UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
|
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 2017March 31, 2019
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: 333-186007
Commission File Number: 333-186007-07
PBF HOLDING COMPANY LLC
PBF FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
|
| | |
DELAWARE DELAWARE | | 27-2198168 45-2685067 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| |
One Sylvan Way, Second Floor Parsippany, New Jersey | | 07054 |
(Address of principal executive offices) | | (Zip Code) |
(973) 455-7500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports);, and (2) has been subject to such filing requirements for the past 90 days.
|
| |
PBF Holding Company LLC | o Yes x No |
PBF Finance Corporation | o Yes x No |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
| |
PBF Holding Company LLC | x Yes o No |
PBF Finance Corporation | x Yes o No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | | |
| Large accelerated filer | | Accelerated filer | | Non-accelerated filer (Do not check if a smaller reporting company) | | Smaller reporting company | Emerging growth company |
PBF Holding Company LLC | ¨ | | ¨ | | x | | ¨ | o |
PBF Finance Corporation | o | | o | | x | | o | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
|
| |
PBF Holding Company LLC | o Yes o No |
PBF Finance Corporation | o Yes o No |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
| |
PBF Holding Company LLC | ¨ Yes x No |
PBF Finance Corporation | o Yes x No |
Securities registered pursuant to Section 12(b) of The Act. |
| | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
N/A | | N/A | | N/A |
PBF Holding Company LLC has no common stock outstanding. As of November 7, 2017,May 6, 2019, 100% of the membership interests of PBF Holding Company LLC were owned by PBF Energy Company LLC, and PBF Finance Corporation had 100 shares of common stock outstanding, all of which were held by PBF Holding Company LLC.
PBF Finance Corporation meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
PBF HOLDING COMPANY LLC
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2019
TABLE OF CONTENTS
|
| | | | |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS | |
| | | | |
| |
| | | |
| | ITEM 1. | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | ITEM 2. | | |
| | ITEM 3. | | |
| | ITEM 4. | | |
| |
| |
| | | |
| | ITEM 1. | | |
| | ITEM 1A. | | |
| | ITEM 6. | | |
| |
This combined Quarterly Report on Form 10-Q is filed by PBF Holding Company LLC (“PBF Holding”) and PBF Finance Corporation (“PBF Finance”). PBF Holding is a wholly-owned subsidiary of PBF Energy Company LLC (“PBF LLC”) and is the parent company for PBF LLC’s refinery operating subsidiaries. PBF Finance is a wholly-owned subsidiary of PBF Holding. PBF Holding is an indirect subsidiary of PBF Energy Inc. (“PBF Energy”), which is the sole managing member of, and owner of an equity interest representing approximately 96.6%99.0% of the outstanding economic interests in PBF LLC as of September 30, 2017.March 31, 2019. PBF Energy operates and controls all of the business and affairs and consolidates the financial results of PBF LLC and its subsidiaries. PBF Holding, together with its consolidated subsidiaries, owns and operates oil refineries and related facilities in North America.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This combined Quarterly Report on Form 10-Q contains certain "forward-looking statements" 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, 20162018 of PBF Holding Company LLC and PBF Finance Corporation, which we refer to as our 20162018 Annual Report on Form 10-K, and in our other filings with the SEC.United States of America (“U.S.”) Securities and Exchange Commission (“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 expectations with respect to our capital improvement and turnaround projects;
•our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;
•termination of our A&RInventory Intermediation Agreements with J. Aron, which could have a material adverse effect on our liquidity, as we would be required to finance our crude oil, intermediate and refined products inventory covered by the agreements. Additionally, we are obligated to repurchase from J. Aron certain crude, intermediates and finished products located at the Company’s storage tanks at the Paulsboro and Delaware City refineries’ storage tanksrefineries and at PBFX’s East Coast Storage Assets upon termination of these agreements;
•restrictive covenants in our indebtedness that may adversely affect our operational flexibility or ability to make distributions;
•our assumptions regarding payments arising under PBF Energy’s tax receivable agreementTax Receivable Agreement and other arrangements relating to PBF Energy;
•our expectations and timing with respect to our acquisition activity;
•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 partythird-party logistics infrastructure or operations, including pipeline, marine and rail transportation;
•the impact of current and future laws, rulings and governmental regulations, including the implementation of rules and regulations regarding transportation of crude oil by rail;
•the impact of the newly enacted federal income tax legislation on our business;
•the effectiveness of our crude oil sourcing strategies, including our crude by rail strategy and related commitments;
•adverse impacts related to legislation by the federal government lifting the restrictions on exporting U.S. crude oil;
•adverse impacts from changes in our regulatory environment, such as the effects of compliance with the California Global Warming Solutions Act (also referred to as “AB32”), or from actions taken by environmental interest groups;
•market risks related to the volatility in the price of Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuel Standards and greenhouse gas (“GHG”) emission credits required to comply with various GHG emission programs, such as AB32;
•our ability to successfully integrate the completed acquisition of the Torrance refinery and related logistics assets (collectively, the “Torrance Acquisition”)acquisitions into our business and realize the benefits from such acquisition;acquisitions;
•liabilities arising from the Torrance Acquisitionacquisitions that are unforeseen or exceed our expectations; and
•any decisions we continue to make with respect to our energy-related logistical assets that may be transferred to PBFX.
We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements.
Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)millions)
| | | September 30, 2017 | | December 31, 2016 | March 31, 2019 | | December 31, 2018 |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | 241,745 |
| | $ | 626,705 |
| $ | 384.6 |
| | $ | 561.7 |
|
Accounts receivable | 774,907 |
| | 615,881 |
| 863.4 |
| | 710.7 |
|
Accounts receivable - affiliate | 19,938 |
| | 7,631 |
| 4.7 |
| | 12.0 |
|
Affiliate notes receivable | 11,600 |
| | — |
| |
Inventories | 2,310,692 |
| | 1,863,560 |
| 2,564.8 |
| | 1,864.1 |
|
Prepaid expense and other current assets | 44,439 |
| | 40,536 |
| |
Prepaid and other current assets | | 122.4 |
| | 52.5 |
|
Total current assets | 3,403,321 |
| | 3,154,313 |
| 3,939.9 |
| | 3,201.0 |
|
| | | | | | |
Property, plant and equipment, net | 2,805,149 |
| | 2,728,699 |
| 3,014.3 |
| | 2,971.2 |
|
Investment in equity method investee | 172,752 |
| | 179,882 |
| 167.7 |
| | 169.5 |
|
Operating lease right of use assets - third party | | 245.1 |
| | — |
|
Operating lease right of use assets - affiliate | | 655.6 |
| | — |
|
Deferred charges and other assets, net | 801,415 |
| | 504,003 |
| 998.2 |
| | 871.8 |
|
Total assets | $ | 7,182,637 |
| | $ | 6,566,897 |
| $ | 9,020.8 |
| | $ | 7,213.5 |
|
| | | | | | |
LIABILITIES AND EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | $ | 441,483 |
| | $ | 530,365 |
| $ | 546.0 |
| | $ | 483.8 |
|
Accounts payable - affiliate | 36,045 |
| | 37,863 |
| 43.9 |
| | 49.5 |
|
Accrued expenses | 1,809,571 |
| | 1,462,729 |
| 1,843.7 |
| | 1,579.0 |
|
Current operating lease liabilities - third party | | 80.9 |
| | — |
|
Current operating lease liabilities - affiliate | | 73.3 |
| | — |
|
Current debt | | 2.5 |
| | 2.4 |
|
Deferred revenue | 3,296 |
| | 12,340 |
| 63.6 |
| | 17.1 |
|
Notes payable | 6,831 |
| | — |
| |
Total current liabilities | 2,297,226 |
| | 2,043,297 |
| 2,653.9 |
| | 2,131.8 |
|
| | | | | | |
Long-term debt | 1,625,201 |
| | 1,576,559 |
| 1,510.7 |
| | 1,258.0 |
|
Affiliate notes payable | — |
| | 86,298 |
| |
Deferred tax liabilities | 46,340 |
| | 45,699 |
| 33.2 |
| | 40.4 |
|
Long-term operating lease liabilities - third party | | 164.7 |
| | — |
|
Long-term operating lease liabilities - affiliate | | 582.3 |
| | — |
|
Other long-term liabilities | 213,344 |
| | 226,111 |
| 251.0 |
| | 253.5 |
|
Total liabilities | 4,182,111 |
| | 3,977,964 |
| 5,195.8 |
|
| 3,683.7 |
|
| | | | | | |
Commitments and contingencies (Note 9) |
| |
| |
Commitments and contingencies (Note 5) | |
| |
|
| | | | | | |
Equity: | | | | | | |
PBF Holding Company LLC equity | | | | |
Member’s equity | 2,352,772 |
| | 2,155,863 |
| 2,658.4 |
| | 2,652.5 |
|
Retained earnings | 659,891 |
| | 446,519 |
| 1,179.4 |
| | 890.3 |
|
Accumulated other comprehensive loss | (25,024 | ) | | (25,962 | ) | (23.7 | ) | | (23.9 | ) |
Total PBF Holding Company LLC equity | 2,987,639 |
| | 2,576,420 |
| 3,814.1 |
| | 3,518.9 |
|
Noncontrolling interest | 12,887 |
| | 12,513 |
| 10.9 |
| | 10.9 |
|
Total equity | 3,000,526 |
| | 2,588,933 |
| 3,825.0 |
| | 3,529.8 |
|
Total liabilities and equity | $ | 7,182,637 |
| | $ | 6,566,897 |
| $ | 9,020.8 |
| | $ | 7,213.5 |
|
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)millions)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
Revenues | $ | 5,475,816 |
| | $ | 4,508,613 |
| | $ | 15,239,265 |
| | $ | 11,164,571 |
| $ | 5,208.7 |
| | $ | 5,799.6 |
|
| | | | | | | | | | |
Cost and expenses: | | | | | | | | | | |
Cost of products and other | 4,411,809 |
| | 3,904,258 |
| | 13,326,396 |
| | 9,634,989 |
| 4,276.2 |
| | 5,189.6 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 389,591 |
| | 404,045 |
| | 1,225,014 |
| | 972,223 |
| 453.4 |
| | 411.4 |
|
Depreciation and amortization expense | 70,338 |
| | 51,336 |
| | 181,238 |
| | 151,473 |
| 94.3 |
| | 76.8 |
|
Cost of sales | 4,871,738 |
| | 4,359,639 |
| | 14,732,648 |
| | 10,758,685 |
| 4,823.9 |
| | 5,677.8 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 54,693 |
| | 39,912 |
| | 130,092 |
| | 111,272 |
| 51.2 |
| | 58.3 |
|
Depreciation and amortization expense | 2,572 |
| | 1,342 |
| | 10,355 |
| | 4,417 |
| 2.8 |
| | 2.7 |
|
Equity income in investee | (3,799 | ) | | (1,621 | ) | | (11,218 | ) | | (1,621 | ) | (4.7 | ) | | (4.0 | ) |
Loss on sale of assets | 28 |
| | 8,159 |
| | 940 |
| | 11,381 |
| — |
| | 0.1 |
|
Total cost and expenses | 4,925,232 |
| | 4,407,431 |
| | 14,862,817 |
| | 10,884,134 |
| 4,873.2 |
| | 5,734.9 |
|
| | | | | | | | | | |
Income from operations | 550,584 |
| | 101,182 |
| | 376,448 |
| | 280,437 |
| 335.5 |
| | 64.7 |
|
| | | | | | | | | | |
Other income (expenses): | | | | | | | | |
Other income (expense): | | | | |
Change in fair value of catalyst leases | 473 |
| | 77 |
| | (1,011 | ) | | (4,556 | ) | (3.1 | ) | | — |
|
Debt extinguishment costs | — |
| | — |
| | (25,451 | ) | | — |
| |
Interest expense, net | (29,269 | ) | | (33,896 | ) | | (92,782 | ) | | (98,446 | ) | (27.4 | ) | | (33.3 | ) |
Other non-service components of net periodic benefit cost | | (0.1 | ) | | 0.3 |
|
Income before income taxes | 521,788 |
| | 67,363 |
| | 257,204 |
| | 177,435 |
| 304.9 |
| | 31.7 |
|
Income tax (benefit) expense | (4,292 | ) | | 2,291 |
| | 2,040 |
| | 29,287 |
| |
Income tax benefit | | (7.2 | ) | | (0.7 | ) |
Net income | 526,080 |
| | 65,072 |
| | 255,164 |
| | 148,148 |
| 312.1 |
| | 32.4 |
|
Less: net (loss) income attributable to noncontrolling interests | (6 | ) | | 45 |
| | 374 |
| | 438 |
| |
Less: net income attributable to noncontrolling interests | | — |
| | — |
|
Net income attributable to PBF Holding Company LLC | $ | 526,086 |
| | $ | 65,027 |
| | $ | 254,790 |
| | $ | 147,710 |
| $ | 312.1 |
| | $ | 32.4 |
|
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)millions)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
Net income | $ | 526,080 |
| | $ | 65,072 |
| | $ | 255,164 |
| | $ | 148,148 |
| $ | 312.1 |
| | $ | 32.4 |
|
Other comprehensive income: | | | | | | | | | | |
Unrealized (loss) gain on available for sale securities | (1 | ) | | (76 | ) | | 76 |
| | 329 |
| |
Net gain on pension and other post-retirement benefits | 288 |
| | 502 |
| | 862 |
| | 1,134 |
| 0.2 |
| | 0.3 |
|
Total other comprehensive income | 287 |
| | 426 |
| | 938 |
| | 1,463 |
| 0.2 |
| | 0.3 |
|
Comprehensive income | 526,367 |
| | 65,498 |
| | 256,102 |
| | 149,611 |
| 312.3 |
| | 32.7 |
|
Less: comprehensive (loss) income attributable to noncontrolling interests | (6 | ) | | 45 |
| | 374 |
| | 438 |
| |
Less: comprehensive income attributable to noncontrolling interests | | — |
| | — |
|
