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EX-31.2 - EXHIBIT 31.2 - PBF Energy Inc.q116exhibit312-energy.htm
EX-32.2 - EXHIBIT 32.2 - PBF Energy Inc.q116exhibit322-energy.htm
EX-32.1 - EXHIBIT 32.1 - PBF Energy Inc.q116exhibit321-energy.htm
EX-10.1 - EXHIBIT 10.1 - PBF Energy Inc.q116exhibit101-formofrstrs.htm
EX-31.1 - EXHIBIT 31.1 - PBF Energy Inc.q116exhibit311-energy.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark one)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2016
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
 
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 May 2, 2016, PBF Energy Inc. had outstanding 97,817,756 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 MARCH 31, 2016
TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
ITEM 2.
 
 
ITEM 6.

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 March 31, 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 March 31, 2016, PBF LLC also holds a 53.7% 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.


2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995, of expected future developments that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations, which we refer to as “cautionary statements,” are disclosed under “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;

3



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;
market risks related to the volatility in the price of Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuel Standards;
adverse impacts from changes in our regulatory environment or actions taken by environmental interest groups;
our ability to consummate the pending acquisition of the ownership interests of the Torrance refinery and related logistics assets (collectively, the “Torrance Acquisition”), the timing for the closing of such acquisition and our plans for financing such acquisition;
our ability to complete the successful integration of the completed acquisition of Chalmette Refining, L.L.C and related logistic assets (collectively, the “Chalmette Acquisition”) and the pending 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, and 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)
 
March 31,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
740,321

 
$
944,320

Accounts receivable
541,524

 
454,759

Inventories
1,229,299

 
1,174,272

Deferred tax asset
353,547

 
371,186

Prepaid expense and other current assets
156,666

 
77,474

Total current assets
3,021,357

 
3,022,011

Property, plant and equipment, net
2,372,904

 
2,356,638

Deferred tax assets
188,281

 
201,504

Marketable securities
234,408

 
234,258

Deferred charges and other assets, net
366,709

 
290,713

Total assets
$
6,183,659

 
$
6,105,124

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
388,230

 
$
315,653

Accrued expenses
1,144,606

 
1,119,189

Payable to related parties pursuant to tax receivable agreement
57,042

 
56,621

Deferred tax liabilities
29,971

 

Deferred revenue
3,154

 
4,043

Total current liabilities
1,623,003

 
1,495,506

Delaware Economic Development Authority loan
4,000

 
4,000

Long-term debt
1,841,902

 
1,836,355

Payable to related parties pursuant to tax receivable agreement
604,376

 
604,797

Other long-term liabilities
76,632

 
68,609

Total liabilities
4,149,913

 
4,009,267

Commitments and contingencies (Note 10)

 

Equity:
 
 
 
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 97,816,106 shares outstanding at March 31, 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 March 31, 2016, 28 shares outstanding at December 31, 2015

 

Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding, at March 31, 2016 and December 31, 2015

 

Treasury stock, at cost, 6,061,503 shares outstanding at March 31, 2016 and 6,056,719 shares outstanding at December 31, 2015
(150,804
)
 
(150,804
)
Additional paid in capital
1,907,469

 
1,904,751

Retained earnings/(Accumulated deficit)
(141,666
)
 
(83,454
)
Accumulated other comprehensive loss
(22,696
)
 
(23,289
)
Total PBF Energy Inc. equity
1,592,396

 
1,647,297

Noncontrolling interest
441,350

 
448,560

Total equity
2,033,746

 
2,095,857

Total liabilities and equity
$
6,183,659

 
$
6,105,124


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 
 March 31,
 
 
2016
 
2015
Revenues
 
$
2,800,185

 
$
2,995,136


 
 
 
 
Cost and expenses:
 
 
 
 
Cost of sales, excluding depreciation
 
2,412,095

 
2,502,215

Operating expenses, excluding depreciation
 
299,999

 
237,118

General and administrative expenses
 
37,582

 
36,046

Gain on sale of assets
 

 
(359
)
Depreciation and amortization expense
 
55,933

 
47,706

 
 
2,805,609

 
2,822,726

 
 
 
 
 
(Loss) income from operations
 
(5,424
)
 
172,410

 
 
 
 
 
Other income (expenses):
 
 
 
 
Change in fair value of catalyst leases
 
(2,885
)
 
2,039

Interest expense, net
 
(37,527
)
 
(22,192
)
(Loss) income before income taxes
 
(45,836
)
 
152,257

Income tax (benefit) expense
 
(22,500
)
 
49,138

Net (loss) income
 
(23,336
)
 
103,119

Less: net income attributable to noncontrolling interests
 
6,052

 
15,798

Net (loss) income attributable to PBF Energy Inc.
 
$
(29,388
)
 
$
87,321

 
 
 
 
 
Weighted-average shares of Class A common stock outstanding
 
 
 
 
Basic
 
97,809,384

 
84,278,071

Diluted
 
97,809,384

 
91,669,101

Net (loss) income available to Class A common stock per share:
 
 
 
 
Basic
 
$
(0.30
)
 
$
1.04

Diluted
 
$
(0.30
)
 
$
1.00

 
 
 
 
 
Dividends per common share
 
$
0.30

 
$
0.30

 
 
 
 
 




See notes to condensed consolidated financial statements.
6



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

 
Three Months Ended 
 March 31,
 
2016
 
2015
Net (loss) income
$
(23,336
)
 
$
103,119

Other comprehensive income:

 

Unrealized gain (loss) on available for sale securities
306

 
71

Net gain on pension and other postretirement benefits
316

 
400

Total other comprehensive income
622

 
471

Comprehensive (loss) income
(22,714
)
 
103,590

Less: comprehensive income attributable to noncontrolling interests
6,082

 
15,824

Comprehensive (loss) income attributable to PBF Energy Inc.
$
(28,796
)
 
$
87,766


See notes to condensed consolidated financial statements.
7



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Three Months Ended 
 March 31,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(23,336
)
 
$
103,119

Adjustments to reconcile net (loss) income to net cash provided by (used in) operations:
 
 
 
Depreciation and amortization
58,595

 
49,892

Stock-based compensation
3,350

 
2,955

Change in fair value of catalyst lease obligations
2,885

 
(2,039
)
Deferred income taxes
52,954

 
23,168

Non-cash change in inventory repurchase obligations
35,147

 
66,509

Pension and other post retirement benefit costs
7,680

 
6,448

Gain on disposition of property, plant and equipment

 
(359
)
Change in non-cash lower of cost or market adjustment
(59,063
)
 
