Edgar Filing: PBF Energy Inc.

Document

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: June 30, 2016



¨	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

PBF ENERGY INC.

(Exact name of registrant as specified in its charter)



DELAWARE		45-3763855
(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. 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). Yes [x] 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 þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

As of August 2, 2016, PBF Energy Inc. had outstanding 97,825,983 shares of Class A common stock and 27 shares of Class B common stock.

PBF ENERGY INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

TABLE OF CONTENTS



CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS			3

PART I – FINANCIAL INFORMATION

	ITEM 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	5
		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	6
		Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015	7
		Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	8
		Notes to Condensed Consolidated Financial Statements	10
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	62
	ITEM 4.	Controls and Procedures	64

PART II – OTHER INFORMATION

	ITEM 1.	Legal Proceedings	65
	ITEM 1A.	Risk Factors	65
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
	ITEM 6.	Exhibits	68
SIGNATURES			69

This Quarterly Report on Form 10-Q is filed by PBF Energy Inc. (“PBF Energy”) which is a holding company whose primary asset is an equity interest in PBF Energy Company LLC (“PBF LLC”). PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 95.2% of the outstanding economic interests in, PBF LLC as of June 30, 2016. PBF Energy operates and controls all of the business and affairs and consolidates the financial results of PBF LLC and its subsidiaries. PBF LLC is a holding company for the companies that directly and indirectly own and operate the business. PBF Holding Company LLC (“PBF Holding”) is a wholly-owned subsidiary of PBF LLC and PBF Finance Corporation (“PBF Finance”) is a wholly-owned subsidiary of PBF Holding. As of June 30, 2016, PBF LLC also holds a 49.4% limited partner interest, a non-economic general partner interest and all of the incentive distribution rights in PBF Logistics LP (“PBFX” or the “Partnership”), a publicly traded master limited partnership. PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX's unit holders other than PBF LLC. Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires.

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 ("PSLRA"), 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 strategies, objectives, expectations, intentions, resources and expectations regarding future industry trends are forward-looking statements made under the safe harbor of the PSLRA except to the extent such statements relate to the operations of a partnership or limited liability company. 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 “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q and the Annual Report on Form 10-K for the year ended December 31, 2015 of PBF Energy Inc., which we refer to as our 2015 Annual Report on Form 10-K, and in our other filings with the SEC. 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, including volatility in commodity prices;

• the effects of competition in our markets;

•changes in currency exchange rates, interest rates and capital costs;

• adverse developments in our relationship with both our key employees and unionized employees;

•our ability to operate our businesses efficiently, manage capital expenditures and costs (including general and administrative expenses) and generate earnings and cash flow;

•our substantial indebtedness;

•our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;

•termination of our A&R Intermediation Agreements with J. Aron could have a material adverse effect on our liquidity, as we would be required to finance our intermediate and refined products inventory covered by the agreements. Additionally, we are obligated to repurchase from J. Aron certain intermediates and finished 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 current and former holders of PBF LLC Series A Units and PBF LLC Series B Units under our tax receivable agreement for certain tax benefits we may claim;

•our assumptions regarding payments arising under PBF Energy's tax receivable agreement and other arrangements relating to our organizational structure are subject to change due to various factors, including, among other factors, the timing of exchanges of PBF LLC Series A Units for shares of our Class A common

stock as contemplated by the tax receivable agreement, the price of our Class A common stock at the time of such exchanges, the extent to which such exchanges are taxable, and the amount and timing of our income;

•our expectations and timing with respect to our acquisition activity and whether such acquisitions are accretive or dilutive to shareholders;

•our expectations with respect to our capital improvement and turnaround projects;

•the status of an air permit to transfer crude through the Delaware City refinery's dock;

•the impact of disruptions to crude or feedstock supply to any of our refineries, including disruptions due to

problems at PBFX or with third party logistics infrastructure or operations, including pipeline, marine and rail transportation;

•the possibility that we might reduce or not make further dividend payments;

•the inability of our subsidiaries to freely pay dividends or make distributions to us;

•the impact of current and future laws, rulings and governmental regulations, including the implementation of rules and regulations regarding transportation of crude oil by rail;

•the effectiveness of our crude oil sourcing strategies, including our crude by rail strategy and related commitments;

•adverse impacts related to recent legislation by the federal government lifting the restrictions on exporting U.S. crude oil;

•adverse impacts from changes in our regulatory environment, such as the effects of compliance with the California Global Warming Solutions Act (also referred to as "AB32"), or actions taken by environmental interest groups;

•market risks related to the volatility in the price of Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuel Standards and greenhouse gas ("GHG") emission credits required to comply with various GHG emission programs, such as AB32;

•our ability to complete the successful integration of the completed acquisitions of Chalmette Refining, L.L.C and related logistic assets (collectively, the “Chalmette Acquisition”) and the Torrance refinery and related logistics assets (collectively, the “Torrance Acquisition”) into our business and to realize the benefits from such acquisitions;

•liabilities arising from the Chalmette Acquisition and/or Torrance Acquisition that are unforeseen or exceed our expectations;

•risk associated with the operation of PBFX as a separate, publicly-traded entity;

•potential tax consequences related to our investment in PBFX; and

•any decisions we make with respect to our energy-related logistical assets that may be transferred to PBFX.

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. 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.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PBF ENERGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)



	June 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	1,412,935		$	944,320
Accounts receivable	647,866			454,759
Inventories	1,308,536			1,174,272
Deferred tax asset	315,664			371,186
Marketable securities - current	136,144			—
Prepaid expense and other current assets	110,828			77,474
Total current assets	3,931,973			3,022,011
Property, plant and equipment, net	2,504,921			2,356,638
Deferred tax assets	180,727			201,504
Marketable securities	—			234,258
Deferred charges and other assets, net	370,429			290,713
Total assets	$	6,988,050		$	6,105,124
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	373,839		$	315,653
Accrued expenses	1,301,795			1,119,189
Payable to related parties pursuant to tax receivable agreement	57,042			56,621
Deferred tax liabilities	24,530			—
Deferred revenue	8,448			4,043
Current portion of long-term debt	135,864			—
Total current liabilities	1,901,518			1,495,506
Delaware Economic Development Authority loan	4,000			4,000
Long-term debt	2,223,848			1,836,355
Payable to related parties pursuant to tax receivable agreement	604,376			604,797
Other long-term liabilities	78,452			68,609
Total liabilities	4,812,194			4,009,267
Commitments and contingencies (Note 10)
Equity:
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 97,825,983 shares outstanding at June 30, 2016, 97,781,933 shares outstanding at December 31, 2015	93			93
Class B common stock, $0.001 par value, 1,000,000 shares authorized, 27 shares outstanding at June 30, 2016, 28 shares outstanding at December 31, 2015	—			—
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding, at June 30, 2016 and December 31, 2015	—			—
Treasury stock, at cost, 6,078,283 shares outstanding at June 30, 2016 and 6,056,719 shares outstanding at December 31, 2015	(150,804		)	(150,804		)
Additional paid in capital	1,930,697			1,904,751
Retained earnings/(Accumulated deficit)	(67,478		)	(83,454		)
Accumulated other comprehensive loss	(22,302		)	(23,289		)
Total PBF Energy Inc. equity	1,690,206			1,647,297
Noncontrolling interest	485,650			448,560
Total equity	2,175,856			2,095,857
Total liabilities and equity	$	6,988,050		$	6,105,124

See notes to condensed consolidated financial statements.

PBF ENERGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenues	$	3,858,467		$	3,550,664		$	6,658,652		$	6,545,800

Cost and expenses:
Cost of sales, excluding depreciation	3,249,444			2,994,745			5,661,539			5,496,960
Operating expenses, excluding depreciation	276,598			194,970			576,597			432,088
General and administrative expenses	43,373			39,223			80,955			75,269
Loss (gain) on sale of assets	3,222			(632		)	3,222			(991		)
Depreciation and amortization expense	51,060			48,562			106,993			96,268
	3,623,697			3,276,868			6,429,306			6,099,594

Income from operations	234,770			273,796			229,346			446,206

Other (expenses) income:
Change in fair value of catalyst leases	(1,748		)	1,949			(4,633		)	3,988
Interest expense, net	(35,940		)	(26,876		)	(73,467		)	(49,068		)
Income before income taxes	197,082			248,869			151,246			401,126
Income tax expense	76,434			90,409			53,934			139,547
Net income	120,648			158,460			97,312			261,579
Less: net income attributable to noncontrolling interests	17,118			22,650			23,170			38,447
Net income attributable to PBF Energy Inc.	$	103,530		$	135,810		$	74,142		$	223,132

Weighted-average shares of Class A common stock outstanding
Basic	97,836,366			86,036,809			97,822,875			85,175,066
Diluted	103,278,622			91,659,906			103,364,478			91,655,081
Net income available to Class A common stock per share:
Basic	$	1.06		$	1.58		$	0.76		$	2.62
Diluted	$	1.06		$	1.57		$	0.76		$	2.57

Dividends per common share	$	0.30		$	0.30		$	0.60		$	0.60

See notes to condensed consolidated financial statements.

