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, 2018
Or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-35764
Commission File Number: 333-206728-02
 
PBF ENERGY INC.
PBF ENERGY COMPANY LLC
(Exact name of registrant as specified in its charter)
 
DELAWARE
 
45-3763855 
DELAWARE
 
61-1622166
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
One Sylvan Way, Second Floor
Parsippany, New Jersey
 
07054
(Address of principal executive offices)
 
(Zip Code)
(973) 455-7500
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  

PBF Energy Inc.         Yes [x] No [ ]
PBF Energy Company LLC    Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

PBF Energy Inc.         Yes [x] No [ ]
PBF Energy Company LLC    Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
PBF Energy Inc.
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
Emerging growth company o
PBF Energy Company LLC
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer þ
 
Smaller reporting company o
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
PBF Energy Inc.         o
PBF Energy Company LLC     o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PBF Energy Inc.         Yes [ ] No [x]
PBF Energy Company LLC    Yes [ ] No [x]
As of July 31, 2018, PBF Energy Inc. had outstanding 113,831,228 shares of Class A common stock and 20 shares of Class B common stock. PBF Energy Inc. is the sole managing member of, and owner of an equity interest representing approximately 99.0% of the outstanding economic interest in PBF Energy Company LLC as of June 30, 2018. There is no trading in the membership interest of PBF Energy Company LLC and therefore an aggregate market value based on such is not determinable. PBF Energy Company LLC has no common stock outstanding.
 



PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
PBF Energy Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PBF Energy Company LLC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
ITEM 2.
 
 
ITEM 6.
This combined Quarterly Report on Form 10-Q is filed by PBF Energy Inc. (“PBF Energy”) and PBF Energy Company LLC (“PBF LLC”). Each Registrant hereto is filing on its own behalf all of the information contained in this report that relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes no representation as to any such information. PBF Energy is a holding company whose primary asset is an equity interest in PBF LLC. PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 99.0% of the outstanding economic interests in PBF LLC as of June 30, 2018. 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 our 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, 2018, PBF LLC also holds a 43.9% 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. Discussions or areas of this report that either apply only to PBF Energy or PBF LLC are clearly noted in such sections. Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to both PBF Energy and PBF LLC and its consolidated subsidiaries.

2


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995 (“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, intentions, resources and expectations regarding future industry trends are forward-looking statements made under the safe harbor provisions 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, the Annual Report on Form 10-K for the year ended December 31, 2017 of PBF Energy, which we refer to as our 2017 Annual Report on Form 10-K, the PBF LLC financial statements for the year ended December 31, 2017 filed with PBF Logistics LP’s Registration Statement on Form S-4 filed on March 13, 2018 by PBFX Logistics LP, 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 indebtedness;
•our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;
•termination of our Inventory Intermediation Agreements with J. Aron, which 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 by PBF Energy to the current and former holders of PBF LLC Series A Units and PBF LLC Series B Units under our Tax Receivable Agreement (as defined in “Note 10 - Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements) 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,

3


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 impact of the newly enacted federal income tax legislation on our business;
•the effectiveness of our crude oil sourcing strategies, including our crude by rail strategy and related commitments;
•adverse impacts related to 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 from 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 successfully integrate recently completed acquisitions into our business and realize the benefits from such acquisitions;
•liabilities arising from recent acquisitions 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 continue to 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.

4

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,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (PBFX: $19,681 and $19,664, respectively)
$
478,329

 
$
573,021

Accounts receivable
1,034,074

 
952,552

Inventories
2,540,277

 
2,213,797

Prepaid and other current assets
55,150

 
63,589

Total current assets
4,107,830

 
3,802,959

Property, plant and equipment, net (PBFX: $710,412 and $673,823, respectively)
3,560,524

 
3,479,213

Deferred tax assets
—

 
53,638

Deferred charges and other assets, net
878,361

 
782,183

Total assets
$
8,546,715

 
$
8,117,993

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
637,941

 
$
578,551

Accrued expenses
1,830,037

 
1,814,854

Deferred revenue
4,809

 
8,933

Note payable
3,200

 
5,621

Current debt
1,298

 
10,987

Total current liabilities
2,477,285

 
2,418,946

Long-term debt (PBFX: $603,581 and $548,793, respectively)
2,214,042

 
2,175,042

Payable to related parties pursuant to Tax Receivable Agreement
391,156

 
362,142

Deferred tax liabilities
58,617

 
33,155

Other long-term liabilities
233,331

 
225,759

Total liabilities
5,374,431

 
5,215,044

Commitments and contingencies (Note 10)

 

Equity:
 
 
 
PBF Energy Inc. equity
 
 
 
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 113,829,728 shares outstanding at June 30, 2018, 110,565,531 shares outstanding at December 31, 2017
96

 
95

Class B common stock, $0.001 par value, 1,000,000 shares authorized, 20 shares outstanding at June 30, 2018, 25 shares outstanding at December 31, 2017
—

 
—

Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding at June 30, 2018 and December 31, 2017
—

 
—

Treasury stock, at cost, 6,171,898 shares outstanding at June 30, 2018 and 6,132,884 shares outstanding at December 31, 2017
(153,618
)
 
(152,585
)
Additional paid in capital
2,308,502

 
2,277,739

Retained earnings
471,958

 
236,786

Accumulated other comprehensive loss
(25,109
)
 
(25,381
)
Total PBF Energy Inc. equity
2,601,829

 
2,336,654

Noncontrolling interest
570,455

 
566,295

Total equity
3,172,284

 
2,902,949

Total liabilities and equity
$
8,546,715

 
$
8,117,993


See notes to condensed consolidated financial statements.
5


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,
 
2018
 
2017
 
2018
 
2017
Revenues
$
7,444,083

 
$
5,017,225

 
$
13,246,859

 
$
9,771,698


 
 
 
 
 
 
 
Cost and expenses:
 
 
 
 
 
 
 
Cost of products and other
6,452,535

 
4,605,693

 
11,584,637

 
8,802,460

Operating expenses (excluding depreciation and amortization expense as reflected below)
417,695

 
412,790

 
843,830

 
864,056

Depreciation and amortization expense
89,748

 
62,683

 
173,021

 
121,853

Cost of sales
6,959,978

 
5,081,166

 
12,601,488

 
9,788,369

General and administrative expenses (excluding depreciation and amortization expense as reflected below)
58,685

 
41,058

 
121,498

 
84,888

Depreciation and amortization expense
2,563

 
6,020

 
5,277

 
7,782

Loss on sale of assets
594

 
29

 
673

 
912

Total cost and expenses
7,021,820

 
5,128,273

 
12,728,936

 
9,881,951

 
 