Comprehensive income attributable to PBF Holding Company LLC | $ | 526,373 |
| | $ | 65,453 |
| | $ | 255,728 |
| | $ | 149,173 |
| $ | 312.3 |
| | $ | 32.7 |
|
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in millions)
|
| | | | | | | | | | | | | | | |
| Member’s Equity | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total Equity |
|
Balance, December 31, 2017 | $ | 2,359.7 |
| $ | (27.0 | ) | $ | 840.4 |
| $ | 10.8 |
| $ | 3,183.9 |
|
Stock-based compensation | 4.3 |
| — |
| — |
| — |
| 4.3 |
|
Net income | — |
| — |
| 32.4 |
| — |
| 32.4 |
|
Other comprehensive income | — |
| 0.3 |
| — |
| — |
| 0.3 |
|
Other | — |
| — |
| (1.2 | ) | — |
| (1.2 | ) |
Balance, March 31, 2018 | $ | 2,364.0 |
| $ | (26.7 | ) | $ | 871.6 |
| $ | 10.8 |
| $ | 3,219.7 |
|
|
| | | | | | | | | | | | | | | |
| Member’s Equity | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total Equity |
|
Balance, December 31, 2018 | $ | 2,652.5 |
| $ | (23.9 | ) | $ | 890.3 |
| $ | 10.9 |
| $ | 3,529.8 |
|
Member distributions | — |
| — |
| (23.0 | ) | — |
| (23.0 | ) |
Distribution of assets to PBF LLC | (0.3 | ) | — |
| — |
| — |
| (0.3 | ) |
Stock-based compensation | 6.2 |
| — |
| — |
| — |
| 6.2 |
|
Net income | — |
| — |
| 312.1 |
| — |
| 312.1 |
|
Other comprehensive income | — |
| 0.2 |
| — |
| — |
| 0.2 |
|
Balance, March 31, 2019 | $ | 2,658.4 |
| $ | (23.7 | ) | $ | 1,179.4 |
| $ | 10.9 |
| $ | 3,825.0 |
|
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)millions) | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | 2019 | | 2018 |
Cash flows from operating activities: | | | | | | |
Net income | $ | 255,164 |
| | $ | 148,148 |
| $ | 312.1 |
| | $ | 32.4 |
|
Adjustments to reconcile net income to net cash provided by operations: | | | | |
Adjustments to reconcile net income to net cash used in operating activities: | | | | |
Depreciation and amortization | 197,365 |
| | 162,565 |
| 98.7 |
| | 81.1 |
|
Stock-based compensation | 13,549 |
| | 12,658 |
| 7.1 |
| | 4.3 |
|
Change in fair value of catalyst leases | 1,011 |
| | 4,556 |
| 3.1 |
| | — |
|
Deferred income taxes | 641 |
| | 27,813 |
| (7.2 | ) | | (0.7 | ) |
Non-cash change in inventory repurchase obligations | | 14.2 |
| | 8.8 |
|
Non-cash lower of cost or market inventory adjustment | (97,943 | ) | | (320,833 | ) | (506.0 | ) | | (87.7 | ) |
Non-cash change in inventory repurchase obligations | (26,659 | ) | | 29,317 |
| |
Debt extinguishment costs | 25,451 |
| | — |
| |
Pension and other post-retirement benefit costs | 31,682 |
| | 25,894 |
| 11.2 |
| | 11.8 |
|
Income from equity method investee | (11,218 | ) | | (1,621 | ) | (4.7 | ) | | (4.0 | ) |
Distributions from equity method investee | 16,897 |
| | — |
| 4.7 |
| | 4.0 |
|
Loss on sale of assets | 940 |
| | 11,381 |
| — |
| | 0.1 |
|
| | | | | | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | (159,026 | ) | | (194,898 | ) | (152.7 | ) | | 121.4 |
|
Due to/from affiliates | (2,318 | ) | | 8,194 |
| 10.3 |
| | (5.4 | ) |
Inventories | (349,189 | ) | | 54,052 |
| (194.7 | ) | | (278.3 | ) |
Prepaid expense and other current assets | (4,107 | ) | | (20,203 | ) | |
Prepaid and other current assets | | (70.0 | ) | | (36.2 | ) |
Accounts payable | (103,069 | ) | | 50,297 |
| 40.6 |
| | 32.2 |
|
Accrued expenses | 401,674 |
| | 308,047 |
| 213.3 |
| | (22.9 | ) |
Deferred revenue | (9,044 | ) | | 8,029 |
| 46.5 |
| | (2.0 | ) |
Other assets and liabilities | (57,387 | ) | | (21,880 | ) | (11.5 | ) | | (6.0 | ) |
Net cash provided by operations | 124,414 |
| | 291,516 |
| |
Net cash used in operating activities | | $ | (185.0 | ) | | $ | (147.1 | ) |
| | | | | | |
Cash flows from investing activities: | | | | | | |
Acquisition of Torrance refinery and related logistics assets | — |
| | (971,932 | ) | |
Expenditures for property, plant and equipment | (211,224 | ) | | (187,743 | ) | (94.2 | ) | | (21.0 | ) |
Expenditures for deferred turnaround costs | (341,598 | ) | | (138,936 | ) | (133.0 | ) | | (58.8 | ) |
Expenditures for other assets | (31,096 | ) | | (27,735 | ) | (22.2 | ) | | (9.5 | ) |
Chalmette Acquisition working capital settlement | — |
| | (2,659 | ) | |
Proceeds from sale of assets | — |
| | 13,030 |
| |
Equity method investment - return of capital | 451 |
| | — |
| 1.8 |
| | 1.0 |
|
Net cash used in investing activities | $ | (583,467 | ) | | $ | (1,315,975 | ) | $ | (247.6 | ) | | $ | (88.3 | ) |
| | | | |
PBF HOLDING COMPANY LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)millions)
| | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | 2019 | | 2018 |
Cash flows from financing activities: | | | | | | |
Contributions from PBF LLC | $ | 97,000 |
| | $ | 175,000 |
| |
Distributions to members | (39,315 | ) | | (92,503 | ) | $ | (23.0 | ) | | $ | — |
|
Proceeds from affiliate notes payable | — |
| | 635 |
| |
Repayment of affiliate notes payable | — |
| | (517 | ) | |
Proceeds from 2025 7.25% Senior Notes | 725,000 |
| | — |
| |
Cash paid to extinguish 2020 8.25% Senior Secured Notes | (690,209 | ) | | — |
| |
Repayments of PBF Rail Term Loan | (4,959 | ) | | — |
| (1.7 | ) | | (1.7 | ) |
Repayments of Rail Facility revolver borrowings | — |
| | (11,457 | ) | |
Proceeds from revolver borrowings | 490,000 |
| | 550,000 |
| 575.0 |
| | — |
|
Repayments of revolver borrowings | (490,000 | ) | | — |
| (325.0 | ) | | — |
|
Proceeds from catalyst lease | — |
| | 7,927 |
| |
Deferred financing costs and other | (13,424 | ) | | — |
| |
Repayment of note payable | | — |
| | (1.2 | ) |
Proceeds from insurance premium financing | | 30.2 |
| | 27.9 |
|
Net cash provided by financing activities | 74,093 |
| | 629,085 |
| $ | 255.5 |
| | $ | 25.0 |
|
| | | | | | |
Net decrease in cash and cash equivalents | (384,960 | ) | | (395,374 | ) | (177.1 | ) | | (210.4 | ) |
Cash and cash equivalents, beginning of period | 626,705 |
| | 914,749 |
| 561.7 |
| | 526.2 |
|
Cash and cash equivalents, end of period | $ | 241,745 |
| | $ | 519,375 |
| $ | 384.6 |
| | $ | 315.8 |
|
| | | | | | |
Supplemental cash flow disclosures | | | | | | |
Non-cash activities: | | | | | | |
Accrued and unpaid capital expenditures | | $ | 118.1 |
| | $ | 129.0 |
|
Assets acquired under operating leases | | 936.6 |
| | — |
|
Distribution of assets to PBF Energy Company LLC | $ | 25,547 |
| | $ | 173,426 |
| 0.3 |
| | — |
|
Accrued and unpaid capital expenditures | 33,120 |
| | 16,813 |
| |
Conversion of affiliate notes payable to capital contribution | 86,298 |
| | — |
| |
Notes payable issued for purchase of property, plant and equipment | 6,831 |
| | — |
| |
See notes to condensed consolidated financial statements.