PBF ENERGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Net income	$	120,648	$	158,460		$	97,312	$	261,579
Other comprehensive income:
Unrealized gain (loss) on available for sale securities	99		(75		)	405		(4		)
Net gain on pension and other postretirement benefits	316		400			632		800
Total other comprehensive income	415		325			1,037		796
Comprehensive income	121,063		158,785			98,349		262,375
Less: comprehensive income attributable to noncontrolling interests	17,138		22,668			23,220		38,492
Comprehensive income attributable to PBF Energy Inc.	$	103,925	$	136,117		$	75,129	$	223,883

See notes to condensed consolidated financial statements.

PBF ENERGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)



	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net income	$	97,312		$	261,579
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	112,523			100,839
Stock-based compensation	12,709			5,394
Change in fair value of catalyst lease obligations	4,633			(3,988		)
Deferred income taxes	92,973			74,006
Non-cash change in inventory repurchase obligations	26,172			89,203
Pension and other post retirement benefit costs	15,355			12,893
Loss (gain) on disposition of property, plant and equipment	3,222			(991		)
Change in non-cash lower of cost or market adjustment	(216,843		)	(127,166		)

Changes in operating assets and liabilities:
Accounts receivable	(193,107		)	11,042
Inventories	82,579			(84,619		)
Prepaid expenses and other current assets	(29,170		)	29,552
Accounts payable	58,186			19,368
Accrued expenses	157,345			(59,908		)
Deferred revenue	4,405			5,991
Payable to related parties pursuant to tax receivable agreement	—			(10,168		)
Other assets and liabilities	(12,160		)	(5,352		)
Net cash provided by operations	216,134			317,675

Cash flows from investing activities:
Expenditures for property, plant and equipment	(111,772		)	(224,063		)
Expenditures for deferred turnaround costs	(106,649		)	(22,918		)
Expenditures for other assets	(21,325		)	(5,424		)
Expenditure for PBFX Plains Asset Purchase	(98,336		)	—
Chalmette Acquisition working capital settlement	(2,659		)	—
Purchase of marketable securities	(1,310,000		)	(1,379,386		)
Maturities of marketable securities	1,408,124			1,380,085
Proceeds from sale of assets	6,860			138,131
Net cash used in investing activities	(235,757		)	(113,575		)

See notes to condensed consolidated financial statements.

PBF ENERGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(unaudited, in thousands)



	Six Months Ended June 30,
	2016			2015
Cash flows from financing activities:
Proceeds from issuance of PBFX common units, net of underwriters' discount and commissions	$	51,575		$	—
Distributions to PBF Energy Company LLC members	(2,971		)	(8,262		)
Distributions to PBFX unit holders	(14,864		)	(11,033		)
Dividend payments	(58,696		)	(51,545		)
Proceeds from PBFX Senior Notes	—			350,000
Proceeds from PBFX revolver borrowings	98,500			24,500
Repayments of PBFX revolver borrowings	(30,000		)	(275,100		)
Repayments of PBFX Term Loan borrowings	(98,336		)	(700		)
Proceeds from Rail Facility revolver borrowings	—			70,750
Repayments of Rail Facility revolver borrowings	(6,970		)	(64,626		)
Proceeds from revolver borrowings	550,000			—
Purchases of treasury stock	—			(4,000		)
Deferred financing costs and other	—			(8,135		)
Net cash provided by financing activities	488,238			21,849

Net increase in cash and cash equivalents	468,615			225,949
Cash and cash equivalents, beginning of period	944,320			397,873
Cash and cash equivalents, end of period	$	1,412,935		$	623,822

Supplemental cash flow disclosures
Non-cash activities:
Accrued construction in progress and unpaid fixed assets	$	8,149		$	21,367

See notes to condensed consolidated financial statements.

PBF ENERGY INC.

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 in 2011 and completed an initial public offering in December 2012. PBF Energy is the sole managing member of PBF Energy Company LLC (“PBF LLC”), a Delaware limited liability company, 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. 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. Delaware City Refining Company LLC (“Delaware City Refining” or “DCR”), PBF Power Marketing LLC, PBF Energy Limited, Paulsboro Refining Company LLC, Paulsboro Natural Gas Pipeline Company LLC, Toledo Refining Company LLC, Chalmette Refining, L.L.C. (“Chalmette Refining”) and MOEM Pipeline LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned subsidiaries of PBF Holding. In addition, PBF LLC, through Chalmette Refining, holds an 80% interest in and consolidates Collins Pipeline Company and T&M Terminal Company.

As of June 30, 2016, PBF LLC also holds a 49.4% limited partner interest and all of the incentive distribution rights in PBF Logistics LP (“PBFX”), a publicly traded master limited partnership (refer to Note 2 “PBF Logistics LP” of our Notes to Condensed Consolidated Financial Statements). PBF Logistics GP LLC (“PBF GP”) owns the noneconomic general partner interest and serves as the general partner of PBFX and is wholly-owned by PBF LLC. PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX's unit holders other than PBF LLC. Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires.

On February 6, 2015, the Company completed a public offering of 3,804,653 shares of Class A common stock in a secondary offering (the “February 2015 secondary offering”). All of the shares in the February 2015 secondary offering were sold by funds affiliated with Blackstone Group L.P., or Blackstone, and First Reserve Management, L.P., or First Reserve. In connection with the February 2015 secondary offering, Blackstone and First Reserve exchanged all of their remaining PBF LLC Series A Units for an equivalent number of shares of Class A common stock of PBF Energy, and as a result, Blackstone and First Reserve no longer hold any PBF LLC Series A Units or shares of PBF Energy Class A common stock. PBF Energy did not receive any proceeds from the February 2015 secondary offering.

As of June 30, 2016, the Company owns 97,825,983 PBF LLC Series C Units and the Company's current and former executive officers and directors and certain employees and others beneficially own 4,964,901 PBF LLC Series A Units. As of June 30, 2016, the holders of the Company's issued and outstanding shares of Class A common stock have 95.2% of the voting power in the Company and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock have the remaining 4.8% of the voting power in the Company.

Substantially all of the Company’s operations are in the United States. The Company operates in two reportable business segments: Refining and Logistics. The Company’s oil refineries are all engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX is a publicly traded master limited partnership that was formed to operate logistical assets such as crude oil and refined petroleum products terminals, pipelines, and storage facilities. PBFX's operations are aggregated into the Logistics segment. Prior to the PBFX Plains Asset Purchase on April 29, 2016 (refer to "Note 3 Acquisitions"), PBFX did not generate third party revenue and intersegment revenues from affiliates are eliminated in consolidation. Prior to the PBFX initial public offering in May 2014, PBFX's assets, other than those acquired in connection with the PBFX Plains Asset Purchase, were operated within the refining operations of the Company's Delaware City and Toledo refineries. The assets, did not generate third party revenue nor, apart from Delaware Pipeline Company LLC, any intra-entity

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

revenue and were not considered to be a separate 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. 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 financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2015 of PBF Energy. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year.

Recently Adopted Accounting Guidance

Effective January 1, 2016, the Company adopted Accounting Standard Update ("ASU") No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis" ("ASU 2015-02"), which changed existing consolidation requirements associated with the analysis a reporting entity must perform to determine whether it should consolidate certain types of legal entities, including limited partnerships and variable interest entities. The Company’s adoption of this guidance did not impact our consolidated financial statements.

Effective January 1, 2016, the Company adopted ASU No. 2015-16, "Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments" ("ASU 2015-16"), which requires (i) that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, (ii) that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, (iii) that an entity present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The adoption of this guidance did not materially affect any of the Company's financial statements or related disclosures.