 
 
 
 
 
 
Income (loss) from operations
422,263

 
(111,048
)
 
517,923

 
(110,253
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Change in fair value of catalyst leases
4,140

 
1,104

 
4,153

 
(1,484
)
Debt extinguishment costs
—

 
(25,451
)
 
—

 
(25,451
)
Interest expense, net
(43,448
)
 
(40,698
)
 
(86,646
)
 
(77,881
)
Other non-service components of net periodic benefit cost
277

 
(101
)
 
555

 
(202
)
Income (loss) before income taxes
383,232

 
(176,194
)
 
435,985

 
(215,271
)
Income tax expense (benefit)
95,545

 
(72,043
)
 
106,487

 
(91,090
)
Net income (loss)
287,687

 
(104,151
)
 
329,498

 
(124,181
)
Less: net income attributable to noncontrolling interests
15,534

 
5,512

 
26,979

 
16,559

Net income (loss) attributable to PBF Energy Inc. stockholders
$
272,153

 
$
(109,663
)
 
$
302,519

 
$
(140,740
)
 
 
 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding
 
 
 
 
 
 
 
Basic
112,875,813

 
108,779,992

 
111,853,774

 
108,770,237

Diluted
116,409,273

 
108,779,992

 
115,749,927

 
108,770,237

Net income (loss) available to Class A common stock per share:
 
 
 
 
 
 
 
Basic
$
2.41

 
$
(1.01
)
 
$
2.70

 
$
(1.30
)
Diluted
$
2.37

 
$
(1.01
)
 
$
2.66

 
$
(1.30
)
 
 
 
 
 
 
 
 
Dividends per common share
$
0.30

 
$
0.30

 
$
0.60

 
$
0.60



See notes to condensed consolidated financial statements.
6


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Net income (loss)
$
287,687

 
$
(104,151
)
 
$
329,498

 
$
(124,181
)
Other comprehensive income:
 
 
 
 

 

Unrealized (loss) gain on available for sale securities
(235
)
 
43

 
(235
)
 
70

Net gain on pension and other post-retirement benefits
255

 
287

 
509

 
574

Total other comprehensive income
20

 
330

 
274

 
644

Comprehensive income (loss)
287,707

 
(103,821
)
 
329,772

 
(123,537
)
Less: comprehensive income attributable to noncontrolling interests
15,530

 
5,524

 
26,982

 
16,581

Comprehensive income (loss) attributable to PBF Energy Inc. stockholders
$
272,177

 
$
(109,345
)
 
$
302,790

 
$
(140,118
)

See notes to condensed consolidated financial statements.
7


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Six Months Ended 
 June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income (loss)
$
329,498

 
$
(124,181
)
Adjustments to reconcile net income (loss) to net cash used in operations:
 
 
 
Depreciation and amortization
182,283

 
134,595

Stock-based compensation
13,017

 
13,842

Change in fair value of catalyst leases
(4,153
)
 
1,484

Deferred income taxes
105,735

 
(92,464
)
Non-cash change in inventory repurchase obligations
2,538

 
(3,107
)
Non-cash lower of cost or market inventory adjustment
(245,655
)
 
167,134

Debt extinguishment costs
—

 
25,451

Pension and other post-retirement benefit costs
23,691

 
21,121

Loss on sale of assets
673

 
912

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(81,522
)
 
8,533

Inventories
(80,825
)
 
(178,738
)
Prepaid and other current assets
8,439

 
63,853

Accounts payable
61,682

 
(138,802
)
Accrued expenses
7,597

 
113,494

Deferred revenue
(4,124
)
 
(7,131
)
Other assets and liabilities
(10,986
)
 
(40,661
)
Net cash provided by (used in) operations
307,888

 
(34,665
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(115,690
)
 
(220,446
)
Expenditures for deferred turnaround costs
(179,194
)
 
(214,375
)
Expenditures for other assets
(12,357
)
 
(23,747
)
Acquisition of Toledo Products Terminal by PBFX
—

 
(10,097
)
Acquisition of Knoxville Terminals by PBFX
(58,000
)
 
—

Purchase of marketable securities
—

 
(75,036
)
Maturities of marketable securities
—

 
115,060

Net cash used in investing activities
$
(365,241
)
 
$
(428,641
)


See notes to condensed consolidated financial statements.
8


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)
 
Six Months Ended 
 June 30,
 
2018
 
2017
Cash flows from financing activities:
 
 
 
Distributions to PBF Energy Company LLC members other than PBF Energy
$
(1,362
)
 
$
(2,300
)
Distributions to PBFX public unit holders
(22,922
)
 
(21,248
)
Dividend payments
(67,155
)
 
(65,807
)
Proceeds from 2025 Senior Notes
—

 
725,000

Cash paid to extinguish 2020 Senior Secured Notes
—

 
(690,209
)
Proceeds from PBFX revolver borrowings
64,000

 
—

Repayments of PBFX revolver borrowings
(9,700
)
 
—

Repayments of PBFX Term Loan borrowings
—

 
(39,664
)
Repayments of PBF Rail Term Loan
(3,385
)
 
(3,295
)
Proceeds from revolver borrowings
—

 
290,000

Repayments of revolver borrowings
—

 
(290,000
)
Repayment of note payable
(2,421
)
 
—

Catalyst lease settlements
(9,466
)
 
—

Proceeds from insurance premium financing
17,398

 
—

Proceeds from stock options exercised
11,670

 
—

Purchase of treasury stock
(1,033
)
 
—

Deferred financing costs and other
(12,963
)
 
(12,414
)
Net cash used in financing activities
(37,339
)
 
(109,937
)
 
 
 
 
Net decrease in cash and cash equivalents
(94,692
)
 
(573,243
)
Cash and cash equivalents, beginning of period
573,021

 
746,274

Cash and cash equivalents, end of period
$
478,329

 
$
173,031

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
Accrued and unpaid capital expenditures
$
20,143

 
$
128,941



See notes to condensed consolidated financial statements.
9


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except unit and per unit data)
 
June 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (PBFX: $19,681 and $19,664, respectively)
$
474,980

 
$
562,036

Accounts receivable
1,034,074

 
952,552

Inventories
2,540,277

 
2,213,797

Prepaid and other current assets
53,622

 
51,799

Total current assets
4,102,953

 
3,780,184

 
 
 
 
Property, plant and equipment, net (PBFX: $710,412 and $673,823, respectively)
3,560,524