9
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
PBF Holding Company LLC (“PBF Holding” or the “Company”), a Delaware limited liability company, and PBF Finance Corporation (“PBF Finance”), a wholly-owned subsidiary of PBF Holding, together with itsthe Company’s consolidated subsidiaries, owns and operates oil refineries and related facilities in North America. PBF Holding is a wholly-owned subsidiary of PBF Energy Company LLC (“PBF LLC”). PBF Energy Inc. (“PBF Energy”) is the sole managing member of, and owner of an equity interest representing approximately 96.6%99.0% of the outstanding economic interest in, PBF LLC as of September 30, 2017.March 31, 2019. PBF Investments LLC (“PBF Investments”), Toledo Refining Company LLC (“Toledo Refining” or “TRC”), Paulsboro Refining Company LLC (“Paulsboro Refining” or “PRC”), Delaware City Refining Company LLC (“Delaware City Refining” or “DCR”), Chalmette Refining, L.L.C. (“Chalmette Refining”), PBF Western Region LLC (“PBF Western Region”), Torrance Refining Company LLC (“Torrance Refining”) and Torrance Logistics Company LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned subsidiaries of PBF Holding. Collectively, PBF Holding and its consolidated subsidiaries are referred to hereinafter as the “Company”.
On May 14, 2014, PBF Logistics LP (“PBFX”), a Delaware master limited partnership, completed its initial public offering (the “PBFX Offering”). PBF Logistics GP LLC (“PBF GP”) serves as the general partner of PBFX.PBF Logistics LP (“PBFX”). PBF GP is wholly-owned by PBF LLC. In connection with the PBFX Offering, PBF Holding contributed to PBFX the assets and liabilities of certain crude oil terminaling assets. In a series of additional transactions, subsequent to the PBFX Offering, PBF Holding distributed certain additional assets to PBF LLC, which in turn contributed those assets to PBFX (as described in “Note 84 - Related Party Transactions”).
Substantially all of the Company’s operations are in the United States. As of September 30, 2017,March 31, 2019, the Company’s oil refineries are all engaged in the refining of crude oil and other feedstocks into petroleum products, and have been aggregated to form one reportable segment. To generate earnings and cash flows from operations, the Company is primarily dependent upon processing crude oil and selling refined petroleum products at margins sufficient to cover fixed and variable costs and other expenses. Crude oil and refined petroleum products are commodities; and factors that are largely out of the Company’s control can cause prices to vary over time. The resulting potential margin volatility can have a material effect on the Company’s financial position, earnings and cash flow.flows.
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 statementsCondensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim condensed consolidated financial statementsCondensed Consolidated Financial Statements should be read in conjunction with the PBF Holding Company LLC and PBF Finance Corporation financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016 of PBF Holding Company LLC and PBF Finance Corporation.2018. The results of operations for the three and nine months ended September 30, 2017March 31, 2019 are not necessarily indicative of the results to be expected for the full year.
Change in Presentation
During the third quarter of 2017,In 2019, the Company determined that it would revisehas changed its presentation from thousands to millions, as applicable, and as a result, any necessary rounding adjustments have been made to prior year disclosed amounts.
Recently Adopted Accounting Guidance
In February 2016, the presentationFinancial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain line itemspractical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on its consolidated statements of operations to enhance its disclosure under the requirements of Rule 5-03 of Regulation S-X. The revised presentation is comprised of the inclusion of a subtotal within costsan index or rate and expenses referred to as “Cost of sales” and the reclassification of total depreciation and amortization expense between such amounts attributable to cost of sales and other operating costs and expenses. The amount of depreciation andcertain
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
amortization expense that is presented separately within the “Cost of Sales” subtotal represents depreciation and amortization of refining and logistics assets that are integral to the refinery production process.
The historical comparative information has been revised to conform to the current presentation. This revised presentation does not have an effect on the Company’s historical consolidated income from operations or net income, nor does it have any impact on its consolidated balance sheets, statements of comprehensive income or statements of cash flows. Presented below is a summary of the effects of this revised presentation on the Company’s historical statements of operations for the three and nine month periods ended September 30, 2016 (in thousands):
|
| | | | | | | | | | |
| Three Months ended September 30, 2016 |
| As Previously Reported | | Adjustments | | As Reclassified |
Cost and expenses: | | | | | |
Cost of products and other | $ | 3,904,258 |
| | — |
| | $ | 3,904,258 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 404,045 |
| | — |
| | 404,045 |
|
Depreciation and amortization expense | — |
| | 51,336 |
| | 51,336 |
|
Cost of sales | | | | | 4,359,639 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 39,912 |
| | — |
| | 39,912 |
|
Depreciation and amortization expense | 52,678 |
| | (51,336) |
| | 1,342 |
|
Equity income in investee | (1,621) |
| | — |
| | (1,621) |
|
Loss on sale of assets | 8,159 |
| | — |
| | 8,159 |
|
Total cost and expenses | $ | 4,407,431 |
| | | | $ | 4,407,431 |
|
|
| | | | | | | | | | |
| Nine Months ended September 30, 2016 |
| As Previously Reported | | Adjustments | | As Reclassified |
Cost and expenses: | | | | | |
Cost of products and other | $ | 9,634,989 |
| | — |
| | $ | 9,634,989 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 972,223 |
| | — |
| | 972,223 |
|
Depreciation and amortization expense | — |
| | 151,473 |
| | 151,473 |
|
Cost of sales | | | | | 10,758,685 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 111,272 |
| | — |
| | 111,272 |
|
Depreciation and amortization expense | 155,890 |
| | (151,473) |
| | 4,417 |
|
Equity income in investee | (1,621) |
| | — |
| | (1,621) |
|
Loss on sale of assets | 11,381 |
| | — |
| | 11,381 |
|
Total cost and expenses | $ | 10,884,134 |
| | | | $ | 10,884,134 |
|
Cost Classifications
Cost of products and other consists of the cost of crude oil, other feedstocks, blendstocks and purchased refined products and the related in-bound freight and transportation costs.