Recent Accounting Pronouncements

In August 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date of ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) for all entities by one year. The guidance in ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. Under ASU 2015-14, this guidance becomes effective for interim and annual periods beginning after December 15, 2017 and permits the use of either the retrospective or cumulative effect transition method. Under ASU 2015-14, early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"), which requires deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Under ASU 2015-17, this guidance becomes effective for annual periods beginning after December 15, 2016 and interim periods within annual periods beginning after December

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

15, 2016 and interim periods within those years with early adoption permitted as of the beginning of an annual or interim period after the issuance of the ASU. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which amends how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method and how they present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. ASU 2016-01 also changes certain disclosure requirements and other aspects of current GAAP but does not change the guidance for classifying and measuring investments in debt securities and loans. Under ASU 2016-01, this guidance becomes effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted in certain circumstances. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), to increase the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments No. 2016-06 March 2016 a consensus of the FASB Emerging Issues Task Force” (“ASU 2016-06”), to increase consistency in practice in applying guidance on determining if an embedded derivative is clearly and closely related to the economic characteristics of the host contract, specifically for assessing whether call (put) options that can accelerate the repayment of principal on a debt instrument meet the clearly and closely related criterion. The guidance in ASU 2016-06 applies to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. ASU 2016-06 is effective for interim and annual periods beginning after December 15, 2016, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”) which is intended to simplify certain aspects of the accounting for share-based payments to employees. The guidance in ASU 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled rather than recording excess tax benefits or deficiencies in additional paid-in capital. The guidance in ASU 2016-09 also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. ASU 2016-09 also contains additional guidance for nonpublic entities that do not apply to the Company. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) which requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down. This approach is an improvement to current GAAP because an entity will be able to record reversals of credit losses (in situations in which the estimate of credit losses declines) in current period net income, which in turn should align the income statement recognition of credit losses with the reporting period in which changes occur. Current GAAP prohibits reflecting those improvements in current period earnings. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, and requires a modified retrospective approach to adoption. Early adoption is permitted for

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

2. PBF LOGISTICS LP

On May 14, 2014, PBFX completed its initial public offering (the “PBFX Offering”) of 15,812,500 common units. In addition, on April 5, 2016, PBFX completed a public offering of an aggregate of 2,875,000 common units, including 375,000 common units that were sold pursuant to the exercise of an over-allotment option, for net proceeds of $51,575, after deducting underwriting discounts and commissions and other offering expenses (the “April 2016 PBFX Equity Offering”).

On April 29, 2016, PBFX purchased 4 refined product terminals located in the greater Philadelphia region (the “East Coast Terminals”) from an affiliate of Plains All American Pipeline, L.P. for total cash consideration of $100,000 (the “PBFX Plains Asset Purchase”), less a preliminary estimate for working capital, which is subject to final purchase price valuation and working capital adjustment. This acquisition expands PBFX's storage and terminaling footprint and introduces third-party customers to its revenue base. The acquisition was financed through a combination of cash on hand and borrowings from the PBFX senior secured revolving credit facility (the “PBFX Revolving Credit Facility”).

As of June 30, 2016, PBF LLC holds a 49.4% limited partner interest in PBFX (consisting of 2,572,944 common units and 15,886,553 subordinated units) and all of PBFX's incentive distribution rights, with the remaining 50.6% limited partner interest held by public common unit holders. PBF LLC also owns indirectly a non-economic general partner interest in PBFX through its wholly-owned subsidiary, PBF GP, the general partner of PBFX. During the subordination period (as set forth in the partnership agreement of PBFX) holders of the subordinated units are not entitled to receive any distribution of available cash until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. If PBFX does not pay distributions on the subordinated units, the subordinated units will not accrue arrearages for those unpaid distributions. Each subordinated unit will convert into one common unit at the end of the subordination period.

PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products and intermediates from sources located throughout the United States and Canada for PBF Energy in support of certain of its refineries, as well as for third party customers. As of June 30, 2016, all of PBFX’s revenue is derived from either third-party or affiliate revenue at its East Coast Terminals or long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments, for receiving, handling, storing and transferring crude oil and refined products. PBF Energy also has agreements with PBFX that establish fees for certain general and administrative services and operational and maintenance services provided by PBF Holding to PBFX. These transactions, other than those with third parties, are eliminated by PBF Energy in consolidation.

PBFX’s initial assets consisted of a light crude oil rail unloading terminal at the Delaware City refinery that also services the Paulsboro refinery (which is referred to as the “Delaware City Rail Terminal”), and a crude oil truck unloading terminal at the Toledo refinery (which is referred to as the “Toledo Truck Terminal”) that are integral components of the crude oil delivery operations at three of PBF Energy’s refineries. In a series of drop-down transactions subsequent to the PBFX Offering, PBF Holding distributed certain additional assets to PBF LLC which, in turn, contributed such assets to PBFX consisting of the Delaware City heavy crude unloading rack, which is also capable of unloading light crude oil (the "DCR West Rack"), a tank farm and related facilities located at PBF Energy's Toledo refinery, including a propane storage and loading facility (the "Toledo Storage Facility"), and a products pipeline, truck rack and related facilities located at our Delaware City refinery (collectively the "Delaware City Products Pipeline and Truck Rack"). Additionally, on April 29, 2016, PBFX made its initial third-party asset purchase acquiring the East Coast Terminals.

PBFX, a variable interest entity, is consolidated by PBF Energy through its ownership of PBF LLC. PBF LLC through its ownership of PBF GP, has the sole ability to direct the activities of PBFX that most significantly impact its economic performance. PBF LLC is considered to be the primary beneficiary of PBFX for accounting purposes.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

3. ACQUISITIONS

Chalmette Acquisition

On November 1, 2015, the Company acquired from ExxonMobil, Mobil Pipe Line Company and PDV Chalmette, L.L.C., 100% of the ownership interests of Chalmette Refining, which owns the Chalmette refinery and related logistics assets (collectively, the "Chalmette Acquisition"). The Chalmette refinery, located outside of New Orleans, Louisiana, is a dual-train coking refinery and is capable of processing both light and heavy crude oil. Subsequent to the closing of the Chalmette Acquisition, Chalmette Refining is a wholly-owned subsidiary of PBF Holding. Chalmette Refining is strategically positioned on the Gulf Coast with logistics connectivity that offers flexible raw material sourcing and product distribution opportunities, including the potential to export products and provides geographic diversification into PADD 3.

Chalmette Refining owns 100% of the MOEM Pipeline, providing access to the Empire Terminal, as well as the CAM Connection Pipeline, providing access to the Louisiana Offshore Oil Port facility through a third party pipeline. Chalmette Refining also owns 80% of each of the Collins Pipeline Company and T&M Terminal Company, both located in Collins, Mississippi, which provide a clean products outlet for the refinery to the Plantation and Colonial Pipelines. Also included in the acquisition are a marine terminal capable of importing waterborne feedstocks and loading or unloading finished products; a clean products truck rack which provides access to local markets; and a crude and product storage facility.

The aggregate purchase price for the Chalmette Acquisition was $322,000 in cash, plus inventory and final working capital of $245,963. As described below, the valuation of the working capital was finalized in the first quarter of 2016. The transaction was financed through a combination of cash on hand and borrowings under PBF Holding's asset based revolving credit agreement (the “Revolving Loan”).

The Company accounted for the Chalmette Acquisition as a business combination under GAAP whereby we recognize assets acquired and liabilities assumed in an acquisition at their estimated fair values as of the date of acquisition. Any excess consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. The final purchase price and fair value allocation were completed as of March 31, 2016. During the measurement period, which ended in March 2016, adjustments were made to the Company's preliminary fair value estimates related primarily to inventories and accounts payable.

The following table summarizes the final amounts recognized for assets acquired and liabilities assumed as of the acquisition date. The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:



	Purchase Price
Net cash	$	587,005
Cash acquired	(19,042		)
Total consideration	$	567,963

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)



	Fair Value Allocation
Accounts receivable	$	1,126
Inventories	271,434
Prepaid expenses and other current assets	913
Property, plant and equipment	356,961
Deferred charges and other assets	8,312
Accounts payable	(4,870		)
Accrued expenses	(28,371		)
Deferred tax liability	(25,721		)
Noncontrolling interests	(11,821		)
Fair value of net assets acquired	$	567,963

In addition, in connection with the acquisition of Chalmette Refining, the Company acquired Collins Pipeline Company and T&M Terminal Company, which are both C-corporations for tax purposes. As a result, the Company recognized a deferred tax liability of $25,721 attributable to the book and tax basis difference in the C-corporation assets, which had a corresponding impact on noncontrolling interests of $5,144.