 
3,479,213

Deferred charges and other assets, net
873,657

 
779,588

Total assets
$
8,537,134

 
$
8,038,985

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
637,941

 
$
578,551

Accrued expenses
1,843,245

 
1,824,394

Deferred revenue
4,809

 
8,933

Note payable
3,200

 
5,621

Current debt
1,298

 
10,987

Total current liabilities
2,490,493

 
2,428,486

 
 
 
 
Long-term debt (PBFX: $603,581 and $548,793, respectively)
2,214,042

 
2,175,042

Affiliate note payable
322,144

 
292,844

Deferred tax liabilities
28,502

 
33,155

Other long-term liabilities
233,358

 
225,845

Total liabilities
5,288,539

 
5,155,372

 
 
 
 
Commitments and contingencies (Note 10)
 
 
 
 
 
 
 
Series B Units, 1,000,000 issued and outstanding, no par or stated value
5,110

 
5,110

PBF Energy Company LLC equity:
 
 
 
Series A Units, 1,206,325 and 3,767,464 issued and outstanding at June 30, 2018 and December 31, 2017, no par or stated value
19,481

 
40,058

Series C Units, 113,850,959 and 110,586,762 issued and outstanding at June 30, 2018 and December 31, 2017, no par or stated value
1,682,854

 
1,654,999

Treasury stock, at cost
(153,618
)
 
(152,585
)
Retained earnings
1,266,869

 
906,875

Accumulated other comprehensive loss
(26,662
)
 
(26,936
)
Total PBF Energy Company LLC equity
2,788,924

 
2,422,411

Noncontrolling interest
454,561

 
456,092

Total equity
3,243,485

 
2,878,503

Total liabilities, Series B units and equity
$
8,537,134

 
$
8,038,985


See notes to condensed consolidated financial statements.
10


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
7,444,083

 
$
5,017,225

 
$
13,246,859

 
$
9,771,698

 
 
 
 
 
 
 
 
Cost and expenses:
 
 
 
 
 
 
 
Cost of products and other
6,452,535

 
4,605,693

 
11,584,637

 
8,802,460

Operating expenses (excluding depreciation and amortization expense as reflected below)
417,695

 
412,790

 
843,830

 
864,056

Depreciation and amortization expense
89,748

 
62,683

 
173,021

 
121,853

Cost of sales
6,959,978

 
5,081,166

 
12,601,488

 
9,788,369

General and administrative expenses (excluding depreciation and amortization expense as reflected below)
58,244

 
40,986

 
120,805

 
84,780

Depreciation and amortization expense
2,563

 
6,020

 
5,277

 
7,782

Loss on sale of assets
594

 
29

 
673

 
912

Total cost and expenses
7,021,379

 
5,128,201

 
12,728,243

 
9,881,843

 
 
 
 
 
 
 
 
Income (loss) from operations
422,704

 
(110,976
)
 
518,616

 
(110,145
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Change in fair value of catalyst leases
4,140

 
1,104

 
4,153

 
(1,484
)
Debt extinguishment costs
—

 
(25,451
)
 
—

 
(25,451
)
Interest expense, net
(45,482
)
 
(42,456
)
 
(90,643
)
 
(82,017
)
Other non-service components of net periodic benefit cost
277

 
(101
)
 
555

 
(202
)
Income (loss) before income taxes
381,639

 
(177,880
)
 
432,681

 
(219,299
)
Income tax (benefit) expense
(3,983
)
 
5,898

 
(4,684
)
 
6,332

Net income (loss)
385,622

 
(183,778
)
 
437,365

 
(225,631
)
Less: net income attributable to noncontrolling interests
9,426

 
12,116

 
19,583

 
25,019

Net income (loss) attributable to PBF Energy Company LLC
$
376,196

 
$
(195,894
)
 
$
417,782

 
$
(250,650
)

See notes to condensed consolidated financial statements.
11


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

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Net income (loss)
$
385,622

 
$
(183,778
)
 
$
437,365

 
$
(225,631
)
Other comprehensive income:
 
 
 
 
 
 
 
Unrealized (loss) gain on available for sale securities
(235
)
 
43

 
(235
)
 
70

Net gain on pension and other post-retirement benefits
255

 
287

 
509

 
574

Total other comprehensive income
20

 
330

 
274

 
644

Comprehensive income (loss)
385,642

 
(183,448
)
 
437,639

 
(224,987
)
Less: comprehensive income attributable to noncontrolling interests
9,426

 
12,116

 
19,583

 
25,019

Comprehensive income (loss) attributable to PBF Energy Company LLC
$
376,216

 
$
(195,564
)
 
$
418,056

 
$
(250,006
)

See notes to condensed consolidated financial statements.
12


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Six Months Ended 
 June 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income (loss)
$
437,365

 
$
(225,631
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
 
 
 
Depreciation and amortization
182,283

 
134,595

Stock-based compensation
13,017

 
13,842

Change in fair value of catalyst leases
(4,153
)
 
1,484

Deferred income taxes
(4,653
)
 
5,123

Non-cash change in inventory repurchase obligations
2,538

 
(3,107
)
Non-cash lower of cost or market inventory adjustment
(245,655
)
 
167,134

Debt extinguishment costs
—

 
25,451

Pension and other post-retirement benefit costs
23,691

 
21,121

Loss on sale of assets
673

 
912

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(81,522
)
 
8,533

Inventories
(80,825
)
 
(178,738
)
Prepaid and other current assets
(1,823
)
 
(19,156
)
Accounts payable
61,682

 
(138,802
)
Accrued expenses
2,453

 
108,446

Deferred revenue
(4,124
)
 
(7,131
)
Other assets and liabilities
(14,138
)
 
(40,661
)
Net cash provided by (used in) operations
286,809

 
(126,585
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(115,690
)
 
(220,446
)
Expenditures for deferred turnaround costs
(179,194
)
 
(214,375
)
Expenditures for other assets
(12,357
)
 
(23,747
)
Acquisition of Toledo Products Terminal by PBFX
—

 
(10,097
)
Acquisition of Knoxville Terminals by PBFX
(58,000
)
 
—

Purchase of marketable securities
—

 
(75,036
)
Maturities of marketable securities
—

 
115,060

Net cash used in investing activities
$
(365,241
)
 
$
(428,641
)

See notes to condensed consolidated financial statements.
13


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)
 
Six Months Ended 
 June 30,
 
2018
 
2017
Cash flows from financing activities:
 
 
 
Distributions to PBF Energy Company LLC members
$
(68,517
)
 
$
(68,107
)
Distributions to PBFX public unit holders
(22,922
)
 
(21,248
)
Proceeds from 2025 Senior Notes
—

 
725,000

Cash paid to extinguish 2020 Senior Secured Notes
—

 
(690,209
)
Proceeds from PBFX revolver borrowings
64,000

 
—

Repayments of PBFX revolver borrowings
(9,700
)
 
