127

Intermediate and refined product inventory
Cost of sales
$
(29,563
)
For the three months ended September 30, 2012:
 
 
Crude oil and feedstock inventory
Cost of sales
$
(4,196
)
Intermediate and refined product inventory
Cost of sales
$
—

For the nine months ended September 30, 2013:
 
 
Crude oil and feedstock inventory
Cost of sales
$
(378
)
Intermediate and refined product inventory
Cost of sales
$
(29,563
)
For the nine months ended September 30, 2012:
 
 
Crude oil and feedstock inventory
Cost of sales
$
(4,590
)
Intermediate and refined product inventory
Cost of sales
$
—



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

Ineffectiveness related to the Company's fair value hedges resulted in a loss of $888 and $7,264 for the three and nine months ended September 30, 2013 and loss of $8,127 and $7,602 for the three and nine months ended September 30, 2012, respectively, recorded in cost of sales. Gains and losses due to ineffectiveness were excluded from the assessment of hedge effectiveness.

16. NET INCOME (LOSS) 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 (loss) per Class A common share attributable to PBF Energy:

Basic Earnings Per Share:
Three Months Ended September 30, 2013
 
Nine Months Ended September 30, 2013
Numerator for basic net income per Class A common share net income (loss) attributable to PBF Energy
$
(19,848
)
 
$
8,384

Denominator for basic net income (loss) per Class A common share-weighted average shares
39,575,429

 
30,094,946

Basic net income (loss) attributable to PBF Energy per Class A common share
$
(0.50
)
 
$
0.28

 
 
 
 
Diluted Earnings Per Share:
 
 
 
Numerator for diluted net income per Class A common share net income (loss) attributable to PBF Energy (1)
$
(19,848
)
 
$
8,384

 
 
 
 
Denominator (1):
 
 
 
Denominator for basic net income (loss) per Class A common share-weighted average shares
39,575,429

 
30,094,946

Effect of dilutive securities:
 
 
 
Common stock equivalents (2)
—

 
653,955

Denominator for diluted net income (loss) per common share-adjusted weighted average shares
39,575,429

 
30,748,901

Diluted net income (loss) attributable to PBF Energy per Class A common share
$
(0.50
)
 
$
0.27

 
——————————
(1)
During the three and nine months ended September 30, 2013, the potential conversion of 57,243,672 and 66,724,155 PBF LLC Series A Units, respectively, were 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 income tax attributable to the net income associated with the potential conversion of the PBF LLC Series A Units.
(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 753,750 shares of PBF Energy Class A common stock because they are anti-dilutive for the nine months ended September 30, 2013.



27
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

17. SUBSEQUENT EVENTS
Dividend Declared
On October 29, 2013, the Company's Board of Directors declared a dividend of $0.30 per share on outstanding Class A common stock. The dividend is payable on November 21, 2013 to Class A common stockholders of record at the close of business on November 15, 2013.
Delaware City Catalyst Lease
In October 2013, the Delaware City catalyst lease expired and the Company entered into a new catalyst lease agreement with a three year term ending October 21, 2016 and an annual fixed interest rate of 1.96%. The annual lease expense is $322.
Sale-leaseback
On November 5, 2013, the Company sold 250 of its owned railcars and concurrently entered into a lease agreement for the same railcars. The lease agreement has terms for the railcars of four and six years. The Company received cash proceeds for the railcars of approximately $35.7 million.

18. 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 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 condensed consolidating financial information presented in the following statements was necessary to reflect intercompany transactions between the Issuer and the Guarantor Subsidiaries. During the nine months ended September 30, 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 nine month period, correcting entries totaling approximately $1,752.5 million have been reflected in the consolidating schedules to record the intercompany sale of product on the Guarantor Subsidiaries and to record an equal amount of cost of sales on the Issuer. All such intercompany activity was then eliminated in consolidation and, therefore, had no effect on the PBF Holding’s reported condensed consolidated financial statements. The effect of these adjustments increased net income of the Guarantor Subsidiaries by $1,752.5 million for the nine months ended September 30, 2012. On the Issuer, the increase in cost of sales was completely offset by the increase in the Issuer’s equity in the earnings of the Guarantor Subsidiaries. These adjustments also affected the respective entities’ intercompany receivable/payable accounts and the Issuer’s investment in subsidiaries account by $1,910.0 million at December 31, 2012.


28
PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

18. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING BALANCE SHEET (UNAUDITED)

 
September 30, 2013
 
Issuer
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Combining and Consolidating Adjustments
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
56,808

 
$
609

 
$
—

 
$
—

 
$
57,417

Accounts receivable
531,004

 
46,875

 
—

 
—

 
577,879

Inventories
851,985

 
620,652

 
—

 
—

 
1,472,637

Prepaid expense and other current assets
43,721

 
12,412

 
—

 
—

 
56,133

Due from related parties
10,852,441

 
15,714,459

 
—

 
(26,566,900
)
 
—

Total current assets
12,335,959

 
16,395,007

 
—

 
(26,566,900
)
 
2,164,066

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
63,428

 
1,672,332

 
—

 
—

 
1,735,760

Investment in subsidiaries
3,814,871

 
—

 
—

 
(3,814,871
)
 
—

Deferred charges and other assets, net
29,511

 
172,443

 
—

 
—

 
201,954

Total assets
$
16,243,769

 
$
18,239,782