The Company’s consolidated financial statements for the three and six months ended June 30, 2016 include the results of operations of the Chalmette refinery whereas the same periods in 2015 do not include the results of operations of the Chalmette refinery. On an unaudited pro forma basis, the revenues and net income of the Company assuming the acquisition had occurred on January 1, 2014, are shown below. The unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisition occurred on January 1, 2014, nor is the financial information indicative of the results of future operations. The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition and interest expense associated with the financing of the Chalmette Acquisition.



(Unaudited)	Six Months Ended June 30, 2015
Pro forma revenues	$	8,831,441
Pro forma net income attributable to PBF Energy Inc.	$	301,850
Pro forma net income available to Class A common stock per share:
Basic	$	3.12
Diluted	$	3.07

The unaudited amount of revenues and net income above have been calculated after conforming Chalmette Refining's accounting policies to those of the Company and certain one-time adjustments.

PBFX Plains Asset Purchase

On April 29, 2016, PBFX's wholly-owed subsidiary, PBF Logistics Products Terminals LLC, completed the purchase of the East Coast Terminals, including product storage tanks, pipeline connections to the Colonial Pipeline Company, Buckeye Partners, Sunoco Logistics Partners and other proprietary pipeline systems, truck loading lanes and marine facilities capable of handling barges and ships. This acquisition expands PBFX's storage and terminaling footprint and introduces third-party customers to its revenue base.

The aggregate purchase price for the PBFX Plains Asset Purchase was $100,000, less a preliminary estimate for working capital of $1,664, which is subject to final purchase price valuation and working capital adjustment. The consideration for the transaction was funded by PBFX with $98,336 in proceeds from the sale of marketable securities. PBFX borrowed an additional $98,500 under the PBFX Revolving Credit Facility, which was used to

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

repay $98,336 of the PBFX Term Loan (as defined below) in order to release $98,336 in marketable securities that had collateralized the PBFX Term Loan.

PBFX accounted for the PBFX Plains Asset Purchase as a business combination under GAAP whereby PBFX recognizes assets acquired and liabilities assumed in an acquisition at their estimated fair values as of the date of acquisition. Any excess consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. The final purchase price and its allocation are dependent on final reconciliations of working capital and other items subject to agreement by both parties.

The total purchase consideration and the estimated fair values of the assets and liabilities at the acquisition date were as follows:



	Purchase Price
Gross purchase price	$	100,000
Preliminary working capital adjustment	(1,664		)
Total consideration	$	98,336

The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:



	Fair Value Allocation
Prepaid expenses and other current assets	4,184
Property, plant and equipment	99,342
Accounts payable and accrued expenses	(3,174		)
Other long-term liabilities	(2,016		)
Estimated fair value of net assets acquired	$	98,336

The Company’s consolidated financial statements for the three and six months ended June 30, 2016 include the results of operations of the East Coast Terminals whereas the same periods in 2015 do not include the results of operations of the East Coast Terminals. For the period from its acquisition on April 29, 2016 to June 30, 2016, the East Coast Terminals contributed revenues of $3,314 and net income of $1,529. On an unaudited pro forma basis, the revenues and net income of the Company assuming the PBFX Asset Purchase had occurred on January 1, 2015, are shown below. The unaudited pro forma information does not purport to present what the Company’s actual results would have been had the PBFX Asset Purchase occurred on January 1, 2015, nor is the financial information indicative of the results of future operations. The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition and interest expense associated with the PBFX Plains Asset Purchase financing.



(Unaudited)	Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Pro forma revenues	$	6,665,446	$	6,554,429
Pro forma net income attributable to PBF Energy Inc.	$	77,518	$	221,628
Pro forma net income available to Class A common stock per share:
Basic	$	0.79	$	2.60
Diluted	$	0.79	$	2.56

The unaudited amount of revenues and net income above have been calculated after conforming the East Coast Terminals' accounting policies to those of the Company and certain one-time adjustments.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

Acquisition Expenses

The Company incurred acquisition related costs consisting primarily of consulting and legal expenses related to the Chalmette Acquisition, the Torrance Acquisition (as defined in "Note 18 - Subsequent Events"), the PBFX Plains Asset Purchase and other pending and non-consummated acquisitions of $4,988 and $9,712 in the three and six months ended June 30, 2016, respectively. In the three and six months ended June 30, 2015, the Company incurred acquisition related costs of $129 and $679, respectively. These costs are included in the condensed consolidated statements of operations in General and administrative expenses.

Cash Held for Torrance Acquisition

At June 30, 2016, the Company's Cash and cash equivalents included $998,542 that was held to fund the Torrance Acquisition that closed on July 1, 2016.

4. NONCONTROLLING INTERESTS

Noncontrolling Interest in PBF LLC

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. As of December 31, 2015 and June 30, 2016, PBF Energy’s equity interest in PBF LLC represented approximately 95.1% and 95.2%, respectively, of the outstanding interests.

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 includes 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 includes the portion of net assets of PBF Energy attributable to the members of PBF LLC other than PBF Energy.

The noncontrolling interest ownership percentage of PBF LLC as of December 31, 2015 and June 30, 2016 is calculated as follows:



	Holders of PBF LLC Series A Units		Outstanding Shares of PBF Energy Class A Common Stock		Total *
December 31, 2015	4,985,358		97,781,933		102,767,291
	4.9	%	95.1	%	100.0	%
June 30, 2016	4,964,901		97,825,983		102,790,884
	4.8	%	95.2	%	100.0	%

——————————


*	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.

Noncontrolling Interest in PBFX

PBF LLC holds a 49.4% limited partner interest in PBFX and owns all of PBFX’s incentive distribution rights, with the remaining 50.6% limited partner interest owned by public common unit holders as of June 30, 2016. PBF LLC is also the sole member of PBF GP, the general partner of PBFX.

PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX, and records a noncontrolling interest for the economic interest in PBFX held by the public common unit holders. Noncontrolling interest on the consolidated statements of operations includes the portion of net income or loss attributable to the economic interest in PBFX held by the public common unit holders of PBFX other than PBF Energy (through its

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

ownership in PBF LLC). Noncontrolling interest on the consolidated balance sheets includes the portion of net assets of PBFX attributable to the public common unit holders of PBFX.

The noncontrolling interest ownership percentage of PBFX as of December 31, 2015 and June 30, 2016, is calculated as follows:



	Units of PBFX Held by the Public		Units of PBFX Held by PBF LLC (Including Subordinated Units)		Total
December 31, 2015	15,924,676		18,459,497		34,384,173
	46.3	%	53.7	%	100.0	%
June 30, 2016	18,876,597		18,459,497		37,336,094
	50.6	%	49.4	%	100.0	%

Noncontrolling Interest in Subsidiaries of PBF Holding

Subsequent to the Chalmette Acquisition, PBF Holding recorded noncontrolling interests in two subsidiaries of Chalmette Refining. PBF Holding, through Chalmette Refining, owns an 80% ownership interest in both Collins Pipeline Company and T&M Terminal Company. The Company recorded a noncontrolling interest in the earnings of these subsidiaries of $90 and $393 for the three and six months ended June 30, 2016, respectively.

Changes in Noncontrolling Interests

The following table summarizes the changes in equity for the controlling and noncontrolling interests of PBF Energy for the six months ended June 30, 2016 and 2015:



	PBF Energy Inc. Equity			Noncontrolling Interest in PBF LLC			Noncontrolling Interest in PBFX			Total Equity
Balance at January 1, 2016	$	1,647,297		$	108,243		$	340,317		$	2,095,857
Comprehensive income	75,129			7,008			16,212			98,349
Dividends and distributions	(58,696		)	(2,971		)	(14,864		)	(76,531		)
Issuance of additional PBFX common units	16,304			—			35,271			51,575
Stock-based compensation	9,999			—			2,710			12,709
Exercise of PBF LLC options and warrants, net	1,058			(327		)	—			731
Other	(885		)	(4,972		)	(977		)	(6,834		)
Balance at June 30, 2016	$	1,690,206		$	106,981		$	378,669		$	2,175,856

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)



	PBF Energy Inc. Equity			Noncontrolling Interest in PBF LLC			Noncontrolling Interest in PBFX			Total Equity
Balance at January 1, 2015	$	1,218,213		$	138,734		$	336,369		$	1,693,316
Comprehensive income	223,883			21,265			17,227			262,375
Dividends and distributions	(51,545		)	(8,262		)	(11,033		)	(70,840		)
Record deferred tax asset and liabilities and tax receivable agreement associated with secondary offerings	(13,948		)	—			—			(13,948		)
Record allocation of noncontrolling interest upon completion of secondary offerings	39,976			(39,976		)	—			—
Issuance of additional PBFX common units	11,390			—			(11,390		)	—
Stock-based compensation	3,591			190			1,613			5,394
Exercise of PBF LLC options and warrants, net	1,692			(1,605		)	—			87
Purchase of treasury stock	(4,000		)	—			—			(4,000		)
Balance at June 30, 2015	$	1,429,252		$	110,346		$	332,786		$	1,872,384