—

Repayments of PBFX Term Loan borrowings
—

 
(39,664
)
Repayments of PBF Rail Term Loan
(3,385
)
 
(3,295
)
Proceeds from revolver borrowings
—

 
290,000

Repayments of revolver borrowings
—

 
(290,000
)
Repayment of note payable
(2,421
)
 
—

Catalyst lease settlements
(9,466
)
 
—

Proceeds from insurance premium financing
17,398

 
—

Proceeds from affiliate loan with PBF Energy Inc.
40,221

 
99,655

Proceeds from stock options exercised
164

 
—

Repurchase of treasury stock
(1,033
)
 
—

Deferred financing costs and other
(12,963
)
 
(12,414
)
Net cash used in financing activities
(8,624
)
 
(10,282
)
 
 
 
 
Net decrease in cash and cash equivalents
(87,056
)
 
(565,508
)
Cash and cash equivalents, beginning of period
562,036

 
734,962

Cash and cash equivalents, end of period
$
474,980

 
$
169,454

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
Accrued and unpaid capital expenditures
$
20,143

 
$
128,941


See notes to condensed consolidated financial statements.
14
PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

 
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
PBF Energy Inc. (“PBF Energy”) was formed as a Delaware corporation on November 7, 2011 and 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 Investments LLC (“PBF Investments”), Toledo Refining Company LLC (“Toledo Refining” or “TRC”), Paulsboro Refining Company LLC (“Paulsboro Refining” or “PRC”), Delaware City Refining Company LLC (“Delaware City Refining” or “DCR”), Chalmette Refining, L.L.C. (“Chalmette Refining”), PBF Western Region LLC (“PBF Western Region”), Torrance Refining Company LLC (“Torrance Refining”) and Torrance Logistics Company LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned subsidiaries of PBF Holding. Discussions or areas of the Notes to Condensed Consolidated Financial Statements that either apply only to PBF Energy or PBF LLC are clearly noted in such footnotes.
As of June 30, 2018, PBF LLC also holds a 43.9% limited partner interest and all of the incentive distribution rights in PBF Logistics LP (“PBFX”), a publicly traded master limited partnership (refer to “Note 3 - PBF Logistics LP”). 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, PBF GP and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires.
As of June 30, 2018, the Company owns 113,850,959 PBF LLC Series C Units and the Company’s current and former executive officers and directors and certain employees and others beneficially own 1,206,325 PBF LLC Series A Units. As of June 30, 2018, the holders of the Company’s issued and outstanding shares of Class A common stock have 99.0% 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 1.0% 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. 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.

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

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 accounting principles generally accepted in the United States of America (“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 PBF Energy financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017 and the PBF LLC financial statements for the year ended December 31, 2017 included in the Registration Statement on Form S-4 filed on March 13, 2018 by PBF Logistics LP. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year.
Change in Presentation
In 2017, the Company determined that it would revise the presentation of certain line items on its consolidated statements of operations to enhance its disclosure under the requirements of Rule 5-03 of Regulation S-X. The revised presentation is comprised of the inclusion of a subtotal within costs and expenses referred to as “Cost of sales” and the reclassification of total depreciation and amortization expense between such amounts attributable to cost of sales and other operating costs and expenses. The amount of depreciation and amortization expense that is presented separately within the “Cost of Sales” subtotal represents depreciation and amortization of refining and logistics assets that are integral to the refinery production process.
The historical comparative information has been revised to conform to the current presentation. This revised presentation does not have an effect on the Company’s historical consolidated income from operations or net income, nor does it have any impact on its consolidated balance sheets, statements of comprehensive income or statements of cash flows. Presented below is a summary of the effects of this revised presentation on PBF Energy’s historical statements of operations for the three and six months ended June 30, 2017:
PBF Energy
Three Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Reclassified
Cost and expenses:
 
 
 
 
 
Cost of products and other
$
4,605,693

 
—

 
$
4,605,693

Operating expenses (excluding depreciation and amortization expense as reflected below) (1)
412,790

 
—

 
412,790

Depreciation and amortization expense
—

 
62,683

 
62,683

Cost of sales
 
 
 
 
5,081,166

General and administrative expenses (excluding depreciation and amortization expense as reflected below) (1)
41,058

 
—

 
41,058

Depreciation and amortization expense
68,703

 
(62,683)

 
6,020

Loss on sale of assets
29

 
—

 
29

Total cost and expenses
$
5,128,273

 
 
 
$
5,128,273



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

 
Six Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Reclassified
Cost and expenses:
 
 
 
 
 
Cost of products and other
$
8,802,460

 
—

 
$
8,802,460

Operating expenses (excluding depreciation and amortization expense as reflected below) (1)
864,056

 
—

 
864,056

Depreciation and amortization expense
—

 
121,853

 
121,853

Cost of sales
 
 
 
 
9,788,369

General and administrative expenses (excluding depreciation and amortization expense as reflected below) (1)
84,888

 
—

 
84,888

Depreciation and amortization expense
129,635

 
(121,853)

 
7,782

Loss on sale of assets
912

 
—

 
912

Total cost and expenses
$
9,881,951

 
 
 
$
9,881,951

(1) Amounts disclosed include the retrospective adjustments recorded as part of the adoption of ASU 2017-07, as defined below under “Recently Adopted Accounting Guidance”.
Recently Adopted Accounting Guidance
In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” (“ASC 606”). ASC 606 supersedes the revenue recognition requirements in Accounting Standards Codification 605 “Revenue Recognition” (“ASC 605”), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method. See “Note 2 - Revenues” for further details.
In March 2017, the FASB issued ASU No. 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which provides guidance to improve the reporting of net periodic benefit cost in the income statement and on the components eligible for capitalization in assets. Under the new guidance, employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Additionally, under this guidance, employers will present the other non-service components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The guidance includes a practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan note to the financial statements. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company adopted ASU 2017-07 effective January 1, 2018 and applied the new guidance retrospectively in the Condensed Consolidated Statement of Operations. For the three and six months ended June 30, 2018, the Company recorded income of $277 and $555, respectively. For the three and six months ended June 30, 2017, the Company recorded expense of $101 and $202, respectively. These income and expenses have been recorded within Other income (expense) for the non-service cost components of net periodic benefit cost that were historically recorded within Operating expenses and General and administrative expenses.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which provides guidance to increase clarity and reduce both diversity