Operating expenses (excluding depreciation and amortization) consists of direct costs of labor, maintenance and services, utilities, property taxes, environmental compliance costs and other direct operating costs incurred in connection with our refining operations. Such expenses exclude depreciation related to refining and logistics assets
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
that are integral to the refinery production process, which is presented separately as Depreciation and amortization expense as a component of Cost of sales on the Company’s condensed consolidated statements of operations.
Reclassification
Certain amounts previously reported in the Company's condensed consolidated financial statements for prior periods have been reclassified to conform to the 2017 presentation. These reclassifications, in addition to the changes in “Cost and expenses” described above, include certain details about accrued expenses in that footnote.
Recently Adopted Accounting Guidance
Effective January 1, 2017, the Company adopted Accounting Standard Update (“ASU”) No. 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the FASB Emerging Issues Task Force)” (“transition adjustments. ASU 2016-06”). ASU 2016-6 was issued in March 2016 by the Financial Accounting Standards Board (“FASB”) 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 Company’s adoption of this guidance did not materially impact its consolidated financial statements.
Effective January 1, 2017, the Company adopted ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 was issued by the FASB in March 2016 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 could prior to its adoption for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company’s adoption of this guidance did not materially impact its consolidated financial statements.
Effective January 1, 2017, the Company adopted ASU No. 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (“ASU 2016-17”). ASU 2016-17 was issued by the FASB in October 2016 to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (“VIE”) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments in this ASU do not change the characteristics of a primary beneficiary in current GAAP. The amendments in this ASU require that a reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity. The Company’s adoption of this guidance did not materially impact its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”), which provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. Under ASU 2017-01, it is expected that the definition of a business will be narrowed and more consistently applied. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this ASU should be applied prospectively on or after the effective date. Early adoption of ASU 2017-01 is permitted and the Company early adopted the new standard in its consolidated financial statements and related disclosures effective January 1, 2017. The Company’s adoption of this guidance did not materially impact its consolidated financial statements.
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
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
Contracts with Customers” (“ASU 2014-09”) for all entities by one year. Additional ASUs have been issued in 2016 and 2017 that provide certain implementation guidance related to ASU 2014-09 (collectively, the Company refers to ASU 2014-092016-02 and these additional ASUs are now codified as the “Updated Revenue Recognition Guidance”Accounting Standards Codification Standard 842 - “Leases” (“ASC 842”). The Updated Revenue Recognition Guidance will replace most existing revenue recognitionASC 842 supersedes the lease accounting 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 modified retrospective 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 has established a working group to assess the Updated Revenue Recognition Guidance, including its impact on the Company’s business processes, accounting systems, controls and financial statement disclosures. The Company will adopt this new standard effective January 1, 2018, using the modified retrospective application. Under that method, the cumulative effect of initially applying the standard is recognized as an adjustment to the opening balance of retained earnings, and revenues reported in the periods prior to the date of adoption are not changed. The working group is progressing through its implementation plan and continues to evaluate the impact of this new standard on the Company’s consolidated financial statements and related disclosures. Additionally, the Company has begun training the relevant staff at its corporate headquarters and refineries on the Updated Revenue Recognition Guidance, including the potential impacts on internal reporting and disclosure requirements. Although the Company’s analysis of the new standard is still in process and interpretative and industry specific guidance is still developing, based on the results to date, we have reached tentative conclusions for most contract types and do not believe revenue recognition patterns will change materially. However, it is expected that the new standard will have some impact on presentation and disclosures in its financial statements and internal controls.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”Accounting Standards Codification 840 “Leases” (“ASU 2016-02”ASC 840”), 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 elected to utilize the “package” of three expedients, as defined in ASC 842, which retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company also has established a working groupelected to study and lead implementationnot evaluate land easements that existed as of, or expired before, adoption of the new guidancestandard. The Company’s Condensed Consolidated Financial Statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in ASU 2016-02. This working group was formed during 2016 and has begunaccordance with the processCompany’s historical accounting policy. As of compiling a central repository for all leases entered into by the Company and its subsidiaries for further analysis as thedate of implementation project progresses. The Company will not early adopt this new guidance. The working group continues to evaluateon January 1, 2019, the impact of this new standard on its consolidated financial statements and related disclosures. At this time, the Company has identified thatadoption of ASC 842 resulted in the most significant impactsrecognition of this new guidance will be to bring nearly all leases on its balance sheet with “righta right of use assets”asset and “leaselease payable obligation liabilities” as well as accelerating the interest expense component of financing leases. While the assessment of the impacts arising from this standard is progressing, it remains in its early stages. Accordingly, the Company has not fully determined the impacts on its business processes, controls or financial statement disclosures.
In March 2017, the FASB issued ASU No. 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which provides guidance to improve the reporting of net benefit cost in the income statement and on the components eligible for capitalization in assets. UnderCompany’s Condensed Consolidated Balance Sheets of approximately $853.9 million, of which $604.4 million is attributable to leases with affiliates. As the new guidance, employers will presentright of use asset and the service cost component of net periodic benefit cost inlease payable obligation were the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Additionally, under this guidance, employers will present the other componentsupon adoption of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. Employers will apply the guidanceASC 842, there was no cumulative effect impact on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The guidance includes a practical expedient allowing entities to estimate amountsCompany’s retained earnings. See “Note 6 - Leases” for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan note to the financial statements. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company does not expect the
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
adoption of this new standard to have a material impact on its consolidated financial statements and related disclosures.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which provides guidance to increase clarity and reduce both diversity in practice and cost and complexity when applying the existing accounting guidance on changes to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 require an entity to account for the effects of a modification unless all the following are met: (i) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The guidance in ASU 2017-09 should be applied prospectively. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company will apply the guidance prospectively for any modifications to its stock compensation plans occurring after the effective date of the new standard.further details.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The amendments in ASU 2017-12 more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to bothin the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in theconsolidated financial statements. The amendments in ASU 2017-12 address specific limitations in current GAAP by expandingexpand the ability to hedge accounting for both nonfinancial and financial risk components, and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Thus, the amendments in ASU 2017-12 will enable an entity to better portray the economic results of hedging activities for certain fair value and cash flow hedges and will avoid mismatches in earnings by allowing for greater precision when measuring changesreduce complexity in fair value hedges of interest rate risk, eliminate the hedged item forrequirement to separately measure and report hedge ineffectiveness, and eases certain fair value hedges. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements.effectiveness assessment requirements. The guidance in ASU 2017-12 concerning amendments to cash flow and net investment hedge relationships that exist on the date of adoption should bewas applied using a modified retrospective approach (i.e., with a cumulative effect adjustment recorded to the opening balance of retained earnings as of the initial application date).approach. The guidance in ASU 2017-12 also providesprovided transition relief to make it easier for entities to apply certain amendments to existing hedges (including fair value hedges) where the hedge documentation needs to be modified. The presentation and disclosure requirements of ASU 2017-12 were applied prospectively. The Company adopted the amendments in this ASU effective January 1, 2019, which did not have a material impact on its Condensed Consolidated Financial Statements and related disclosures.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Targeted Improvements to Non-employee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. As a result, non-employee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. In addition, ASU 2018-07 also clarifies that any share-based payment awards issued to customers should be applied prospectively.evaluated under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company adopted the amendments in this ASU effective January 1, 2019, which did not have a material impact on its Condensed Consolidated Financial Statements and related disclosures.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)”, to improve the effectiveness of benefit plan disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Additionally, the amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for annual periods beginningfiscal years ending after December 15, 2018, including interim periods within those annual periods.2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.