5. INVENTORIES

Inventories consisted of the following:



June 30, 2016
	Titled Inventory			Inventory Supply and Intermediation Arrangements			Total
Crude oil and feedstocks	$	1,034,615		$	—		$	1,034,615
Refined products and blendstocks	739,813			371,013			1,110,826
Warehouse stock and other	63,588			—			63,588
	$	1,838,016		$	371,013		$	2,209,029
Lower of cost or market reserve	(765,620		)	(134,873		)	(900,493		)
Total inventories	$	1,072,396		$	236,140		$	1,308,536



December 31, 2015
	Titled Inventory			Inventory Supply and Intermediation Arrangements			Total
Crude oil and feedstocks	$	1,137,605		$	—		$	1,137,605
Refined products and blendstocks	687,389			411,357			1,098,746
Warehouse stock and other	55,257			—			55,257
	$	1,880,251		$	411,357		$	2,291,608
Lower of cost or market reserve	(966,564		)	(150,772		)	(1,117,336		)
Total inventories	$	913,687		$	260,585		$	1,174,272

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

Inventory under inventory supply and intermediation arrangements included certain crude oil stored at the Company’s Delaware City refinery's storage facilities that the Company was obligated to purchase as it was consumed in connection with its Crude Supply Agreement that expired on December 31, 2015; and light finished products sold to counterparties in connection with the A&R Intermediation Agreements and stored in the Paulsboro and Delaware City refineries' storage facilities.

Due to the lower crude oil and refined product pricing environment beginning at the end of 2014 and continuing throughout 2015 and into 2016, the Company recorded adjustments to value its inventories to the lower of cost or market. During the three months ended June 30, 2016, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $157,780 and $95,264, respectively, reflecting the net change in the lower of cost or market inventory reserve from $1,058,273 at March 31, 2016 to $900,493 at June 30, 2016. During the six months ended June 30, 2016, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $216,843 and $130,973, respectively, reflecting the net change in the lower of cost or market inventory reserve from $1,117,336 at December 31, 2015 to $900,493 at June 30, 2016.

During the three months ended June 30, 2015, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $105,958 and $63,363, respectively, reflecting the net change in the lower of cost or market inventory reserve from $668,902 at March 31, 2015 to $562,944 at June 30, 2015. During the six months ended June 30, 2015, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $127,166 and $76,045, respectively, reflecting the net change in the lower of cost or market inventory reserve from $690,110 at December 31, 2014 to $562,944 at June 30, 2015.

6. DEFERRED CHARGES AND OTHER ASSETS, NET

Deferred charges and other assets, net consisted of the following:



	June 30, 2016		December 31, 2015
Deferred turnaround costs, net	$	232,501	$	177,236
Catalyst, net	90,444		77,725
Linefill	13,504		13,504
Restricted cash	1,500		1,500
Intangible assets, net	199		219
Other	32,281		20,529
Total deferred charges and other assets, net	$	370,429	$	290,713

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

7. ACCRUED EXPENSES

Accrued expenses consisted of the following:



	June 30, 2016		December 31, 2015
Inventory-related accruals	$	764,093	$	548,800
Inventory supply and intermediation arrangements	248,345		252,380
Accrued transportation costs	78,236		91,546
Excise and sales tax payable	47,577		34,129
Renewable energy credit obligations	42,753		19,472
Accrued interest	28,440		24,806
Accrued utilities	20,546		25,192
Customer deposits	19,654		20,395
Accrued salaries and benefits	15,604		61,011
Accrued construction in progress	7,200		7,400
Other	29,347		34,058
Total accrued expenses	$	1,301,795	$	1,119,189

The Company has the obligation to repurchase certain intermediates and finished products that are held in the Company’s refinery storage tanks at the Delaware City and Paulsboro refineries in accordance with the A&R Intermediation Agreements with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”). As of June 30, 2016 and December 31, 2015, a liability is recognized for the Inventory supply and intermediation arrangements and is recorded at market price for the J. Aron owned inventory held in the Company's storage tanks under the A&R Inventory Intermediation Agreements, with any change in the market price being recorded in cost of sales.

The Company is subject to obligations to purchase Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuels Standard. The Company's overall RINs obligation is based on a percentage of domestic shipments of on-road fuels as established by the Environmental Protection Agency (“EPA”). To the degree the Company is unable to blend the required amount of biofuels to satisfy its RINs obligation, RINs must be purchased on the open market to avoid penalties and fines. The Company records its RINs obligation on a net basis in Accrued expenses when its RINs liability is greater than the amount of RINs earned and purchased in a given period and in Prepaid expenses and other current assets when the amount of RINs earned and purchased is greater than the RINs liability.

8. MARKETABLE SECURITIES

The U.S Treasury securities purchased by the Company with the proceeds from the PBFX Offering are used as collateral to secure a three-year, $300,000 term loan facility entered into by PBFX (the “PBFX Term Loan”). PBFX anticipates holding the securities for an indefinite amount of time (the securities will be rolled over as they mature). As necessary and at the discretion of PBFX, these securities are expected to be liquidated and the proceeds used to fund future capital expenditures. While PBFX does not routinely sell marketable securities prior to their scheduled maturity dates, some of PBFX's investments may be held and restricted for the purpose of funding future capital expenditures and acquisitions, so these investments are classified as available-for-sale marketable securities as they may occasionally be sold prior to their scheduled maturity dates due to the unexpected timing of cash needs. The carrying value of these marketable securities approximates fair value and are measured using Level 1 inputs. The maturities of the marketable securities range from one to three months and are classified on the balance sheet in current assets as of June 30, 2016. As described in "Note 3 - Acquisitions", $98,336 of marketable securities

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

were sold by PBFX to fund the consideration for the PBFX Plains Asset Purchase during the three months ended June 30, 2016.

As of June 30, 2016 and December 31, 2015, the Company held $136,144 and $234,258, respectively, in marketable securities. As of June 30, 2016, the marketable securities were classified as current whereas at December 31, 2015, they were classified as non-current. The classification of the marketable securities on the balance sheet is consistent with the PBFX Term Loan they collateralize. The gross unrecognized holding gains and losses as of June 30, 2016 and December 31, 2015 were not material. The net realized gains or losses from the sale of marketable securities were not material for the three and six months ended June 30, 2016 and 2015.

9. INCOME TAXES

PBF Energy files 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 of PBF LLC’s pre-tax income (approximately 95.1% as of December 31, 2015 and approximately 95.2% as of June 30, 2016). PBF LLC is organized as a limited liability company and PBFX is a master limited partnership, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income taxes apart from the income tax attributable to two subsidiaries of Chalmette Refining that are treated as C-Corporations for income tax purposes. As a result, PBF Energy's condensed consolidated financial statements do not reflect any benefit or provision for income taxes on the pre-tax income or loss attributable to the noncontrolling interests in PBF LLC or PBFX apart from the income tax of $366 and $1,165 for the three and six months ended June 30, 2016 attributable to those two C-Corporation subsidiaries of Chalmette Refining.

The income tax provision in the PBF Energy condensed consolidated financial statements of operations consisted of the following:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016			2015
Current tax expense (benefit)	$	36,415	$	39,571	$	(39,039	)	$	65,541
Deferred tax expense	40,019		50,838		92,973			74,006
Total tax expense	$	76,434	$	90,409	$	53,934		$	139,547

Income tax expense (benefit) is based on income before taxes attributable to PBF Energy and excludes income before taxes attributable to noncontrolling interests as such interests are not subject to income taxes. The difference between the Company’s income tax expense (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 June 30, 2016				Three Months Ended June 30, 2015
Provision at Federal statutory rate	$	62,931	35.0	%	$	79,177		35.0	%
Increase (decrease) attributable to flow-through of certain tax adjustments:
State income taxes (net federal income tax)	8,324		4.6	%	11,786			5.2	%
Non deductible/nontaxable items	52		—	%	340			0.2	%
Adjustment for manufacturer's benefit	—		—	%	(1,609		)	(0.7	)%
Rate differential from foreign jurisdictions	3,505		2.0	%	1,803			0.8	%
Other	1,622		0.7	%	(1,088		)	(0.5	)%
Total	$	76,434	42.3	%	$	90,409		40.0	%

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)



	Six Months Ended June 30, 2016					Six Months Ended June 30, 2015
Provision at Federal statutory rate	$	44,770		35.0	%	$	126,938		35.0	%
Increase (decrease) attributable to flow-through of certain tax adjustments:
State income taxes (net federal income tax)	5,922			4.6	%	18,895			5.2	%
Non deductible/nontaxable items	187			0.2	%	866			0.2	%
Adjustment for manufacturer's benefit	—			—	%	(2,815		)	(0.8	)%
Rate differential from foreign jurisdictions	3,130			2.5	%	(3,826		)	(1.0	)%
Other	(75		)	(0.4	)%	(511		)	(0.1	)%
Total	$	53,934		41.9	%	$	139,547		38.5	%

The Company's effective income tax rate for the three and six months ended June 30, 2016, including the impact of income attributable to noncontrolling interests of $17,118 and $23,170, respectively, was 38.8% and 35.7%, respectively. The Company's effective income tax rate for the three and six months ended June 30, 2015, including the impact of income attributable to noncontrolling interests of $22,650 and $38,447, respectively, was 36.3% and 34.8%, respectively.