(21,208
)
 
 
 
 
Changes in current assets and current liabilities:
 
 
 
Accounts receivable
(86,765
)
 
110,084

Inventories
4,035

 
(1,007
)
Prepaid expenses and other current assets
(79,192
)
 
19,940

Accounts payable
72,577

 
(22,113
)
Accrued expenses
(9,375
)
 
(195,613
)
Deferred revenue
(889
)
 
4,859

Payable to related parties pursuant to tax receivable agreement

 
(10,168
)
Other assets and liabilities
800

 
(1,962
)
Net cash (used in) provided by operations
(20,597
)
 
132,505

 
 
 
 
Cash flow from investing activities:
 
 
 
Expenditures for property, plant and equipment
(43,170
)
 
(102,395
)
Expenditures for deferred turnaround costs
(82,747
)
 
(18,376
)
Expenditures for other assets
(17,163
)
 
(4,958
)
Chalmette Acquisition working capital settlement
(2,659
)
 

Purchase of marketable securities
(690,000
)
 
(689,693
)
Maturities of marketable securities
689,860

 
689,697

Proceeds from sale of assets

 
77,618

Net cash used in investing activities
(145,879
)
 
(48,107
)


See notes to condensed consolidated financial statements.
8



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)
 
Three Months Ended 
 March 31,
 
2016
 
2015
Cash flows from financing activities:
 
 
 
Distributions to PBF Energy Company LLC members
$
(1,487
)
 
$
(1,610
)
Distributions to PBFX unit holders
(6,694
)
 
(5,309
)
Dividend payments
(29,342
)
 
(25,733
)
Proceeds from Rail Facility revolver borrowings

 
23,425

Repayments of Rail Facility revolver borrowings

 
(22,774
)
Purchases of treasury stock

 
(407
)
Deferred financing costs and other

 
(383
)
Net cash used in financing activities
(37,523
)
 
(32,791
)
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(203,999
)
 
51,607

Cash and cash equivalents, beginning of period
944,320

 
397,873

Cash and cash equivalents, end of period
$
740,321

 
$
449,480

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
Accrued construction in progress and unpaid fixed assets
$
7,619

 
$
26,708



See notes to condensed consolidated financial statements.
9

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 March 31, 2016, PBF LLC also holds a 53.7% 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 March 31, 2016, the Company owns 97,816,106 PBF LLC Series C Units and the Company's current and former executive officers and directors and certain employees and others beneficially own 4,947,401 PBF LLC Series A Units. As of March 31, 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 four 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. PBFX currently does not generate third party revenue and as such intersegment related 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. The assets, 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

10

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

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 months ended March 31, 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 affect any of the Company's financial statements or related disclosures.
Recent Accounting Pronouncements
In August 2015, the 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 continues to evaluate 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

11

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. 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 US 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.

2. PBF LOGISTICS LP
On May 14, 2014, PBFX completed its initial public offering (the “PBFX Offering”) of 15,812,500 common units. As of March 31, 2016, PBF LLC holds a 53.7% 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 46.3% 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

12

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

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 and transferring of crude oil and the receipt, storage and delivery of crude oil, refined products and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries. As of March 31, 2016, all 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 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 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").
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.

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

13

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

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 US 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 1, 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

 
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 months ended March 31, 2016 include the results of operations of the Chalmette refinery whereas the same period 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, 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 acquisition 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 financing of the Chalmette Acquisition.

14

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

(Unaudited)
 
Three Months Ended March 31, 2015
Pro forma revenues
 
$
4,052,933

Pro forma net income attributable to PBF Energy Inc.
 
$
126,926

Pro forma net income available to Class A common stock per share:
 
 
Basic
 
$
1.32

Diluted
 
$
1.30

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.

Acquisition Expenses
The Company incurred acquisition related costs consisting primarily of consulting and legal expenses related to the Chalmette Acquisition and other pending and non-consummated acquisitions of $4,724 and $550 in the three months ended March 31, 2016 and 2015, respectively. These costs are included in the consolidated income statement in General and administrative expenses.

4. NONCONTROLLING INTEREST OF PBF ENERGY AND PBFX
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 March 31, 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 March 31, 2016 and December 31, 2015 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
%
March 31, 2016
4,947,401

 
97,816,106

 
102,763,507

 
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.


15

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

Noncontrolling Interest in PBFX
PBF LLC holds a 53.7% limited partner interest in PBFX and owns all of PBFX’s incentive distribution rights, with the remaining 46.3% limited partner interest owned by public common unit holders as of March 31, 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 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 March 31, 2016 and December 31, 2015, 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
%
March 31, 2016
15,924,676

 
18,459,497

 
34,384,173

 
46.3
%
 
53.7
%
 
100.0
%
Noncontrolling Interest in 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 $303 for the three months ended March 31, 2016.
The following table summarizes the changes in equity for the controlling and noncontrolling interests of PBF Energy for the three months ended March 31, 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
(28,796
)
 
(2,411
)
 
8,493

 
(22,714
)
Dividends and distributions
(29,342
)
 
(1,487
)
 
(6,694
)
 
(37,523
)
Stock-based compensation
2,621

 

 
729

 
3,350

Exercise of PBF LLC options and warrants, net
1,058

 
(190
)
 

 
868

Other
(442
)
 
(5,145
)
 
(505
)
 
(6,092
)
Balance at March 31, 2016
$
1,592,396

 
$
99,010

 
$
342,340

 
$
2,033,746



16

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
87,766

 
7,814

 
8,010

 
103,590

Dividends and distributions
(25,733
)
 
(1,610
)
 
(5,309
)
 
(32,652
)
Record deferred tax asset and liabilities and tax receivable agreement associated with secondary offerings
1,297

 

 

 
1,297

Record allocation of noncontrolling interest upon completion of secondary offerings
39,976

 
(39,976
)
 

 

Stock-based compensation
1,930

 
95

 
930

 
2,955

Exercise of PBF LLC options and warrants, net

 
(383
)
 

 
(383
)
Purchase of treasury stock
(407
)
 

 

 
(407
)
Balance at March 31, 2015
$
1,323,042

 
$
104,674

 
$
340,000

 
$
1,767,716


5. INVENTORIES
Inventories consisted of the following:
March 31, 2016
 
Titled Inventory
 
Inventory Supply and Intermediation Arrangements
 
Total
Crude oil and feedstocks
$
1,135,671

 
$

 
$
1,135,671

Refined products and blendstocks
690,813

 
400,753

 
1,091,566

Warehouse stock and other
60,335

 

 
60,335

 
$
1,886,819

 
$
400,753

 
$
2,287,572

Lower of cost or market reserve
(900,728
)
 
(157,545
)
 
(1,058,273
)
Total inventories
$
986,091

 
$
243,208

 
$
1,229,299

 
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


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

17

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

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 March 31, 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 $59,063 and $35,674, respectively, reflecting the net change in the lower of cost or market inventory reserve from $1,117,336 at December 31, 2015 to $1,058,273 at March 31, 2016. During the three months ended March 31, 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 $21,208 and $12,682, respectively, reflecting the net change in the lower of cost or market inventory reserve from $690,110 at December 31, 2014 to $668,902 at March 31, 2015.

6. DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and other assets, net consisted of the following:
 
March 31,
2016
 
December 31,
2015
Deferred turnaround costs, net
$
237,398

 
$
177,236

Catalyst, net
89,995

 
77,725

Linefill
13,504

 
13,504

Restricted cash
1,500

 
1,500

Intangible assets, net
209

 
219

Other
24,103

 
20,529

Total deferred charges and other assets, net
$
366,709

 
$
290,713

 
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
 
March 31,
2016
 
December 31,
2015
Inventory-related accruals
$
583,287

 
$
548,800

Inventory supply and intermediation arrangements
274,668

 
252,380

Accrued transportation costs
87,972

 
91,546

Renewable energy credit obligations
45,729

 
19,472

Excise and sales tax payable
41,110

 
34,129

Accrued interest
30,558

 
24,806

Accrued utilities
24,780

 
25,192

Customer deposits
26,656

 
20,395

Accrued salaries and benefits
12,290

 
61,011

Accrued construction in progress
6,709

 
7,400

Other
10,847

 
34,058

Total accrued expenses
$
1,144,606

 
$
1,119,189

 

18

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

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 March 31, 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 non-current assets.
As of March 31, 2016 and December 31, 2015, the Company held $234,408 and $234,258, respectively, in marketable securities. The gross unrecognized holding gains and losses as of March 31, 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 months ended March 31, 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 March 31, 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 $799 for the three months ended March 31, 2016 attributable to those two C-Corporation subsidiaries of Chalmette Refining.


19

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

The income tax provision in the PBF Energy condensed consolidated financial statements of operations consisted of the following:
 
 
 
Three Months Ended 
 March 31,
 
 
2016
 
2015
Current tax (benefit) expense
 
$
(75,454
)
 
$
25,970

Deferred tax expense
 
52,954

 
23,168

Total tax (benefit) expense
 
$
(22,500
)
 
$
49,138


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 
 March 31, 2016
 
Three Months Ended 
 March 31, 2015
Provision at Federal statutory rate
 
$
(18,161
)
 
35.0
 %
 
$
47,689

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

 
 
 
 

State income taxes (net federal income tax)
 
(2,402
)
 
4.6
 %
 
7,098

 
5.2
 %
Non deductible/nontaxable items
 
135

 
(0.3
)%
 
526

 
0.4
 %
Adjustment for manufacturer's benefit
 

 
 %
 
(1,206
)
 
(0.9
)%
Rate differential from foreign jurisdictions
 
(375
)
 
0.7
 %
 
(5,629
)
 
(4.1
)%
Other
 
(1,697
)
 
3.3
 %
 
660

 
0.5
 %
Total
 
$
(22,500
)
 
43.3
 %
 
$
49,138

 
36.1
 %
The Company's effective income tax rate for the three months ended March 31, 2016 and 2015, including the impact of income attributable to noncontrolling interests of $6,052 and $15,798, respectively, was 49.1% and 32.3%, respectively.

PBF Energy has determined there are no material uncertain tax positions as of March 31, 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 $12,021 recorded as of March 31, 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

20

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

environmental liability is recorded in Accrued expenses and the non-current portion is recorded in Other long-term liabilities. As of March 31, 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 purchased a ten year, $100,000 environmental insurance policy to insure against unknown environmental liabilities at the refinery.
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, six Northeastern states require heating oil with 15 PPM or less sulfur. By July 1, 2016, two more states are expected to adopt this requirement and by July 1, 2018 most of the remaining Northeastern states (except for Pennsylvania and New Hampshire) will require heating oil with 15 PPM or less sulfur. 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 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

21

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

(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.
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. We purchased RINs to satisfy a portion of our obligations under the Renewable Fuels Standard program for calendar year 2012 and had purchased some RINs the EPA considered invalid. We continue to purchase RINs to satisfy our obligations under the RFS program, and on April 11, 2016, PBF Holding Company LLC 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. We are in the process of determining whether any of those RINs are invalid. We understand the EPA continues to investigate invalid RINs. While we do not know what actions the EPA will take, or penalties it will impose with respect to these identified RINs or any other RINs we have purchased that the EPA may identify as being invalid, at this time, we do not expect any such action or penalties would have a material effect on our 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

22

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

is required to make a “true up” tax distribution, no later than March 15 of the following year, equal to such difference, subject to the available cash and borrowings of PBF LLC. 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 March 31, 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 March 31, 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 three months ended March 31, 2016, PBF LLC made aggregate non-tax quarterly distributions of $0.30 per unit to its members, of which $29,342 was distributed pro-rata to PBF Energy and the balance was distributed to its other members. PBF Energy used this $29,342 to pay quarterly cash dividends of $0.30 per share of Class A common stock on March 8, 2016.

With respect to distributions paid during the three months ended March 31, 2016, PBFX paid a distribution on outstanding common and subordinated units of $0.41 per unit on March 8, 2016, for a total distribution of $14,680, of which $7,986 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 three months ended March 31, 2016. From the inception of the Repurchase Program through March 31, 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

23

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 March 31, 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 
 March 31,
Pension Benefits
 
2016

2015
Components of net periodic benefit cost:
 
 
 
 
Service cost
 
$
7,340

 
$
5,790

Interest cost
 
776

 
709

Expected return on plan assets
 
(1,106
)
 
(829
)
Amortization of prior service costs
 
13

 
13

Amortization of loss
 
194

 
311

Net periodic benefit cost
 
$
7,217

 
$
5,994

 
 
Three Months Ended 
 March 31,
Post Retirement Medical Plan
 
2016
 
2015
Components of net periodic benefit cost:
 
 
 
 
Service cost
 
$
220

 
$
244

Interest cost
 
134

 
134

Amortization of prior service costs
 
109

 
76

Amortization of loss (gain)
 

 

Net periodic benefit cost
 
$
463

 
$
454


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 March 31, 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.