2. ACQUISITIONS
Torrance Acquisition
On July 1, 2016, the Company acquired from ExxonMobil Oil Corporation and its subsidiary, Mobil Pacific Pipe Line Company, the Torrance refinery and related logistics assets (collectively, the “Torrance Acquisition”). The Torrance refinery, located in Torrance, California, is a high-conversion, delayed-coking refinery. 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 provided the Company with a broader more diversified asset base and increased the number of operating refineries from four to five and expanded the Company’s combined crude oil throughput capacity. The acquisition also provided the Company with a presence in the PADD 5 market.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
In addition to refining assets, the transaction included 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 crude gathering and transportation system which delivers San Joaquin Valley crude oil directly from the field to the refinery. Additionally, included in the transaction were 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 aggregate purchase price for the Torrance Acquisition was $521,350 in cash after post-closing purchase price adjustments, plus final working capital of $450,582. In addition, the Company assumed certain pre-existing environmental and regulatory emission credit obligations in connection with the Torrance Acquisition. The transaction was financed through a combination of cash on hand, including proceeds from certain PBF Energy equity offerings and borrowings under the Company’s asset based revolving credit agreement (the “Revolving Loan”).
The Company accounted for the Torrance Acquisition as a business combination under GAAP whereby the Company recognizes assets acquired and liabilities assumed in an acquisition at their estimated fair values as of the date of acquisition. The final purchase price and fair value allocation were completed as of June 30, 2017. During the measurement period, which ended in June 2017, adjustments were made to the Company’s preliminary fair value estimates related primarily to Property, plant and equipment and Other long-term liabilities reflecting the finalization of the Company’s assessment of the costs and duration of certain assumed pre-existing environmental obligations.
The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:
|
| | | |
| Purchase Price |
Gross purchase price | $ | 537,500 |
|
Working capital | 450,582 |
|
Post close purchase price adjustments | (16,150 | ) |
Total consideration | $ | 971,932 |
|
The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
|
| | | |
| Fair Value Allocation |
Inventories | $ | 404,542 |
|
Prepaid expenses and other current assets | 982 |
|
Property, plant and equipment | 704,633 |
|
Deferred charges and other assets, net | 68,053 |
|
Accounts payable | (2,688 | ) |
Accrued expenses | (64,137 | ) |
Other long-term liabilities | (139,453 | ) |
Fair value of net assets acquired | $ | 971,932 |
|
The Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2017 include the results of operations of the Torrance refinery and related logistics assets subsequent to the Torrance Acquisition. The Company’s condensed consolidated financial statements for the prior year include the results of operations of such assets from the date of the Torrance Acquisition on July 1, 2016 to September 30, 2016 during which period the Torrance refinery and related logistics assets contributed revenues of $928,225 and net income of $51,457. On an unaudited pro forma basis, the revenues and net income of the Company assuming the Torrance Acquisition had occurred on January 1, 2015, are shown below. The unaudited pro forma information does not
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
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 attributable to the Torrance Acquisition and interest expense associated with the related financing.
|
| | | |
| Nine Months Ended September 30, 2016 |
Pro forma revenues | $ | 12,243,582 |
|
Pro forma net loss attributable to PBF Holding Company LLC | $ | (60,908 | ) |
The unaudited amount of revenues and net loss above have been calculated after conforming accounting policies of the Torrance refinery and related logistics assets to those of the Company and certain one-time adjustments.
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”). While the Company’s condensed consolidated financial statements for both the three and nine months ended September 30, 2017 and 2016 include the results of operations of Chalmette Refining, the final working capital settlement for the Chalmette Acquisition was finalized in the first quarter of 2016. Additionally, certain acquisition related costs for the Chalmette Acquisition were recorded in the first quarter of 2016.
Acquisition Expenses
The Company incurred acquisition related costs consisting primarily of consulting and legal expenses related to completed, pending and non-consummated acquisitions. These costs were $22 and $488 in the three and nine months ended September 30, 2017, respectively, and $3,912 and $13,622 in the three and nine months ended September 30, 2016, respectively. These costs are included in the condensed consolidated statements of operations in General and administrative expenses.
3.2. INVENTORIES
Inventories consisted of the following:
|
| | | | | | | | | | | |
September 30, 2017 |
| Titled Inventory | | Inventory Intermediation Arrangements | | Total |
Crude oil and feedstocks | $ | 1,302,162 |
| | $ | — |
| | $ | 1,302,162 |
|
Refined products and blendstocks | 1,065,608 |
| | 343,904 |
| | 1,409,512 |
|
Warehouse stock and other | 97,063 |
| | — |
| | 97,063 |
|
| $ | 2,464,833 |
| | $ | 343,904 |
| | $ | 2,808,737 |
|
Lower of cost or market adjustment | (404,227 | ) | | (93,818 | ) | | (498,045 | ) |
Total inventories | $ | 2,060,606 |
| | $ | 250,086 |
| | $ | 2,310,692 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
|
| | | | | | | | | | | |
March 31, 2019 |
(in millions) | Titled Inventory | | Inventory Intermediation Agreements | | Total |
Crude oil and feedstocks | $ | 1,156.2 |
| | $ | 69.9 |
| | $ | 1,226.1 |
|
Refined products and blendstocks | 1,067.1 |
| | 308.0 |
| | 1,375.1 |
|
Warehouse stock and other | 109.4 |
| | — |
| | 109.4 |
|
| $ | 2,332.7 |
| | $ | 377.9 |
| | $ | 2,710.6 |
|
Lower of cost or market adjustment | (76.8 | ) | | (69.0 | ) | | (145.8 | ) |
Total inventories | $ | 2,255.9 |
| | $ | 308.9 |
| | $ | 2,564.8 |
|
| | December 31, 2016 | |
| Titled Inventory | | Inventory Intermediation Arrangements | | Total | |
December 31, 2018 | | December 31, 2018 |
(in millions) | | Titled Inventory | | Inventory Intermediation Agreements | | Total |
Crude oil and feedstocks | $ | 1,102,007 |
| | $ | — |
| | $ | 1,102,007 |
| $ | 1,044.8 |
| | $ | — |
| | $ | 1,044.8 |
|
Refined products and blendstocks | 915,397 |
| | 352,464 |
| | 1,267,861 |
| 1,026.9 |
| | 334.8 |
| | 1,361.7 |
|
Warehouse stock and other | 89,680 |
| | — |
| | 89,680 |
| 109.4 |
| | — |
| | 109.4 |
|
| $ | 2,107,084 |
| | $ | 352,464 |
| | $ | 2,459,548 |
| $ | 2,181.1 |
| | $ | 334.8 |
| | $ | 2,515.9 |
|
Lower of cost or market adjustment | (492,415 | ) | | (103,573 | ) | | (595,988 | ) | (557.2 | ) | | (94.6 | ) | | (651.8 | ) |
Total inventories | $ | 1,614,669 |
| | $ | 248,891 |
| | $ | 1,863,560 |
| $ | 1,623.9 |
| | $ | 240.2 |
| | $ | 1,864.1 |
|
Inventory under inventory intermediation arrangements includedagreements includes crude oil and certain light finished products sold to counterparties and stored in the Paulsboro and Delaware City refineries’ storage facilities in connection with the amended and restated inventory intermediation agreements (as amended, in the second and third quartersfirst quarter of 2017,2019, the “A&R“Inventory Intermediation Agreements”) with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”). This inventory is held in the Company’s storage tanks at the Delaware City and Paulsboro refineries and at PBFX’s East Coast Storage Assets (the “PBFX East Coast Storage Facility”, and together with the Company’s storage tanks at the Delaware City and Paulsboro refineries, the “Storage Tanks”).