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

in practice and cost and complexity when applying the existing accounting guidance on changes to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 require an entity to account for the effects of a modification unless all the following are met: (i) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The guidance in ASU 2017-09 should be applied prospectively. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company’s adoption of this guidance did not materially impact its condensed consolidated financial statements.
Recent Accounting Pronouncements
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. Additional ASUs have been issued subsequent to ASU 2016-02 to provide additional clarification and implementation guidance for leases related to ASU 2016-02 related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments (collectively, the Company refers to ASU 2016-02 and these additional ASUs as the “Updated Lease Guidance”). The Updated Lease 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. The Updated Lease Guidance is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. While early adoption is permitted, the Company will not early adopt the Updated Lease Guidance. The Company has established a working group to study and lead the implementation of the Updated Lease Guidance and has instituted a task plan designed to meet the requirements and implementation deadline. The Company has also evaluated and purchased a lease software system, completed software design and configuration of the system, and begun testing the implementation of the selected system. The working group continues to evaluate the impact of the Updated Lease Guidance on the Company’s consolidated financial statements and related disclosures and the impact on its business processes and controls. While the assessment of this standard is ongoing, the Company has identified that the most significant impacts of the Updated Lease Guidance will be to bring nearly all leases on its balance sheet with “right of use assets” and “lease obligation liabilities” as well as accelerating recognition of the interest expense component of financing leases. The new standard will also require additional disclosures for financing and operating leases.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The amendments in ASU 2017-12 more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments in ASU 2017-12 address specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Thus, the amendments in ASU 2017-12 will enable an entity to better portray the economic results of hedging activities for certain fair value and cash flow hedges and will avoid mismatches in earnings by allowing for greater precision when measuring changes in fair value of the hedged item for certain fair value hedges. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. The guidance in ASU 2017-12 concerning amendments to cash flow and net investment hedge relationships that exist on the date of adoption should be applied using a modified retrospective approach (i.e., with a cumulative effect adjustment recorded to the opening balance of retained earnings as of the initial application date). The guidance in ASU 2017-12 also provides transition relief to make it easier for entities to apply certain amendments to existing hedges (including fair value hedges) where

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

the hedge documentation needs to be modified. The presentation and disclosure requirements of ASU 2017-12 should be applied prospectively. The amendments in this ASU are effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Targeted Improvements to Non-employee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under ASU 2018-07, the existing employee guidance for share-based payments will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. ASU 2018-07 also specifies the following: (i) that equity-classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to re-measure the awards through the performance completion date; (ii) for performance conditions, compensation cost associated with the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the performance condition; (iii) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. Finally, ASU 2018-07 also clarifies that any share-based payment awards issued to customers should be evaluated under ASC 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. Upon adoption, an entity should only re-measure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must not re-measure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting principle and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other components of equity. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

2. REVENUES
Adoption of Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”
Prior to January 1, 2018, the Company recognized revenue from customers when all of the following criteria were met:  (i) persuasive evidence of an exchange arrangement existed, (ii) delivery had occurred or services had been rendered, (iii) the buyer’s price was fixed or determinable and (iv) collectability was reasonably assured. Amounts billed in advance of the period in which the service was rendered or product delivered were recorded as deferred revenue. 
Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. As a result, the Company has changed its accounting policy for the recognition of revenue from contracts with customers as detailed below.
The Company adopted ASC 606 using the modified retrospective method, which has been applied for the three and six months ended June 30, 2018. The Company has applied ASC 606 only to those contracts that were not complete as of January 1, 2018. As such, the financial information for prior periods has not been adjusted and continues to be reported under ASC 605. The Company did not record a cumulative effect adjustment upon initially applying ASC 606 as there was not a significant impact upon adoption; however, the details of significant qualitative

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

and quantitative disclosure changes upon implementing ASC 606 are discussed below.
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
As noted in “Note 15 - Segment Information”, the Company’s business consists of the Refining Segment and Logistics Segment. The following table provides information relating to the Company’s revenues for each product or group of similar products or services by segment for the periods presented:
 
Three Months Ended June 30,
 
2018
 
2017
Refining Segment:
 
 
 
Gasoline and distillates
$
6,341,757

 
$
4,154,375

Feedstocks and other
404,197

 
310,951

Asphalt and blackoils
397,203

 
287,731

Chemicals
202,552

 
179,076

Lubricants
94,761

 
81,118

Total
7,440,470

 
5,013,251

Logistics Segment:
 
 
 
Logistics
67,398

 
62,329

Total revenue prior to eliminations
7,507,868

 
5,075,580

Eliminations of intercompany revenue
(63,785
)
 
(58,355
)
Total Revenues
$
7,444,083

 
$
5,017,225

 
 
 
 
 
Six Months Ended June 30,
 
2018
 
2017
Refining Segment:
 
 
 
Gasoline and distillates
$
11,336,077

 
$
8,243,186

Asphalt and blackoils
706,064

 
472,859

Feedstocks and other
642,906

 
535,361

Chemicals
378,660

 
363,499

Lubricants
176,364

 
148,544

Total
13,240,071

 
9,763,449

Logistics Segment:
 
 
 
Logistics
131,437

 
122,806

Total revenue prior to eliminations
13,371,508

 
9,886,255

Eliminations of intercompany revenue
(124,649
)
 
(114,557
)
Total Revenues
$
13,246,859

 
$
9,771,698


The majority of the Company’s revenues are generated from the sale of refined petroleum products reported in the Refining segment. These revenues are largely based on the current spot (market) prices of the products sold, which represent consideration specifically allocable to the products being sold on a given day, and the Company recognizes those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and

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

transfer of title occurs is the point when the Company’s control of the products is transferred to the Company’s customers and when their performance obligation to their customers is fulfilled. Delivery and transfer in title are specifically agreed to between the Company and customers within the contracts. The Refining segment also has contracts which contain fixed pricing, tiered pricing, minimum volume features with makeup periods, or other factors that have not materially been affected by ASC 606.
Logistics segment revenue is generated by charging fees for crude oil and refined products terminaling, storing and pipeline services based on the greater of contractual minimum volume commitments, as applicable, or the delivery of actual volumes transferred based on contractual rates applied to throughput volumes. A majority of the Company’s logistics revenues are generated between intercompany transactions and are eliminated on consolidation.
Deferred Revenues
The Company records deferred revenues when cash payments are received or are due in advance of our performance, including amounts which are refundable. Deferred revenue was $4,809 and $8,933 as of June 30, 2018 and December 31, 2017, respectively. The decrease in the deferred revenue balance for the six months ended June 30, 2018 is primarily driven by the timing and extent of cash payments received or due in advance of satisfying the Company’s performance obligations for the comparative periods.
Our payment terms vary by the type and location of our customer and the products offered. The period between invoicing and when payment is due is not significant (i.e. generally within two months). For certain products or services and customer types, we require payment before the products or services are delivered to the customer.
Significant Judgment and Practical Expedients
For performance obligations related to sales of products, the Company has determined that customers are able to direct the use of, and obtain substantially all of the benefits from, the products at the point in time that the products are delivered. The Company has determined that the transfer of control upon delivery to the customer’s requested destination accurately depicts the transfer of goods. Upon the delivery of the products and transfer of control, the Company generally has the present right to payment and the customers bear the risks and rewards of ownership of the products. We have elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