24

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

 
As of March 31, 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
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
507,498

 
$

 
$

 
$
507,498

 
N/A

 
$
507,498

Marketable securities
234,408

 

 

 
234,408

 
N/A

 
234,408

Commodity contracts
29,761

 
21,346

 
1,915

 
53,022

 
(38,338
)
 
14,684

Derivatives included with inventory intermediation agreement obligations

 
365

 

 
365

 

 
365

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
34,368

 
3,970

 

 
38,338

 
(38,338
)
 

Catalyst lease obligations

 
34,688

 

 
34,688

 

 
34,688

 
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
 
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


25

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 March 31, 2016 and December 31, 2015, $9,645 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 
 March 31,
 
 
2016
 
2015
Balance at beginning of period
 
$
3,543

 
$
1,521

Purchases
 

 

Settlements
 
(256
)
 
(1,200
)
Unrealized gain included in earnings
 
(1,372
)
 
9,357

Transfers into Level 3
 

 

Transfers out of Level 3
 

 

Balance at end of period
 
$
1,915

 
$
9,678


There were no transfers between levels during the three months ended March 31, 2016 and 2015, respectively.

26

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 March 31, 2016 and December 31, 2015.
 
March 31, 2016
 
December 31, 2015
 
Carrying
value
 
Fair
 value
 
Carrying
 value
 
Fair
value
Senior Secured Notes due 2020 (a)
$
669,940

 
$
702,571

 
$
669,644

 
$
706,246

Senior Secured Notes due 2023 (a)
500,000

 
474,138

 
500,000

 
492,452

PBFX Senior Notes (a)
350,000

 
339,216

 
350,000

 
321,722

PBFX Term Loan (b)
234,200

 
234,200

 
234,200

 
234,200

Rail Facility (b)
67,491

 
67,491

 
67,491

 
67,491

Catalyst leases (c)
34,688

 
34,688

 
31,802

 
31,802

PBFX Revolving Credit Facility (b)
24,500

 
24,500

 
24,500

 
24,500

Revolving Loan (b)

 

 

 

 
1,880,819

 
1,876,804

 
1,877,637

 
1,878,413

Less - Current maturities

 

 

 

Less - Unamortized deferred financing costs
38,917

 
n/a

 
41,282

 
n/a

Long-term debt
$
1,841,902

 
$
1,876,804

 
$
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 March 31, 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 March 31, 2016, there were 3,440,594 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

27

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

December 31, 2015) outstanding under these derivative instruments not designated as hedges. These volumes represent the notional value of the contract.
The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of March 31, 2016, there were 39,380,250 barrels of crude oil and 4,502,000 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 March 31, 2016 and December 31, 2015 and the line items in the consolidated balance sheet in which the fair values are reflected.
Description

Balance Sheet Location
Fair Value
Asset/(Liability)
Derivatives designated as hedging instruments:
 
 
March 31, 2016:
 
 
Derivatives included with the inventory intermediation agreement obligations
Accrued expenses
$
365

December 31, 2015
 
 
Derivatives included with the inventory intermediation agreement obligations
Accrued expenses
$
35,511

 
 
 
Derivatives not designated as hedging instruments:
 
 
March 31, 2016:
 
 
Commodity contracts
Accounts receivable
$
14,684

December 31, 2015
 
 
Commodity contracts
Accounts receivable
$
46,127


28

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 consolidated financial statements in which such gains and losses are reflected.
Description
Location of Gain or (Loss) Recognized in
 Income on Derivatives
Gain or (Loss)
Recognized in
Income on Derivatives
Derivatives designated as hedging instruments:
 
 
For the three months ended March 31, 2016:
 
 
Derivatives included with the inventory intermediation agreement obligations
Cost of sales
$
(35,146
)
For the three months ended March 31, 2015:
 
 
Derivatives included with inventory supply arrangement obligations
Cost of sales
$
(2,821
)
Derivatives included with the inventory intermediation agreement obligations
Cost of sales
$
(63,686
)
 
 
 
Derivatives not designated as hedging instruments:
 
 
For the three months ended March 31, 2016:
 
 
Commodity contracts
Cost of sales
$
(19,953
)
For the three months ended March 31, 2015:
 
 
Commodity contracts
Cost of sales
$
(41,128
)
 
 
 
Hedged items designated in fair value hedges:
 
 
For the three months ended March 31, 2016:
 
 
Intermediate and refined product inventory
Cost of sales
$
35,146

For the three months ended March 31, 2015:
 
 
Crude oil and feedstock inventory
Cost of sales
$
2,821

Intermediate and refined product inventory
Cost of sales
$
63,686


The Company had no ineffectiveness related to the Company's fair value hedges for the three months ended March 31, 2016 and 2015.


29

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
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; and (v) an interstate petroleum products pipeline and a 15-lane truck loading rack both located at the Delaware City refinery. PBFX provides various rail and truck terminaling services, pipeline transportation services and storage services to PBF Holding and/or its subsidiaries through long-term commercial agreements. 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. The assets, 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 months ended March 31, 2016 and March 31, 2015 are presented below. In connection with the contribution by PBF LLC of the Delaware City Products Pipeline and Truck Rack, the accompanying segment information has been retrospectively adjusted to include the historical results of the Delaware City Products Pipeline and Truck Rack for all periods presented prior to such contribution.
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.