PBF Energy has determined there are no material uncertain tax positions as of June 30, 2016. PBF Energy does not have any unrecognized tax benefits.

10. 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 $11,340 recorded as of June 30, 2016 ($10,367 as of December 31, 2015) represents the present value of expected future costs discounted at a rate of 8.0%. The current portion of the environmental liability is recorded in Accrued expenses and the non-current portion is recorded in Other long-term liabilities. As of June 30, 2016 and December 31, 2015, this liability is self-guaranteed by the Company.

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, subject to certain limitations.

In connection with the acquisition of the Chalmette refinery, the Company obtained $3,936 in financial assurance (in the form of a surety bond) to cover estimated potential site remediation costs associated with an agreed to Administrative Order of Consent with the EPA. The estimated cost assumes remedial activities will continue for a minimum of 30 years. Further, in connection with the acquisition of the Chalmette refinery, the Company

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

purchased a ten year, $100,000 environmental insurance policy to insure against unknown environmental liabilities at the refinery.

In connection with the PBFX Plains Asset Purchase, PBFX is responsible for the environmental remediation costs for conditions that existed on the closing date up to a maximum of $250 per year for 10 years, with Plains All American Pipeline, L.P. remaining responsible for any and all additional costs above such amounts during such period. The environmental liability of $2,273 recorded as of June 30, 2016 represents the present value of expected future costs discounted at a rate of 1.83%. At June 30, 2016 the undiscounted liability is $2,500 and PBFX expects to make aggregate payments for this liability of $1,250 over the next five years. The current portion of the environmental liability is recorded in accounts payable and accrued liabilities and the non-current portion is recorded in other long-term liabilities.

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 parts per million (“PPM”) sulfur. Since July 1, 2012, other states in the Northeast market began requiring heating oil sold in their state to contain no more than 15 PPM sulfur. Currently, all of the Northeastern states and Washington DC have adopted sulfur controls on heating oil. Most of the Northeastern states will now require heating oil with 15 PPM or less sulfur by July 1, 2018 (except for Pennsylvania and Maryland - 500 ppm sulfur required). All of the heating oil the Company currently produces meets these specifications. The mandate and other requirements do not currently have a material impact on the Company's financial position, results of operations or cash flows.

The EPA issued the final Tier 3 Gasoline standards on March 3, 2014 under the Clean Air Act. This final rule establishes more stringent vehicle emission standards and further reduces the sulfur content of gasoline starting in January of 2017. The new standard is set at 10 PPM sulfur in gasoline on an annual average basis starting January 1, 2017, with a credit trading program to provide compliance flexibility. The EPA responded to industry comments on the proposed rule and maintained the per gallon sulfur cap on gasoline at the existing 80 PPM cap. The standards set by the new rule are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

The EPA was required to release the final annual standards for the Reformulated Fuels Standard (“RFS”) for 2014 no later than Nov 29, 2013 and for 2015 no later than Nov 29, 2014. The EPA did not meet these requirements but did release proposed standards for 2014. The EPA did not finalize this proposal in 2014. The EPA published the final 2014-2016 Renewable standards late in 2015. The EPA essentially set the standards for 2014 and 2015 at the estimated actual renewable fuel used in each year given they were for the most part regulating activities that had already occurred. In setting the 2016 standards the EPA recognized the E10 blend wall and used the general waiver authority to set the 2016 renewable fuel requirement lower than the original requirements stated in the Energy Independence Security Act (“EISA”). These new standards are being challenged by both renewable fuel producers and obligated parties in legal actions. The courts are attempting to consolidate some of these challenges. It appears unlikely the courts will be able resolve these issues before EPA releases the final 2017 standards late in 2016 assuming they stay on schedule. The EPA did propose the 2017 standards in May of 2016 and raised the requirements above the 2016 standards. Numerous public interest groups have publicly indicated that they believe that the EPA is relying on perhaps somewhat aggressive expectations of E15 and E85 marketing in proposing the new standards. The EPA is receiving comments on the new proposal and is targeting to release the final rule by the end of November 2016 as required. The Company is currently evaluating the final standards and they may have a material impact on the Company's cost of compliance with RFS 2.

The EPA published a Final Rule to the Clean Water Act (“CWA”) Section 316(b) in August 2014 regarding cooling water intake structures, which includes requirements for petroleum refineries. The purpose of this rule is to prevent fish from being trapped against cooling water intake screens (impingement) and to prevent fish from being drawn through cooling water systems (entrainment). Facilities will be required to implement Best Technology Available (BTA) as soon as possible, but state agencies have the discretion to establish implementation time lines. The Company continues to evaluate the impact of this regulation, and at this time does not anticipate it having a material impact on the Company’s financial position, results of operations or cash flows.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

In addition, on December 1, 2015 the EPA finalized revisions to an existing air regulation concerning Maximum Achievable Control Technologies (“MACT”) for Petroleum Refineries. The regulation requires additional continuous monitoring systems for eligible process safety valves relieving to atmosphere, minimum flare gas heat (Btu) content, and delayed coke drum vent controls to be installed by January 30, 2019. In addition, a program for ambient fence line monitoring for benzene will need to be implemented by January 30, 2018. The Company is currently evaluating the final standards to evaluate the impact of this regulation, and at this time does not anticipate it will have a material impact on the Company's financial position, results of operations or cash flows.

In late 2015, the EPA initiated enforcement proceedings against companies it believes produced invalid RINs. The Company purchased RINs to satisfy a portion of its obligations under the Renewable Fuels Standard program for calendar year 2012 and had purchased some RINs the EPA considered invalid. The Company continues to purchase RINs to satisfy its obligations under the RFS program, and on April 11, 2016, PBF Holding was notified by the EPA that the EPA’s records indicated that PBF Holding used potentially invalid RINs generated by one of the companies. The EPA directed PBF Holding to resubmit reports to remove the potentially invalid RINs and to replace the invalid RINs with valid RINs with the same D Code. The Company has retired the invalid RINs and on May 6, 2016, the counterparty who sold the RINs to the Company replaced the RINs. The counterparty has also agreed to indemnify the Company for certain penalties to the extent imposed by the EPA. On July 28, 2016, the Company and the EPA entered an Administrative Settlement Agreement to resolve the matter which requires the payment of a $250 penalty. The Company expects to be reimbursed by the counterparty for this penalty under the indemnification agreement. In any event, the penalty is not expected to have a material effect on its financial condition, results of operations or cash flows.

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, regardless of whether such holders receive cash distributions from PBF LLC. PBF Energy ultimately may not receive cash distributions from PBF LLC equal to its share of such taxable income or even equal to the actual tax due with respect to that income. For example, PBF LLC is required to include in taxable income PBF LLC’s allocable share of PBFX’s taxable income and gains (such share to be determined pursuant to the partnership agreement of PBFX), regardless of the amount of cash distributions received by PBF LLC from PBFX, and such taxable income and gains will flow-through to PBF Energy to the extent of its allocable share of the taxable income of PBF LLC. As a result, at certain times, the amount of cash otherwise ultimately available to PBF Energy on account of its indirect interest in PBFX may not be sufficient for PBF Energy to pay the amount of taxes it will owe on account of its indirect interests in PBFX.

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 are required to be in 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 is required to make a “true up” tax distribution, no later than March 15 of the following year, equal to such difference,

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

subject to the available cash and borrowings of PBF LLC. PBF LLC obtains funding to pay its tax distributions by causing PBF Holding to distribute cash to PBF LLC and from distributions it receives from PBFX.