During the three months ended September 30, 2017, the Company recorded an adjustment to value its inventories to the lower of cost or market (“LCM”) which increased both operating income and net income by $265,077 reflecting the net change in the lower of cost or market inventory reserve from $763,122 at June 30, 2017 to $498,045 at September 30, 2017. During the nine months ended September 30, 2017,March 31, 2019, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased both operating income and net income by $97,943$506.0 million, reflecting the net change in the lower of cost or market (“LCM”) inventory reserve from $595,988$651.8 million at December 31, 20162018 to $498,045$145.8 million at September 30, 2017.March 31, 2019.
During the three months ended September 30, 2016,March 31, 2018, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased both operating income and net income by $103,990$87.7 million, reflecting the net change in the lower of cost or market inventoryLCM reserve from $900,493 at June 30, 2016 to $796,503 at September 30, 2016. During the nine months ended September 30, 2016, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased both operating income and net income by $320,833 reflecting the net change in the lower of cost or market inventory reserve from $1,117,336$300.5 million at December 31, 20152017 to $796,503$212.8 million at September 30, 2016.March 31, 2018.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
4.3. ACCRUED EXPENSES
Accrued expenses consisted of the following:
| | | September 30, 2017 | | December 31, 2016 | |
(in millions) | | March 31, 2019 | | December 31, 2018 |
Inventory-related accruals | $ | 984,702 |
| | $ | 810,027 |
| $ | 1,124.3 |
| | $ | 846.3 |
|
Inventory intermediation arrangements | 282,640 |
| | 225,524 |
| |
Inventory intermediation agreements | | 294.6 |
| | 249.4 |
|
Excise and sales tax payable | | 129.3 |
| | 149.4 |
|
Accrued capital expenditures | | 66.7 |
| | 59.9 |
|
Accrued transportation costs | | 62.3 |
| | 53.6 |
|
Accrued utilities | | 40.0 |
| | 49.8 |
|
Accrued interest | | 28.8 |
| | 6.8 |
|
Renewable energy credit and emissions obligations | 138,717 |
| | 70,158 |
| 24.3 |
| | 27.1 |
|
Excise and sales tax payable | 91,042 |
| | 86,046 |
| |
Accrued transportation costs | 90,933 |
| | 89,830 |
| |
Accrued salaries and benefits | | 15.4 |
| | 89.3 |
|
Environmental liabilities | | 8.8 |
| | 6.5 |
|
Accrued refinery maintenance and support costs | | 8.3 |
| | 19.0 |
|
Customer deposits | 45,548 |
| | 9,215 |
| 0.7 |
| | 5.6 |
|
Accrued utilities | 36,274 |
| | 44,190 |
| |
Accrued refinery maintenance and support costs | 36,098 |
| | 28,670 |
| |
Accrued salaries and benefits | 32,709 |
| | 17,466 |
| |
Accrued interest | 30,987 |
| | 28,934 |
| |
Accrued capital expenditures | 18,933 |
| | 33,610 |
| |
Environmental liabilities | 8,295 |
| | 8,882 |
| |
Other | 12,693 |
| | 10,177 |
| 40.2 |
| | 16.3 |
|
Total accrued expenses | $ | 1,809,571 |
| | $ | 1,462,729 |
| $ | 1,843.7 |
| | $ | 1,579.0 |
|
The Company has the obligation to repurchase certain intermediatescrude oil, intermediate and finished products (the “Products”) that are held in the Company’s refinery storage tanks at the Delaware City and Paulsboro refineriesStorage Tanks in accordance with the A&RInventory Intermediation Agreements with J. Aron. As of September 30, 2017March 31, 2019 and December 31, 2016,2018, a liability is recognized for the inventory intermediation arrangementsInventory Intermediation Agreements and is recorded at market price for the J. Aron owned inventory held in the Company’s storage tanksStorage Tanks under the A&RInventory Intermediation Agreements, with any change in the market price being recorded in Cost of products and other.
The Company is subject to obligations to purchase Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuels Standard. The Company’s overall RINs obligation is based on a percentage of domestic shipments of on-road fuels as established by the Environmental Protection Agency (“EPA”). To the degree the Company is unable to blend the required amount of biofuels to satisfy its RINs obligation, RINs must be purchased on the open market to avoid penalties and fines. The Company records its RINs obligation on a net basis in Accrued expenses when its RINs liability is greater than the amount of RINs earned and purchased in a given period and in Prepaid expenses and other current assets when the amount of RINs earned and purchased is greater than the RINs liability. In addition, the Company is subject to obligations to comply with federal and state legislative and regulatory measures, including regulations in the state of California pursuant to Assembly Bill 32 (“AB32”), to address environmental compliance and greenhouse gas and other emissions, including AB32 in California.emissions. These requirements include incremental costs to operate and maintain our facilities as well as to implement and manage new emission controls and programs, which have contributed to the increase in accrued environmental liabilities and emission obligations following the Torrance Acquisition.programs. Renewable energy credit and emissions obligations fluctuate with the volume of applicable product sales and timing of credit purchases.
5. DEBT
Senior Notes
On May 30, 2017, PBF Holding entered into an Indenture (the “Indenture”) among PBF Holding and PBF Holding’s wholly-owned subsidiary, PBF Finance Corporation (“PBF Finance” and, together with PBF Holding, the “Issuers”), the guarantors named therein (collectively the “Guarantors”) and Wilmington Trust, National Association as Trustee, under which the Issuers issued $725,000 in aggregate principal amount of 7.25% senior
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
notes due 2025 (the “2025 Senior Notes”). The Issuers received net proceeds of approximately $711,576 from the offering after deducting the initial purchasers’ discount and estimated offering expenses. The Company used the net proceeds to fund the cash tender offer (the “Tender Offer”) for any and all of its outstanding 8.25% senior secured notes due 2020 (the “2020 Senior Secured Notes”), to pay the related redemption price and accrued and unpaid interest for any 2020 Senior Secured Notes that remained outstanding after the completion of the Tender Offer, and for general corporate purposes. The difference between the carrying value of the 2020 Senior Secured Notes on the date they were reacquired and the amount for which they were reacquired has been classified as debt extinguishment costs in the condensed consolidated statements of operations.