30

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

 
Three Months Ended March 31, 2016
 
Refining
 
Logistics
 
Corporate
 
Eliminations
 
Consolidated Total
Revenues
$
2,800,185

 
$
36,549

 
$

 
$
(36,549
)
 
$
2,800,185

Depreciation and amortization expense
52,596

 
1,640

 
1,697

 

 
55,933

Income (loss) from operations
4,967

 
26,323

 
(36,714
)
 

 
(5,424
)
Interest expense, net
972

 
7,229

 
29,326

 

 
37,527

Capital expenditures (1)
139,600

 
439

 
5,700

 

 
145,739

 
Three Months Ended March 31, 2015
 
Refining
 
Logistics
 
Corporate
 
 Eliminations
 
Consolidated Total
Revenues
$
2,995,136

 
$
32,846

 
$

 
$
(32,846
)
 
$
2,995,136

Depreciation and amortization expense
43,030

 
1,633

 
3,043

 

 
47,706

Income (loss) from operations
188,085

 
19,717

 
(35,392
)
 

 
172,410

Interest expense, net
3,956

 
1,955

 
16,281

 

 
22,192

 Capital expenditures
124,468

 
76

 
1,185

 

 
125,729

 
Balance at March 31, 2016
 
Refining
 
Logistics
 
Corporate
 
 Eliminations
 
Consolidated Total
Total assets
$
5,165,674

 
$
433,579

 
$
608,860

 
$
(24,454
)
 
$
6,183,659

 
Balance at December 31, 2015
 
Refining
 
Logistics
 
Corporate
 
 Eliminations
 
Consolidated Total
Total assets
$
5,087,554

 
$
422,902

 
$
618,617

 
$
(23,949
)
 
$
6,105,124

  
(1)
The Refining segment includes capital expenditures of $2.7 million for the working capital settlement related to the acquisition of the Chalmette refinery that was finalized in the first quarter of 2016.


31

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

17. NET (LOSS) INCOME PER SHARE OF PBF ENERGY
The following table sets forth the computation of basic and diluted net (loss) income per Class A common share attributable to PBF Energy:
 
Three Months Ended 
 March 31,
Basic Earnings Per Share:
2016
 
2015
Numerator for basic net (loss) income per Class A common share - net (loss) income attributable to PBF Energy
$
(29,388
)
 
$
87,321

Denominator for basic net (loss) income per Class A common share - weighted average shares
97,809,384

 
84,278,071

Basic net (loss) income attributable to PBF Energy per Class A common share
$
(0.30
)
 
$
1.04

 
 
 
 
Diluted Earnings Per Share:
 
 
 
Numerator:
 
 
 
Net (loss) income attributable to PBF Energy
$
(29,388
)
 
$
87,321

Plus: Net (loss) income attributable to noncontrolling interest (1)

 
7,788

Less: Income tax expense (benefit) on net (loss) income attributable to noncontrolling interest (1)

 
(3,131
)
Numerator for diluted net (loss) income per Class A common share - net income (loss) attributable to PBF Energy (1)
$
(29,388
)
 
$
91,978

 
 
 
 
Denominator(1):
 
 
 
Denominator for basic net (loss) income per Class A common share-weighted average shares
97,809,384

 
84,278,071

Effect of dilutive securities:
 
 
 
Conversion of PBF LLC Series A Units

 
6,866,867

Common stock equivalents (2)

 
524,163

Denominator for diluted net (loss) income per common share-adjusted weighted average shares
97,809,384

 
91,669,101

Diluted net (loss) income attributable to PBF Energy per Class A common share
$
(0.30
)
 
$
1.00

__________
 
 
 
 
(1)
The diluted earnings per share calculation generally assumes the conversion of all outstanding PBF LLC Series A Units to Class A common stock of PBF Energy. The net (loss) income attributable to PBF Energy, used in the numerator of the diluted earnings per share calculation is adjusted to reflect the net (loss) income, as well as the corresponding income tax expense (benefit) (based on a 39.6% and 40.2% statutory tax rate for the three months ended March 31, 2016 and 2015, respectively) attributable to the converted units. During the three months ended March 31, 2016, the potential conversion of 4,956,417 PBF LLC Series A Units into PBF Energy Class A common stock were excluded from the denominator in computing diluted net income per share because including them would have had an anti-dilutive effect. As the potential conversion of the PBF LLC Series A Units and Common stock equivalents were not included, the numerator used in the calculation of diluted net income per share was equal to the numerator used in the calculation of basic net income per share and does not include the net income and income tax attributable to the net income associated with the potential conversion of the PBF LLC Series A Units and Common stock equivalents.

(2)
Represents an adjustment to weighted-average diluted shares outstanding to assume the full exchange of common stock equivalents, including options and warrants for PBF LLC Series A Units and options for shares of PBF Energy Class A common stock as calculated under the treasury stock method (to the extent the impact of such exchange would not be anti-dilutive). Common stock equivalents excludes

32

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

the effects of options to purchase 4,945,360 and 2,869,500 shares of PBF Energy Class A common stock because they are anti-dilutive for the three months ended March 31, 2016 and 2015, respectively.

18. SUBSEQUENT EVENTS
Dividend Declared
On April 28, 2016, the Company announced a dividend of $0.30 per share on outstanding Class A common stock. The dividend is payable on May 31, 2016 to Class A common stockholders of record at the close of business on May 13, 2016.
PBFX Distributions
On April 28, 2016, the Board of Directors of PBF GP announced a distribution of $0.42 per unit on outstanding common and subordinated units of PBFX. The distribution is payable on May 31, 2016 to PBFX unit holders of record at the close of business on May 13, 2016.
PBFX Plains Asset Purchase
On April 29, 2016, PBFX's wholly-owned subsidiary, PBF Logistics Products Terminals LLC, completed the purchase of four refined product terminals located in the greater Philadelphia region from an affiliate of Plains All American Pipeline, L.P. for total cash consideration of approximately $100,000.
April 2016 PBFX Equity Offering
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 $51,400, after deducting underwriting discounts and commissions and other offering expenses (the "April 2016 PBFX Equity Offering").

As a result of the April 2016 PBFX Equity Offering, PBF LLC holds a 49.5% limited partner interest in PBFX and owns all of PBFX’s IDRs, with the remaining 50.5% limited partner interest owned by public unitholders.


33


ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited financial statements of PBF Energy Inc. included in the Annual Report on Form 10-K for the year ended December 31, 2015 and the unaudited financial statements and related notes included in this report. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements.”
 
Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding and its subsidiaries and PBFX and its subsidiaries. 