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 benefits 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, PBF Holding or PBFX. In general, PBF Energy expects to obtain funding for these annual payments from PBF LLC, primarily through tax distributions, which PBF LLC makes on a pro-rata basis to its owners. Such owners include PBF Energy, which holds a 95.2% interest in PBF LLC as of June 30, 2016 (95.1% as of December 31, 2015). PBF LLC obtains funding to pay its tax distributions by causing PBF Holding to distribute cash to PBF LLC and from distributions it receives from PBFX.

As of June 30, 2016, the Company has recognized a liability for the tax receivable agreement of $661,418 ($661,418 as of December 31, 2015) reflecting the estimate of the undiscounted amounts that the Company expects to pay under the agreement.

11. DIVIDENDS AND DISTRIBUTIONS

With respect to dividends and distributions paid during the six months ended June 30, 2016, PBF LLC made aggregate non-tax quarterly distributions of $0.60 per unit to its members, of which $58,696 was distributed pro-rata to PBF Energy and the balance was distributed to its other members. PBF Energy used this $58,696 to pay quarterly cash dividends of $0.30 per share of Class A common stock on March 8, 2016 and May 31, 2016.

With respect to distributions paid during the six months ended June 30, 2016, PBFX paid a distribution on outstanding common and subordinated units of $0.41 per unit on March 8, 2016 and $0.42 per unit on May 31, 2016, for a total distribution of $31,099, of which $16,496 was distributed to PBF LLC and the balance was distributed to its public unit holders.

12. TREASURY STOCK

On August 19, 2014, the Company's Board of Directors authorized the repurchase of up to $200,000 of the Company's Class A common stock (the “Repurchase Program”). On October 29, 2014, the Company's Board of Directors approved an additional $100,000 increase to the existing Repurchase Program. The Repurchase Program expires on September 30, 2016. No repurchases of the Company's Class A common stock were made during the six months ended June 30, 2016. From the inception of the Repurchase Program through June 30, 2016, the Company has purchased approximately 6.05 million shares of the Company's Class A common stock through open market transactions under the Repurchase Program, for a total of $150,804.

These repurchases may be made from time to time through various methods, including open market transactions, block trades, accelerated share repurchases, privately negotiated transactions or otherwise, certain of which may

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

be effected through Rule 10b5-1 and Rule 10b-18 plans. The timing and number of shares repurchased will depend on a variety of factors, including price, capital availability, legal requirements and economic and market conditions. The Company is not obligated to purchase any shares under the Repurchase Program, and repurchases may be suspended or discontinued at any time without prior notice.

As of June 30, 2016, the Company has the ability to purchase an additional $149,196 in common stock under the approved Repurchase Program.

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 June 30,						Six Months Ended June 30,
Pension Benefits	2016			2015			2016			2015
Components of net periodic benefit cost:
Service cost	$	7,339		$	5,789		$	14,679		$	11,579
Interest cost	775			707			1,551			1,416
Expected return on plan assets	(1,107		)	(829		)	(2,213		)	(1,659		)
Amortization of prior service costs	13			13			26			26
Amortization of loss	194			311			388			622
Net periodic benefit cost	$	7,214		$	5,991		$	14,431		$	11,984



	Three Months Ended June 30,				Six Months Ended June 30,
Post Retirement Medical Plan	2016		2015		2016		2015
Components of net periodic benefit cost:
Service cost	$	219	$	244	$	439	$	488
Interest cost	133		134		267		269
Amortization of prior service costs	109		76		218		152
Amortization of loss (gain)	—		—		—		—
Net periodic benefit cost	$	461	$	454	$	924	$	909

PBF ENERGY INC.

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 June 30, 2016 and December 31, 2015.

We have elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty; however, fair value amounts by hierarchy level are presented on a gross basis in the tables below. We have posted cash margin with various counterparties to support hedging and trading activities. The cash margin posted is required by counterparties as collateral deposits and cannot be offset against the fair value of open contracts except in the event of default. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.



	As of June 30, 2016
	Fair Value Hierarchy						Total Gross Fair Value		Effect of Counter-party Netting		Net Carrying Value on Balance Sheet
	Level 1		Level 2		Level 3		Total Gross Fair Value		Effect of Counter-party Netting		Net Carrying Value on Balance Sheet
Assets:
Money market funds	$	25,005	$	—	$	—	$	25,005	N/A		$	25,005
Marketable securities	136,144		—		—		136,144		N/A		136,144
Commodity contracts	17,039		23,098		493		40,630		(26,175	)	14,455
Derivatives included with inventory intermediation agreement obligations	—		9,338		—		9,338		—		9,338
Liabilities:
Commodity contracts	21,690		4,485		—		26,175		(26,175	)	—
Catalyst lease obligations	—		36,436		—		36,436		—		36,436



	As of December 31, 2015
	Fair Value Hierarchy						Total Gross Fair Value		Effect of Counter-party Netting		Net Carrying Value on Balance Sheet
	Level 1		Level 2		Level 3		Total Gross Fair Value		Effect of Counter-party Netting		Net Carrying Value on Balance Sheet
Assets:
Money market funds	$	631,280	$	—	$	—	$	631,280	N/A		$	631,280
Marketable securities	234,258		—		—		234,258		N/A		234,258
Commodity contracts	63,810		31,256		3,543		98,609		(52,482	)	46,127
Derivatives included with inventory intermediation agreement obligations	—		35,511		—		35,511		—		35,511
Derivatives included with inventory supply arrangement obligations	—		—		—		—		—		—
Liabilities:
Commodity contracts	49,960		2,522		—		52,482		(52,482	)	—
Catalyst lease obligations	—		31,802		—		31,802		—		31,802

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

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.


•	Marketable securities, consisting primarily of US Treasury securities, categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted market prices.


•	The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair value hierarchy are measured at fair value using a market approach based upon future commodity prices for similar instruments quoted in active markets.

•

The commodity contracts categorized in Level 3 of the fair value hierarchy consist of commodity price swap contracts that relate to forecasted purchases of crude oil for which quoted forward market prices are not readily available due to market illiquidity. The forward prices used to value these swaps were derived using broker quotes, prices from other third party sources and other available market based data.


•	The derivatives included with inventory supply arrangement obligations, derivatives included with inventory intermediation agreement obligations and the catalyst lease obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based upon commodity prices for similar instruments quoted in active markets.

Non-qualified pension plan assets are measured at fair value using a market approach based on published net asset values of mutual funds as a practical expedient. As of June 30, 2016 and December 31, 2015, $9,811 and $9,325, respectively, were included within Deferred charges and other assets, net for these non-qualified pension plan assets.

The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value hierarchy:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Balance at beginning of period	$	1,915		$	9,678		$	3,543		$	1,521
Purchases	—			—			—			—
Settlements	(746		)	(10,111		)	(1,003		)	(11,311		)
Unrealized gain included in earnings	(676		)	2,338			(2,047		)	11,695
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Balance at end of period	$	493		$	1,905		$	493		$	1,905

There were no transfers between levels during the three and six months ended June 30, 2016 and 2015, respectively.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

Fair value of debt

The table below summarizes the fair value and carrying value of debt as of June 30, 2016 and December 31, 2015.



	June 30, 2016				December 31, 2015
	Carrying value		Fair value		Carrying value		Fair value
Senior Secured Notes due 2020 (a)	$	670,243	$	704,783	$	669,644	$	706,246
Revolving Loan (b)	550,000		550,000		—		—
Senior Secured Notes due 2023 (a)	500,000		483,584		500,000		492,452
PBFX Senior Notes (a)	350,000		344,714		350,000		321,722
PBFX Term Loan (b)	135,864		135,864		234,200		234,200
PBFX Revolving Credit Facility (b)	93,000		93,000		24,500		24,500
Rail Facility (b)	60,521		60,521		67,491		67,491
Catalyst leases (c)	36,436		36,436		31,802		31,802
	2,396,064		2,408,902		1,877,637		1,878,413
Less - Current maturities	135,864		135,864		—		—
Less - Unamortized deferred financing costs	36,352		n/a		41,282		n/a
Long-term debt	$	2,223,848	$	2,273,038	$	1,836,355	$	1,878,413

(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 and the PBFX Senior 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.

15. DERIVATIVES

The Company uses derivative instruments to mitigate certain exposures to commodity price risk. Prior to December 31, 2015, the Company’s crude supply agreement contained purchase obligations for certain volumes of crude oil and other feedstocks. In addition, the Company entered into Inventory Intermediation Agreements commencing in July 2013 that contain purchase obligations for certain volumes of intermediates and refined products. The 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 the underlying crude oil and refined products. The level of activity for these derivatives is based on the level of operating inventories.