3. PBF LOGISTICS LP
PBFX is a fee-based, growth-oriented, publicly traded Delaware master limited partnership formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries, as well as for third party customers. As of June 30, 2018, a substantial majority of PBFX’s revenue is derived from long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments for receiving, handling, storing and transferring crude oil, refined products and natural gas. 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 and PBF LLC in consolidation.
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.
As of June 30, 2018, PBF LLC holds a 43.9% limited partner interest in PBFX consisting of 18,459,497 common units, with the remaining 56.1% limited partner interest held by public unit holders. PBF LLC also owns all of the incentive distribution rights (“IDRs”) and indirectly owns a non-economic general partner interest in PBFX through

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

its wholly-owned subsidiary, PBF GP, the general partner of PBFX. The IDRs entitle PBF LLC to receive increasing percentages, up to a maximum of 50.0%, of the cash PBFX distributes from operating surplus in excess of $0.345 per unit per quarter.
Knoxville Terminals Purchase
On April 16, 2018, PBFX completed the purchase of two refined product terminals located in Knoxville, Tennessee, which include product tanks, pipeline connections to the Colonial and Plantation pipeline systems and truck loading facilities (the “Knoxville Terminals”) from Cummins Terminals, Inc. for total cash consideration of approximately $58,000, excluding working capital adjustments (the “Knoxville Terminals Purchase”). The transaction was financed through a combination of cash on hand and borrowings under the PBFX Revolving Credit Facility.
4. EQUITY
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 June 30, 2018 and December 31, 2017, PBF Energy’s equity interest in PBF LLC represented approximately 99.0% and 96.7%, 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 condensed 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 condensed consolidated balance sheets represents the portion of net assets of PBF Energy attributable to the members of PBF LLC other than PBF Energy.
The noncontrolling interest ownership percentages in PBF LLC as of June 30, 2018 and December 31, 2017 are calculated as follows:
 
Holders of PBF LLC Series A Units
 
Outstanding Shares of PBF Energy Class A Common Stock
 
Total *
December 31, 2017
3,767,464

 
110,565,531

 
114,332,995

 
3.3
%
 
96.7
%
 
100.0
%
June 30, 2018
1,206,325

 
113,829,728

 
115,036,053

 
1.0
%
 
99.0
%
 
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 43.9% limited partner interest in PBFX and owns all of PBFX’s IDRs, with the remaining 56.1% limited partner interest owned by public common unit holders as of June 30, 2018. 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 condensed 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 ownership in PBF LLC). Noncontrolling interest on the condensed consolidated balance sheets includes the portion of net assets of PBFX attributable to the public common unit holders of PBFX.

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

The noncontrolling interest ownership percentages in PBFX as of June 30, 2018 and December 31, 2017, are calculated as follows:

Units of PBFX Held by the Public

Units of PBFX Held by PBF LLC

Total
December 31, 2017
23,441,211

 
18,459,497

 
41,900,708


55.9
%
 
44.1
%
 
100.0
%
June 30, 2018
23,613,565

 
18,459,497

 
42,073,062

 
56.1
%
 
43.9
%
 
100.0
%
Noncontrolling Interest in PBF Holding
In connection with 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. For the three months ended June 30, 2018 and 2017 the Company recorded a noncontrolling interest in the earnings of these subsidiaries of $76 and $267, respectively. For the six months ended June 30, 2018 and 2017 the Company recorded a noncontrolling interest in the earnings of these subsidiaries of $8 and $380, respectively.
Changes in Equity and Noncontrolling Interests
The following tables summarize the changes in equity for the controlling and noncontrolling interests of PBF Energy for the six months ended June 30, 2018 and 2017, respectively: 
 
PBF Energy Inc. Equity
 
Noncontrolling
Interest in PBF LLC

Noncontrolling Interest in PBF Holding
 
Noncontrolling
Interest in PBFX
 
Total Equity
Balance at January 1, 2018
$
2,336,654

 
$
110,203

 
$
10,808

 
$
445,284

 
$
2,902,949

Comprehensive income
302,790

 
7,399

 
8

 
19,575

 
329,772

Dividends and distributions
(67,347
)
 
(1,362
)
 
—

 
(23,562
)
 
(92,271
)
Effects of exchanges of PBF LLC Series A Units on deferred tax assets and liabilities and Tax Receivable Agreement obligation
(2,380
)
 
—

 
—

 
—

 
(2,380
)
Equity-based compensation awards
9,520

 
—

 
—

 
3,497

 
13,017

Exercise of PBF LLC and PBF Energy options and warrants, net
11,671

 
(346
)
 
—

 
—

 
11,325

Other
10,921

 
—

 
—

 
(1,049
)
 
9,872

Balance at June 30, 2018
$
2,601,829

 
$
115,894

 
$
10,816

 
$
443,745

 
$
3,172,284



23
PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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 PBF Holding
 
Noncontrolling
Interest in PBFX
 
Total Equity
Balance at January 1, 2017
$
2,025,044

 
$
98,671

 
$
12,513

 
$
434,456

 
$
2,570,684

Comprehensive income (loss)
(140,118
)
 
(8,439
)
 
380

 
24,640

 
(123,537
)
Dividends and distributions
(65,807
)
 
(2,300
)
 
—

 
(21,787
)
 
(89,894
)
Equity-based compensation awards
10,134

 
—

 
—

 
3,708

 
13,842

Other
(2,098
)
 
—

 
—

 
(4
)
 
(2,102
)
Balance at June 30, 2017
$
1,827,155

 
$
87,932

 
$
12,893

 
$
441,013

 
$
2,368,993

The following tables summarize the changes in equity for the controlling and noncontrolling interests of PBF LLC for the six months ended June 30, 2018 and 2017, respectively:
 
PBF Energy Company LLC Equity
 
Noncontrolling Interest in PBF Holding
 
Noncontrolling
Interest in PBFX
 
Total Equity
Balance at January 1, 2018
$
2,422,411

 
$
10,808

 
$
445,284

 
$
2,878,503

Comprehensive income
418,056

 
8

 
19,575

 
437,639

Dividends and distributions
(68,709
)
 