Overview
We are one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. We sell our products throughout the Northeast, Midwest and Gulf Coast of the United States, as well as in other regions of the United States and Canada, and are able to ship products to other international destinations. We were formed in 2008 to pursue acquisitions of crude oil refineries and downstream assets in North America. We currently own and operate four domestic oil refineries and related assets, which we acquired in 2010, 2011 and November 2015. Our refineries have a combined processing capacity, known as throughput, of approximately 730,000 barrels per day (“bpd”), and a weighted-average Nelson Complexity Index of 11.7. We operate in two reportable business segments: Refining and Logistics.
As of March 31, 2016, our four refineries are located in Toledo, Ohio, Delaware City, Delaware, Paulsboro, New Jersey and New Orleans, Louisiana. Our Mid-Continent refinery at Toledo processes light, sweet crude, has a throughput capacity of 170,000 bpd and a Nelson Complexity Index of 9.2. The majority of Toledo’s West Texas Intermediate (“WTI”) based crude is delivered via pipelines that originate in both Canada and the United States. Since our acquisition of Toledo in 2011, we have added additional truck and rail crude unloading capabilities that provide feedstock sourcing flexibility for the refinery and enables Toledo to run a more cost-advantaged crude slate. Our East Coast refineries at Delaware City and Paulsboro have a combined refining capacity of 370,000 bpd and Nelson Complexity Indices of 11.3 and 13.2, respectively. These high-conversion refineries process primarily medium and heavy, sour crudes and have the flexibility to receive crude and feedstock via both water and rail. We have expanded and upgraded existing on-site railroad infrastructure at our Delaware City refinery, including the expansion of the crude rail unloading facilities that was completed in February 2013. The Delaware City rail unloading facility, which was transferred to PBFX in 2014, allows our East Coast refineries the flexibility to source WTI-based crudes from Western Canada and the Mid-Continent, when doing so provides cost advantages versus traditional Brent-based international crudes. We believe this sourcing optionality can be a beneficial component to the profitability of our East Coast refining system in certain crude pricing environments. The Chalmette Refinery, located outside of New Orleans, Louisiana, is a 189,000 bpd, dual-train coking refinery with a Nelson Complexity of 12.7 and is capable of processing both light and heavy crude oil. The facility is strategically positioned on the Gulf Coast with strong logistics connectivity that offers flexible raw material sourcing and product distribution opportunities, including the potential to export products.
As of March 31, 2016, we owned 97,816,106 PBF LLC Series C Units and our current and former executive officers and directors and certain employees and others held 4,947,401 PBF LLC Series A Units (we refer to all of the holders of the PBF LLC Series A Units as “the members of PBF LLC other than PBF Energy”). As a result, the holders of our issued and outstanding shares of our Class A common stock have approximately 95.2% of the voting power in us, and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock have approximately 4.8% of the voting power in us.

34


Business Developments
Recent significant business developments affecting the Company are discussed below.
Pending Torrance Acquisition
On September 29, 2015, PBF Holding entered into a definitive Sale and Purchase Agreement (the “Torrance Sale and Purchase Agreement”) with ExxonMobil Oil Corporation (“ExxonMobil”) and its subsidiary, Mobil Pacific Pipeline Company (together, the “Torrance Sellers”), to purchase the Torrance refinery, and related logistics assets (collectively, the “Torrance Acquisition”). The Torrance refinery, located on 750 acres in Torrance, California, is a high-conversion 155,000 barrel per day, delayed-coking refinery with a Nelson Complexity of 14.9. The facility is strategically positioned in Southern California with advantaged logistics connectivity that offers flexible raw material sourcing and product distribution opportunities primarily in the California, Las Vegas and Phoenix area markets. The Torrance Acquisition is expected to further increase the Company's total throughput capacity to approximately 900,000 bpd.
In addition to refining assets, the Torrance Acquisition includes a number of high-quality logistics assets including a sophisticated network of crude and products pipelines, product distribution terminals and refinery crude and product storage facilities. The most significant of the logistics assets is a 171-mile crude gathering and transportation system which delivers San Joaquin Valley crude oil directly from the field to the refinery. Additionally, included in the transaction are several pipelines which provide access to sources of crude oil including the Ports of Long Beach and Los Angeles, as well as clean product outlets with a direct pipeline supplying jet fuel to the Los Angeles airport. The Torrance refinery also has crude and product storage facilities with approximately 8.6 million barrels of shell capacity.
The purchase price for the Torrance Acquisition is $537.5 million, plus working capital to be valued at closing. The purchase price is also subject to other customary purchase price adjustments. The Torrance Acquisition is expected to close in the second quarter of 2016, subject to satisfaction of customary closing conditions. Additionally, as a condition of closing, the Torrance refinery is required to be restored to full working order with respect to the event that occurred on February 18, 2015 resulting in damage to the electrostatic precipitator and related systems, and shall have operated as required under the sale and purchase agreement for a period of at least fifteen days after such restoration. PBF Energy expects to finance the transaction with a combination of cash on hand, debt and proceeds from our October 2015 Equity Offering and 2023 Senior Secured Notes offering. Following the expected completion of the Torrance Acquisition, our weighted average Nelson Complexity Index will increase to 12.2.
PBFX Plains Asset Purchase
On February 2, 2016, PBFX announced that its wholly-owned subsidiary, PBF Logistics Products Terminals LLC, entered into an agreement to purchase the assets of four 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 approximately $100.0 million (the “PBFX Plains Asset Purchase”). 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 PBFX's senior secured revolving credit facility. On April 29, 2016, PBFX closed on the acquisition of the East Coast Terminals.
April 2016 PBFX Equity Offering
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 $51,400, after deducting underwriting discounts and commissions and other offering expenses (the “April 2016 PBFX Equity Offering”). As a result of the April 2016 PBFX Equity Offering, PBF LLC holds a 49.5% limited partner interest in PBFX and owns all of PBFX's IDRs, with the remaining 50.5% limited partner interest owned by public unitholders.