As of June 30, 2016, there were no barrels of crude oil and feedstocks (no barrels at December 31, 2015) outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at December 31, 2015) outstanding under these derivative instruments not designated as hedges. As of June 30, 2016, there were 3,300,487 barrels of intermediates and refined products (3,776,011 barrels at December 31, 2015) outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at December 31, 2015) outstanding

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

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 June 30, 2016, there were 30,486,500 barrels of crude oil and 5,857,000 barrels of refined products (39,577,000 and 4,599,136, respectively, as of December 31, 2015), 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 June 30, 2016 and December 31, 2015 and the line items in the condensed consolidated balance sheet in which the fair values are reflected.



Description	Balance Sheet Location	Fair Value Asset/(Liability)
Derivatives designated as hedging instruments:
June 30, 2016:
Derivatives included with the inventory intermediation agreement obligations	Accrued expenses	$	9,338
December 31, 2015
Derivatives included with the inventory intermediation agreement obligations	Accrued expenses	$	35,511

Derivatives not designated as hedging instruments:
June 30, 2016:
Commodity contracts	Accounts receivable	$	14,455
December 31, 2015
Commodity contracts	Accounts receivable	$	46,127

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

The following table provides information about the gain or loss recognized in income on these derivative instruments and the line items in the condensed 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 June 30, 2016:
Derivatives included with the inventory intermediation agreement obligations	Cost of sales	$	8,973
For the three months ended June 30, 2015:
Derivatives included with inventory supply arrangement obligations	Cost of sales	$	(1,808	)
Derivatives included with the inventory intermediation agreement obligations	Cost of sales	$	(20,888	)
For the six months ended June 30, 2016:
Derivatives included with the inventory intermediation agreement obligations	Cost of sales	$	(26,172	)
For the six months ended June 30, 2015:
Derivatives included with inventory supply arrangement obligations	Cost of sales	$	(4,629	)
Derivatives included with the inventory intermediation agreement obligations	Cost of sales	$	(84,574	)

Derivatives not designated as hedging instruments:
For the three months ended June 30, 2016:
Commodity contracts	Cost of sales	$	(19,134	)
For the three months ended June 30, 2015:
Commodity contracts	Cost of sales	$	(3,969	)
For the six months ended June 30, 2016:
Commodity contracts	Cost of sales	$	(39,087	)
For the six months ended June 30, 2015:
Commodity contracts	Cost of sales	$	(45,097	)

Hedged items designated in fair value hedges:
For the three months ended June 30, 2016:
Intermediate and refined product inventory	Cost of sales	$	(8,973	)
For the three months ended June 30, 2015:
Crude oil and feedstock inventory	Cost of sales	$	1,808
Intermediate and refined product inventory	Cost of sales	$	20,888
For the six months ended June 30, 2016:
Intermediate and refined product inventory	Cost of sales	$	26,172
For the six months ended June 30, 2015:
Crude oil and feedstock inventory	Cost of sales	$	4,629
Intermediate and refined product inventory	Cost of sales	$	84,574

The Company had no ineffectiveness related to the Company's fair value hedges for the three and six months ended June 30, 2016 and 2015.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

16. SEGMENT INFORMATION

The Company's operations are organized into two reportable segments, Refining and Logistics. Operations that are not included in the Refining and Logistics segments are included in Corporate. Intersegment transactions are eliminated in the consolidated financial statements and are included in Eliminations.

Refining

As of June 30, 2016, the Company's Refining Segment includes the operations of its four refineries which are located in Toledo, Ohio, Delaware City, Delaware, Paulsboro, New Jersey and New Orleans, Louisiana. The refineries produce unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The Company purchases crude oil, other feedstocks and blending components from various third-party suppliers. The Company sells products throughout the Northeast, Midwest and Gulf Coast of the United States, as well as in other regions of the United States and Canada, and is able to ship products to other international destinations.

Logistics

The Company formed PBFX, a publicly traded master limited partnership, to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX's assets consist of (i) a rail terminal which has a double loop track and ancillary pumping and unloading equipment located at the Delaware City refinery; (ii) a truck terminal comprised of six lease automatic custody transfer units accepting crude oil deliveries by truck located at the Toledo refinery; (iii) a heavy crude rail unloading rack located at the Delaware City refinery; (iv) a tank farm, including a propane storage and loading facility at the Toledo Refinery; (v) an interstate petroleum products pipeline and a 15-lane truck loading rack both located at the Delaware City refinery; and (vi) the East Coast Terminals consisting of product storage tanks and terminal operations with pipeline connections to the Colonial Pipeline Company, Buckeye Partners, Sunoco Logistics Partners and other proprietary pipeline systems, truck loading lanes and marine facilities capable of handling barges and ships. PBFX provides various rail, truck and marine terminaling services, pipeline transportation services and storage services to PBF Holding and/or its subsidiaries and third party customers through fee-based commercial agreements. Apart from the East Coast Terminals, PBFX currently does not generate third party revenue and, as such, intersegment related-party revenues are eliminated in consolidation. Prior to the PBFX Offering, PBFX's assets were operated within the refining operations of the Company's Delaware City and Toledo refineries and did not generate third party revenue nor, apart from Delaware Pipeline Company LLC, any intra-entity revenue and were not considered to be a separate reportable segment.

The Company evaluates the performance of its segments based primarily on income from operations. Income from operations includes those revenues and expenses that are directly attributable to management of the respective segment. The Logistics segment's revenues include inter-segment transactions with the Company's Refining segment at prices the Company believes are substantially equivalent to the prices that could have been negotiated with unaffiliated parties with respect to similar services. Activities of the Company's business that are not included in the two operating segments are included in Corporate. Such activities consist primarily of corporate staff operations and other items that are not specific to the normal operations of the two operating segments. The Company does not allocate certain items of other income and expense, including income taxes, to the individual segments. The Refinery segment's operating subsidiaries and PBFX are primarily pass-through entities with respect to income taxes.

Disclosures regarding our reportable segments with reconciliations to consolidated totals for the three and six months ended June 30, 2016 and June 30, 2015 are presented below.

Total assets of each segment consist of net property, plant and equipment, inventories, cash and cash equivalents, accounts receivables and other assets directly associated with the segment’s operations. Corporate assets consist primarily of deferred tax assets, property, plant and equipment and other assets not directly related to our refinery and logistic operations.

PBF ENERGY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)



	Three Months Ended June 30, 2016
	Refining		Logistics		Corporate			Eliminations			Consolidated Total
Revenues	$	3,855,773	$	40,659	$	—		$	(37,965	)	$	3,858,467
Depreciation and amortization expense	47,540		2,142		1,378						51,060
Income (loss) from operations	248,724		23,888		(37,842		)	—			234,770
Interest expense, net	1,142		7,634		27,164			—			35,940
Capital expenditures (1)	88,480		99,963		6,559			—			195,002



	Three Months Ended June 30, 2015
	Refining		Logistics		Corporate			Eliminations			Consolidated Total
Revenues	$	3,550,664	$	34,868	$	—		$	(34,868	)	$	3,550,664
Depreciation and amortization expense	44,421		1,637		2,504			—			48,562
Income (loss) from operations	287,442		24,734		(38,380		)	—			273,796
Interest expense, net	4,575		4,930		17,371			—			26,876
Capital expenditures	126,107		144		425			—			126,676



	Six Months Ended June 30, 2016
	Refining		Logistics		Corporate			Eliminations			Consolidated Total
Revenues	$	6,655,958	$	77,208	$	—		$	(74,514	)	$	6,658,652
Depreciation and amortization expense	100,136		3,782		3,075			—			106,993
Income (loss) from operations	253,691		50,211		(74,556		)	—			229,346
Interest expense, net	2,114		14,863		56,490			—			73,467
Capital expenditures (1)	228,080		100,402		12,259			—			340,741



	Six Months Ended June 30, 2015
	Refining		Logistics		Corporate			Eliminations			Consolidated Total
Revenues	$	6,545,800	$	67,713	$	—		$	(67,713	)	$	6,545,800
Depreciation and amortization expense	87,451		3,270		5,547			—			96,268
Income (loss) from operations	476,081		44,450		(74,325		)	—			446,206
Interest expense, net	9,290		6,885		32,893			—			49,068
Capital expenditures	250,575		220		1,610			—			252,405

Balance at June 30, 2016

Refining

Logistics

Corporate

Eliminations