—

 
(23,562
)
 
(92,271
)
Equity-based compensation awards
9,520

 
—

 
3,497

 
13,017

Exercise of PBF LLC options and warrants, net
(3,275
)
 
—

 
—

 
(3,275
)
Other
10,921

 
—

 
(1,049
)
 
9,872

Balance at June 30, 2018
$
2,788,924

 
$
10,816

 
$
443,745

 
$
3,243,485

 
PBF Energy Company LLC Equity
 
Noncontrolling
Interest in PBF Holding
 
Noncontrolling
Interest in PBFX
 
Total Equity
Balance at January 1, 2017
$
2,040,851

 
$
12,513

 
$
434,456

 
$
2,487,820

Comprehensive income (loss)
(250,006
)
 
380

 
24,639

 
(224,987
)
Dividends and distributions
(68,107
)
 
—

 
(21,787
)
 
(89,894
)
Equity-based compensation awards
10,134

 
—

 
3,708

 
13,842

Other
(2,102
)
 
—

 
(3
)
 
(2,105
)
Balance at June 30, 2017
$
1,730,770

 
$
12,893

 
$
441,013

 
$
2,184,676


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

Share Activity
The following table presents the changes in PBF Energy Class A common stock and treasury stock outstanding:
 
Six Months Ended June 30, 2018
 
Year Ended December 31, 2017
 
Class A Common Stock
 
Treasury Stock
 
Class A Common Stock
 
Treasury Stock
Balance at beginning of period
110,565,531

 
6,132,884

 
109,204,047

 
6,087,963

Treasury stock purchases (1)
(39,014
)
 
39,014

 
—

 
44,921

Stock based compensation
12,244

 
—

 
702,404

 
—

Exercise of options and warrants
602,916

 
—

 
462,500

 
—

Exchange of PBF LLC Series A units for shares of Class A common stock
2,688,051

 
—

 
196,580

 
—

Balance at end of period
113,829,728

 
6,171,898

 
110,565,531

 
6,132,884

_____
(1) Includes shares repurchased from participants in connection with the vesting of equity awards granted under the Company’s stock compensation plans to cover employee income tax liabilities.
The following table presents the changes in PBF LLC Series C Units and Series A Units outstanding:
 
Six Months Ended June 30, 2018
 
Year Ended December 31, 2017
 
Series A Units
 
Series C Units
 
Series A Units
 
Series C Units
Balance at beginning of period
3,767,464

 
110,586,762

 
3,920,902

 
109,204,047

Exercise of Series A warrants and options
126,912

 
602,916

 
64,373

 
462,500

Exchange of Series A units for PBF Energy Class A common stock
(2,688,051
)
 
2,688,051

 
(196,580
)
 
217,811

Grant of restricted shares
—

 
12,244

 
—

 
702,404

Surrender of units for tax withholding
—

 
(39,014
)
 
—

 
—

Redemption of Series A units by PBF Energy
—

 
—

 
(21,231
)
 
—

Balance at end of period
1,206,325

 
113,850,959

 
3,767,464

 
110,586,762



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

5. INVENTORIES
Inventories consisted of the following:
June 30, 2018
 
Titled Inventory
 
Inventory Intermediation Agreements
 
Total
Crude oil and feedstocks
$
1,159,842

 
$
—

 
$
1,159,842

Refined products and blendstocks
1,036,028

 
296,142

 
1,332,170

Warehouse stock and other
103,066

 
—

 
103,066

 
$
2,298,936

 
$
296,142

 
$
2,595,078

Lower of cost or market adjustment
(11,751
)
 
(43,050
)
 
(54,801
)
Total inventories
$
2,287,185

 
$
253,092

 
$
2,540,277

December 31, 2017
 
Titled Inventory
 
Inventory Intermediation Agreements
 
Total
Crude oil and feedstocks
$
1,073,093

 
$
—

 
$
1,073,093

Refined products and blendstocks
1,030,817

 
311,477

 
1,342,294

Warehouse stock and other
98,866

 
—

 
98,866

 
$
2,202,776

 
$
311,477

 
$
2,514,253

Lower of cost or market adjustment
(232,652
)
 
(67,804
)
 
(300,456
)
Total inventories
$
1,970,124

 
$
243,673

 
$
2,213,797

Inventory under inventory intermediation agreements included certain light finished products sold to counterparties and stored in the Paulsboro and Delaware City refineries’ storage facilities in connection with the amended and restated inventory intermediation agreements (as amended, the “Inventory Intermediation Agreements”) with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”).
During the three months ended June 30, 2018, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $158,002 and $116,274, respectively, reflecting the net change in the lower of cost or market inventory reserve from $212,803 at March 31, 2018 to $54,801 at June 30, 2018. During the six months ended June 30, 2018, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $245,655 and $180,778, respectively, reflecting the net change in the lower of cost or market inventory reserve from $300,456 at December 31, 2017 to $54,801 at June 30, 2018.
During the three months ended June 30, 2017, the Company recorded an adjustment to value its inventories to the lower of cost or market which decreased operating income and net income by $151,095 and $91,624, respectively, reflecting the net change in the lower of cost or market inventory reserve from $612,027 at March 31, 2017 to $763,122 at June 30, 2017. During the six months ended June 30, 2017, the Company recorded an adjustment to value its inventories to the lower of cost or market which decreased operating income and net income by $167,134 and $101,350, respectively, reflecting the net change in the lower of cost or market inventory reserve from $595,988 at December 31, 2016 to $763,122 at June 30, 2017.

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

6. ACCRUED EXPENSES
Accrued expenses consisted of the following:


PBF Energy
June 30,
2018
 
December 31,
2017
Inventory-related accruals
$
1,138,913

 
$
1,151,810

Inventory intermediation agreements
227,740

 
244,287

Excise and sales tax payable
176,557

 
118,515

Accrued transportation costs
53,464

 
64,400

Renewable energy credit and emissions obligations
52,390

 
26,231

Accrued utilities
31,647

 
42,189

Accrued salaries and benefits
30,347

 
58,589

Accrued refinery maintenance and support costs
25,578

 
35,674

Customer deposits
22,670

 
16,133

Accrued interest
15,170

 
14,080

Accrued capital expenditures
14,395

 
18,765

Environmental liabilities
7,197

 
8,289

Other
33,969

 
15,892

Total accrued expenses
$
1,830,037

 
$
1,814,854

 