35


Factors Affecting Comparability Between Periods
Our results have been affected by the following events, which must be understood in order to assess the comparability of our period to period financial performance and financial condition.
Chalmette Acquisition
On November 1, 2015, the Company acquired from ExxonMobil Oil Corporation, Mobil Pipe Line Company and PDV Chalmette, Inc., 100% of the ownership interests of Chalmette Refining, which owns the Chalmette refinery and related logistics assets. 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 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 $322.0 million in cash, plus final inventory and working capital of $246.0 million, which was finalized in the first quarter of 2016. The transaction was financed through a combination of cash on hand and borrowings under the Company’s Revolving Loan.
Initial Public Offering of PBFX and Subsequent Drop-Down Transactions
On May 14, 2014, PBFX completed its initial public offering (the “PBFX Offering”) of 15,812,500 common units, including 2,062,500 common units issued upon exercise of the underwriters' over-allotment option. Subsequent to the PBFX Offering, PBF Holding and PBF LLC entered into a series of drop-down transactions with PBFX.
PBFX is a fee-based, growth-oriented, 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 and transferring of crude oil and the receipt, storage and delivery of crude oil, refined products and intermediates. PBFX’s assets consist of a light crude oil rail unloading terminal at the Delaware City refinery that also services the Paulsboro refinery (which we refer to as the “Delaware City Rail Terminal”), a crude oil truck unloading terminal at the Toledo refinery (which we refer to as the “Toledo Truck Terminal”), the DCR West Rack, the Toledo Storage Facility and the Delaware City Products Pipeline and Truck Rack. All of PBFX’s revenue is derived from long-term, fee-based commercial agreements with subsidiaries of PBF Energy, which include minimum volume commitments, for receiving, handling, transferring and storing crude oil and refined products. These transactions are eliminated by PBF Energy in consolidation.
During 2014, PBFX acquired from PBF LLC the DCR West Rack, a heavy crude oil rail unloading facility (also, capable of unloading light crude oil) at the Delaware City refinery and the Toledo Storage Facility, a tank farm and related facilities located at our Toledo refinery, including a propane storage and loading facility.
In addition, on May 14, 2015, PBF LLC contributed to PBFX all of the issued and outstanding limited liability company interests of Delaware Pipeline Company LLC and Delaware City Logistics Company LLC, whose assets consist of a product pipeline, truck rack and related facilities located at our Delaware City refinery (collectively referred to as the “Delaware City Products Pipeline and Truck Rack”).

36


Amended and Restated Asset Based Revolving Credit Facility
On an ongoing basis, the Third Amended and Restated Revolving Credit Agreement ("Revolving Loan") is available to be used for working capital and other general corporate purposes. In November and December 2015, PBF Holding increased the maximum availability under the Revolving Loan to $2.60 billion and $2.64 billion, respectively, in accordance with its accordion feature. The commitment fees on the unused portions, the interest rate on advances and the fees for letters of credit were also reduced in the amended and restated Revolving Loan.
Senior Secured Notes Offering
On November 24, 2015, PBF Holding and PBF Finance Corporation issued $500.0 million in aggregate principal amount of 7.0% senior secured notes due 2023 (the "2023 Senior Secured Notes"). The net proceeds were approximately $490.0 million after deducting the initial purchasers’ discount and offering expenses. The Company intends to use the proceeds for general corporate purposes, including to fund a portion of the purchase price for the pending Torrance Acquisition.
Rail Facility Revolving Credit Facility
Effective March 25, 2014, PBF Rail Logistics Company LLC (“PBF Rail”), an indirect wholly-owned subsidiary of PBF Holding, entered into a $250.0 million secured revolving credit agreement (the “Rail Facility”). The primary purpose of the Rail Facility is to fund the acquisition by PBF Rail of coiled and insulated crude tank cars and non-coiled and non-insulated general purpose crude tank cars (the “Eligible Railcars”) before December 2015. The amount available to be advanced under the Rail Facility equals 70% of the lesser of the aggregate Appraised Value of the Eligible Railcars, or the aggregate Purchase Price of such Eligible Railcars, as these terms are defined in the credit agreement.
On April 29, 2015, the Rail Facility was amended to, among other things, extend the maturity from March 31, 2016 to April 29, 2017, reduce the total commitment from $250.0 million to $150.0 million, and reduce the commitment fee on the unused portion of the Rail Facility. At any time prior to maturity PBF Rail may repay and re-borrow any advances without premium or penalty. On the first anniversary of the closing of the amendment, the advance rate adjusts automatically to 65%.
J. Aron Intermediation Agreements
On May 29, 2015, PBF Holding entered into amended and restated inventory intermediation agreements (the “A&R Intermediation Agreements”) with J. Aron & Company (“J. Aron”) pursuant to which certain terms of the existing inventory intermediation agreements were amended, including, among other things, pricing and an extension of the term for a period of two years from the original expiry date of July 1, 2015, subject to certain early termination rights. In addition, the A&R Intermediation Agreements include one-year renewal clauses by mutual consent of both parties.
Pursuant to each A&R Intermediation Agreement, J. Aron will continue to purchase and hold title to certain of the intermediate and finished products (the “Products”) produced by the Paulsboro and Delaware City refineries (the “Refineries”), respectively, and delivered into tanks at the Refineries. Furthermore, J. Aron agrees to sell the Products back to Paulsboro refinery and Delaware City refinery as the Products are discharged out of the Refineries' tanks. J. Aron has the right to store the Products purchased in tanks under the A&R Intermediation Agreements and will retain these storage rights for the term of the agreements. PBF Holding will continue to market and sell the Products independently to third parties.
Crude Oil Acquisition Agreement Terminations
Effective December 31, 2015, our crude oil supply agreement with Statoil for the Delaware City refinery expired. Subsequent to the termination of the Statoil supply agreement, we purchase all of our crude and feedstock needs independently from a variety of suppliers, including Saudi Aramco and others, on the spot market or through

37


term agreements. Subsequent to the Chalmette Acquisition we made a contract with PDVSA for the supply of 40,000 to 60,000 bpd of crude oil that can be processed at any of our East or Gulf Coast refineries.
Public Offerings
On February 6, 2015, funds affiliated with Blackstone and First Reserve exchanged 3,804,653 PBF LLC Series A units for the same number of shares of PBF Energy Class A common stock which were subsequently sold in a secondary public offering (the “February 2015 secondary offering” and collectively with the secondary offerings completed in 2013 and 2014, the “secondary offerings”). As a result of these secondary offerings, Blackstone and First Reserve no longer hold any PBF LLC Series A units. The holders of PBF LLC Series B Units, which include certain current and former executive officers of PBF Energy, received a portion of the proceeds of the sales of the PBF Energy Class A common stock by Blackstone and First Reserve in accordance with the amended and restated limited liability company agreement of PBF LLC. PBF Energy did not receive any proceeds from the secondary offerings.
On October 13, 2015, we completed a public offering of an aggregate of 11,500,000 shares of Class A common stock (the " October 2015 Equity Offering"), including 1,500,000 shares of Class A common stock that was sold pursuant to the exercise of an over-allotment option, for net proceeds of $344.0 million, after deducting underwriting discounts and commissions and other offering expenses.
As of December 31, 2015, we owned 97,781,933 PBF LLC Series C Units and our current and former executive officers and directors and certain employees beneficially owned 4,985,358 PBF LLC Series A Units, and the holders of our issued and outstanding shares of Class A common stock had 95.1% of the voting power in us and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock had the remaining 4.9% of the voting power in us.
As of March 31, 2016, we currently own 97,816,106 PBF LLC Series C Units and our current and former executive officers and directors and certain employees beneficially own 4,947,401 PBF LLC Series A Units, and the holders of our issued and outstanding shares of Class A common stock have 95.2% of the voting power in us 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 us.
PBFX Debt Facilities
On May 12, 2015, PBFX entered into an Indenture among the Partnership, PBF Logistics Finance Corporation, a Delaware corporation and wholly-owned subsidiary of PBFX (“PBF Logistics Finance,” and together with PBFX, the “Issuers”), the Guarantors named therein (certain subsidiaries of PBFX) and Deutsche Bank Trust Company Americas, as Trustee, under which the Issuers issued $350.0 million in aggregate principal amount of 6.875% Senior Notes due 2023 (the “PBFX Senior Notes”). PBF LLC has provided a limited guarantee of collection of the principal amount of the PBFX Senior Notes, but is not otherwise subject to the covenants of the indenture. Of the $350.0 million aggregate PBFX Senior Notes, $19.9 million were purchased by certain of PBF Energy’s officers and directors and their affiliates pursuant to a separate private placement transaction. After deducting offering expenses, PBFX received net proceeds of approximately $343.0 million from the PBFX Senior Notes offering.