PBF LLC
June 30,
2018
 
December 31,
2017
Inventory-related accruals
$
1,138,913

 
$
1,151,810

Inventory intermediation agreements
227,740

 
244,287

Excise and sales tax payable
176,557

 
118,515

Accrued transportation costs
53,464

 
64,400

Renewable energy credit and emissions obligations
52,390

 
26,231

Accrued utilities
31,647

 
42,189

Accrued salaries and benefits
30,347

 
58,589

Accrued interest
28,461

 
23,419

Accrued refinery maintenance and support costs
25,578

 
35,674

Customer deposits
22,670

 
16,133

Accrued capital expenditures
14,395

 
18,765

Environmental liabilities
7,197

 
8,289

Other
33,886

 
16,093

Total accrued expenses
$
1,843,245

 
$
1,824,394

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 Inventory Intermediation Agreements with J. Aron. As of June 30, 2018 and December 31, 2017, a liability is recognized for the Inventory Intermediation Agreements and is recorded at market price for the J. Aron owned inventory held in

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

the Company’s storage tanks under the Inventory Intermediation Agreements, with any change in the market price being recorded in Cost of products and other.
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 and other current assets when the amount of RINs earned and purchased is greater than the RINs liability. In addition, the Company is subject to obligations to comply with federal and state legislative and regulatory measures, including regulations in the state of California pursuant to Assembly Bill 32 (“AB32”), to address environmental compliance and greenhouse gas and other emissions. These requirements include incremental costs to operate and maintain our facilities as well as to implement and manage new emission controls and programs. Renewable energy credit and emissions obligations fluctuate with the volume of applicable product sales and timing of credit purchases.
7. DEBT
2018 Revolving Credit Agreement
On May 2, 2018, PBF Holding and certain of our wholly-owned subsidiaries, as borrowers or subsidiary guarantors, replaced its existing asset-based revolving credit agreement dated as of August 15, 2014 (the “August 2014 Revolving Credit Agreement”) with a new asset-based revolving credit agreement (the “2018 Revolving Credit Agreement"). The 2018 Revolving Credit Agreement has a maximum commitment of $3,400,000, a maturity date of May 2023 and redefines certain components of the Borrowing Base (as defined in the credit agreement) to make more funding available for working capital and other general corporate purposes. Borrowings under the 2018 Revolving Credit Agreement bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR Rate plus the Applicable Margin (all as defined in the credit agreement). The Applicable Margin ranges from 0.25% to 1.00% for Alternative Base Rate Loans and from 1.25% to 2.00% for Adjusted LIBOR Rate Loans, in each case depending on our corporate credit rating. In addition, an accordion feature allows for commitments of up to $3,500,000. The LC Participation Fee ranges from 1.00% to 1.75% depending on the Company’s corporate credit rating and the Fronting Fee is capped at 0.25%. The 2018 Revolving Credit Agreement contains representations, warranties and covenants by PBF Holding and the other borrowers, as well as customary events of default and indemnification obligations.
At June 30, 2018 and December 31, 2017, there was $350,000 and $350,000, respectively, outstanding under the revolving credit agreements.

PBFX Revolving Credit Facility
On July 30, 2018, PBFX entered into an amended and restated revolving credit facility (the “PBFX A&R Revolving Credit Facility”), that among other things extends the maturity date from May 2019 to July 2023. Refer to Note 17 “Subsequent Events” of the Notes to Condensed Consolidated Financial Statements for further details.

8. AFFILIATE NOTE PAYABLE - PBF LLC
As of June 30, 2018 and December 31, 2017, PBF LLC had an outstanding note payable with PBF Energy for an aggregate principal amount of $322,144 and $292,844, respectively. The notes have an interest rate of 2.5% and a 5-year term but may be prepaid in whole or in part at any time, at the option of the payor without penalty or premium.


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

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 primarily of its share of PBF LLC’s pre-tax income (approximately 99.0% as of June 30, 2018 and approximately 96.7% as of December 31, 2017). 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 the two subsidiaries acquired in connection with the acquisition of Chalmette Refining and PBF Holding’s wholly-owned Canadian subsidiary, PBF Ltd, that are treated as C-Corporations for income tax purposes.
The income tax expense (benefit) in the PBF Energy condensed consolidated financial statements of operations consists of the following: 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Current income tax expense
$
669

 
$
901

 
$
752

 
$
1,374

Deferred income tax expense (benefit)
94,876

 
(72,944
)
 
105,735

 
(92,464
)
Total income tax expense (benefit)
$
95,545

 
$
(72,043
)
 
$
106,487

 
$
(91,090
)

Income tax expense (benefit) is based on income (loss) before taxes attributable to PBF Energy and excludes income before taxes attributable to noncontrolling interests as such interests are generally not subject to income taxes except as noted above. The difference between PBF Energy’s effective income tax rate and the United States statutory rate is reconciled below:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Provision at Federal statutory rate
21.0
 %
 
35.0
 %
 
21.0
 %
 
35.0
 %
Increase (decrease) attributable to flow-through of certain tax adjustments:
 
 
 
 
 
 
 

State income taxes (net of federal income tax)
5.6
 %
 
4.8
 %
 
5.6
 %
 
4.7
 %
Nondeductible/nontaxable items
0.1
 %
 
(0.9
)%
 
0.1
 %
 
(0.7
)%
Rate differential from foreign jurisdictions
(0.2
)%
 
1.0
 %
 
(0.2
)%
 
0.9
 %
Foreign tax rate change
—
 %
 
—
 %
 
—
 %
 
(0.4
)%
Other
(0.5
)%
 
(0.3
)%
 
(0.5
)%
 
(0.2
)%
Effective tax rate
26.0
 %
 
39.6
 %
 
26.0
 %
 
39.3
 %
PBF Energy’s effective income tax rate for the three and six months ended June 30, 2018, including the impact of income attributable to noncontrolling interests of $15,534 and $26,979, respectively, was 24.9% and 24.4%, respectively. PBF Energy’s effective income tax rate for the three and six months ended June 30, 2017, including the impact of income attributable to noncontrolling interests of $5,512 and $16,559, respectively, was 40.9% and 42.3% respectively.
The decrease in effective tax rate when comparing the three and six month periods ended June 30, 2018 to the three and six month periods ended June 30, 2017 is primarily driven by the Tax Cuts and Jobs Act (“TCJA”), which was effective as of January 1, 2018. The TCJA significantly revised the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0%. In connection with the enactment of the TCJA, PBF Energy recorded a net tax expense of $20,153 in the year ending December 31, 2017. It is the Company’s expectation

29
PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)

that the other legislative areas within TCJA, such as the Transition Tax and the Global Low-Taxed Intangible Income, will not have a material impact on the provision for income taxes.
The income tax expense (benefit) in the PBF LLC condensed consolidated financial statements of operations consists of the following: 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Current income tax (benefit) expense
$
(26