38


Results of Operations
The tables below reflect our consolidated financial and operating highlights for the three months ended March 31, 2016 and 2015 (amounts in thousands, except per share data). We operate in two reportable business segments: Refining and Logistics. Our four oil refineries, excluding the assets owned by PBFX, 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 operates 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 Offering and PBFX's acquisition of the DCR West Rack, the Toledo Storage Facility and the Delaware City Products Pipeline and Truck Rack, PBFX's assets were operated within the refining
operations of our Delaware City and Toledo refineries. The assets did not generate third party or intra-entity revenue, other than certain intra-entity revenue recognized by the Delaware City Products Pipeline and Truck Rack, and were not considered to be a separate reportable segment. We did not analyze our results by individual segments as our Logistics segment does not have any third party revenue and substantially all of its operating results eliminate in consolidation. Additionally, third party expenses attributable directly to the Logistics segment are immaterial to our consolidated operating results.
 
Three Months Ended 
 March 31,
 
2016
 
2015
Revenue
$
2,800,185

 
$
2,995,136

Cost of sales, excluding depreciation
2,412,095

 
2,502,215


388,090

 
492,921

Operating expenses, excluding depreciation
299,999

 
237,118

General and administrative expenses
37,582

 
36,046

Gain on sale of assets

 
(359
)
Depreciation and amortization expense
55,933

 
47,706

(Loss) income from operations
(5,424
)
 
172,410

Change in fair value of catalyst leases
(2,885
)
 
2,039

Interest expense, net
(37,527
)
 
(22,192
)
(Loss) income before income taxes
(45,836
)
 
152,257

Income tax (benefit) expense
(22,500
)
 
49,138

Net (loss) income
(23,336
)
 
103,119

Less: net income attributable to noncontrolling interests
6,052

 
15,798

Net (loss) income attributable to PBF Energy Inc.
$
(29,388
)
 
$
87,321

 
 
 
 
Gross margin
$
38,855

 
$
216,328

 
 
 
 
Gross refining margin (1)
$
354,202

 
$
466,096

 
 
 
 
Net (loss) income available to Class A common stock per share:
 
 
 
Basic
$
(0.30
)
 
$
1.04

Diluted
$
(0.30
)
 
$
1.00


(1)
See Non-GAAP Financial Measures below.

39


Operating Highlights
 
Three Months Ended 
 March 31,
 
2016
 
2015
Key Operating Information
 
 
 
Production (bpd in thousands)
655.9

 
465.4

Crude oil and feedstocks throughput (bpd in thousands)
650.1

 
467.8

Total crude oil and feedstocks throughput (millions of barrels)
59.2

 
42.1

Gross refining margin, excluding special items, per barrel of throughput (1)
$
4.99

 
$
10.57

Refinery operating expenses, excluding depreciation, per barrel of throughput
$
5.01

 
$
5.54

 
 
 
 
Crude and feedstocks (% of total throughput) (2):
 
 
 
Heavy crude
14
%
 
15
%
Medium crude
50
%
 
46
%
Light crude
23
%
 
27
%
Other feedstocks and blends
13
%
 
12
%
 
 
 
 
Yield (% of total throughput):
 
 
 
Gasoline and gasoline blendstocks
48
%
 
49
%
Distillates and distillate blendstocks
31
%
 
34
%
Lubes
1
%
 
1
%
Chemicals
4
%
 
3
%
Other
16
%
 
13
%
 
 
 
 



(1)
See Non-GAAP Financial Measures below.
(2)
We define heavy crude oil as crude oil with American Petroleum Institute (API) gravity less than 24 degrees.     We define medium crude oil as crude oil with API gravity between 24 and 35 degrees. We define light crude oil as crude oil with API gravity higher than 35 degrees.

40


The table below summarizes certain market indicators relating to our operating results as reported by Platts. 
 
Three Months Ended 
 March 31,
 
2016
 
2015
 
(dollars per barrel, except as noted)
Dated Brent Crude
$
34.24

 
$
54.29

West Texas Intermediate (WTI) crude oil
$
33.45

 
$
48.49

Light Louisiana Sweet (LLS) crude oil
$
35.34

 
$
52.84

Crack Spreads
 
 
 
Dated Brent (NYH) 2-1-1
$
11.18

 
$
15.76

WTI (Chicago) 4-3-1
$
8.83

 
$
15.45

LLS (Gulf Coast) 2-1-1
$
8.71

 
$
13.61

Crude Oil Differentials
 
 
 
Dated Brent (foreign) less WTI
$
0.79

 
$
5.80

Dated Brent less Maya (heavy, sour)
$
8.04

 
$
10.14

Dated Brent less WTS (sour)
$
0.94

 
$
6.79

Dated Brent less ASCI (sour)
$
4.27

 
$
5.58

WTI less WCS (heavy, sour)
$
11.34

 
$
11.80

WTI less Bakken (light, sweet)
$
1.56

 
$
5.13

WTI less Syncrude (light, sweet)
$
(4.44
)
 
$
(0.68
)
Natural gas (dollars per MMBTU)
$
1.98

 
$
2.81

Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015
Overview— Net loss was $23.3 million for the three months ended March 31, 2016 compared to net income of $103.1 million for the three months ended March 31, 2015. Net loss attributable to PBF Energy was $29.4 million, or $(0.30)