The 2025 Senior Notes included a registration rights arrangement whereby the Company agreed to file with the SEC and use commercially reasonable efforts to consummate an offer to exchange the 2025 Senior Notes for an issue of registered notes with terms substantially identical to the notes not later than 365 days after the date of the original issuance of the notes. This registration statement was declared effective on October 18, 2017 and it is anticipated that the exchange will be consummated during the fourth quarter of 2017. As such, the Company does not anticipate it will have to transfer any consideration as a result of the registration rights agreement and thus no loss contingency was recorded.
The 2025 Senior Notes are guaranteed on a senior unsecured basis by substantially all of PBF Holding’s subsidiaries. The 2025 Senior Notes and guarantees are senior unsecured obligations and rank equal in right of payment with all of the Issuers’ and the Guarantors’ existing and future senior indebtedness, including PBF Holding’s Revolving Loan and the Issuers’ 7.00% senior notes due 2023 (the “2023 Senior Notes”). The 2025 Senior Notes and the guarantees rank senior in right of payment to the Issuers’ and the Guarantors’ existing and future indebtedness that is expressly subordinated in right of payment thereto. The 2025 Senior Notes and the guarantees are effectively subordinated to any of the Issuers’ and the Guarantors’ existing or future secured indebtedness (including the Revolving Loan) to the extent of the value of the collateral securing such indebtedness. The 2025 Senior Notes and the guarantees are structurally subordinated to any existing or future indebtedness and other obligations of the Issuers’ non-guarantor subsidiaries.
PBF Holding has optional redemption rights to repurchase all or a portion of the 2025 Senior Notes at varying prices no less than 100% of the principal amounts of the notes plus accrued and unpaid interest. The holders of the 2025 Senior Notes have repurchase options exercisable only upon a change in control, certain asset sale transactions, or in event of a default as defined in the Indenture. In addition, the 2025 Senior Notes contain customary terms, events of default and covenants for an issuer of non-investment grade debt securities that limit certain types of additional debt, equity issuances, and payments. Many of these covenants will cease to apply or will be modified if the 2025 Senior Notes are rated investment grade.
Upon the satisfaction and discharge of the 2020 Senior Secured Notes in connection with the closing of the Tender Offer and the redemption described above, a Collateral Fall-Away Event under the indenture governing the 2023 Senior Notes occurred on May 30, 2017, and the 2023 Senior Notes became unsecured and certain covenants were modified, as provided for in the indenture governing the 2023 Senior Notes and related documents.
Notes Payable
In connection with the purchase of a waste water treatment facility servicing the Toledo refinery completed on September 28, 2017, the Company issued a short-term promissory note payable in the amount of $6,831 due June 30, 2018. Payments of $403 on the note will be made monthly with a balloon payment of $3,200 due at maturity.
6. INCOME TAXES
PBF Holding is a limited liability company treated as a “flow-through” entity for income tax purposes. Accordingly, there is generally no benefit or provision for federal or state income tax in the PBF Holding financial statements apart from the income tax attributable to two subsidiaries acquired in connection with the acquisition of Chalmette Refining and the Company’s wholly-owned Canadian subsidiary, PBF Energy Limited (“PBF Ltd.”). The two
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
subsidiaries acquired in connection with the Chalmette Acquisition are treated as C-Corporations for income tax purposes.
The income tax provision (benefit) in the PBF Holding condensed consolidated financial statements of operations consists of the following:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Current income tax expense | | $ | 190 |
| | $ | 389 |
| | $ | 1,399 |
| | $ | 1,474 |
|
Deferred income tax (benefit) expense | | (4,482 | ) | | 1,902 |
| | 641 |
| | 27,813 |
|
Total income tax (benefit) expense | | $ | (4,292 | ) | | $ | 2,291 |
| | $ | 2,040 |
| | $ | 29,287 |
|
During the preparation of the financial statements for the first quarter of 2016, management determined that the deferred income tax liabilities for PBF Ltd. were understated for prior periods. For the three months ended March 31, 2016, the Company incurred $30,602 of deferred tax expense and $121 of current tax expense relating to a correction of prior periods.
7. AFFILIATE NOTES PAYABLE
PBF Holding has entered into affiliate notes payable with PBF Energy and PBF LLC with an interest rate of 2.5% and a five year term, which may be prepaid in whole or in part at any time, at the option of PBF Holding, without penalty or premium. Additional borrowings may be made by PBF Holding under such affiliate notes payable from time to time. In the fourth quarter of 2016, the notes were extended to 2021. Additionally, in the fourth quarter of 2016, PBF LLC converted $379,947 of the outstanding affiliate notes payable from PBF Holding to a capital contribution. In the first quarter of 2017, PBF LLC converted the full amount of outstanding affiliate notes payable from PBF Holding of $86,298 to a capital contribution. Therefore, as of September 30, 2017, PBF Holding had no outstanding affiliate notes payable with PBF Energy and PBF LLC ($86,298 outstanding as of December 31, 2016).
8.4. RELATED PARTY TRANSACTIONS
Transactions and Agreements with PBFX
PBF HoldingThe Company entered into agreements with PBFX that establish fees for certain general and administrative services, and operational and maintenance services provided by the Company to PBFX. In addition, the Company executed terminal, pipeline and storage services agreements with PBFX under which PBFX provides commercial transportation, terminaling, storage and pipeline services to the Company. These agreements with PBFX include the agreements set forth below:include:
Contribution Agreements
Immediately prior to the closing of certain contribution agreements, which PBF LLC entered into with PBFX (collectively referred to as the “Contribution Agreements”), PBF Holdingthe Company contributed certain assets to PBF LLC. PBF LLC in turn contributed those assets to PBFX pursuant to the Contribution Agreements. Certain proceeds received by PBF LLC from PBFX in accordance with the Contribution Agreements were subsequently contributed by PBF LLC to PBF Holding.
Pursuantthe Company. Refer to the Company’s 2018 Annual Report on Form 10-K (Note 10 - Related Party Transactions) for a more complete description of the Contribution AgreementAgreements with PBFX that were entered into on February 15, 2017, PBF Holding contributed all of the issued and outstanding limited liability company interests of Paulsboro Natural Gas Pipeline Company LLC (“PNGPC”)prior to PBF LLC. PBFX Operating Company LP (“PBFX Op Co”), PBFX’s wholly-owned subsidiary, in turn acquired the limited liability company interests in PNGPC from PBF LLC in connection with the Contribution Agreement effective February 28, 2017. PNGPC owns and operates an existing interstate natural gas pipeline which serves
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
PBF Holding's Paulsboro refinery (the “Paulsboro Natural Gas Pipeline”), which is subject to regulation by the Federal Energy Regulatory Commission (“FERC”). In connection with the PNGPC Contribution Agreement, PBFX constructed a new pipeline to replace the existing pipeline, which commenced services in August 2017.
In consideration for the PNGPC limited liability company interests, PBFX delivered to PBF LLC (i) an $11,600 intercompany promissory note in favor of Paulsboro Refining Company LLC, a wholly owned subsidiary of PBF Holding (the “Promissory Note”), (ii) an expansion rights and right of first refusal agreement in favor of PBF LLC with respect to the new pipeline and (iii) an assignment and assumption agreement with respect to certain outstanding litigation involving PNGPC and the existing pipeline.2019.
Commercial Agreements
In connectionPBFX currently derives a substantial majority of its revenue from long-term, fee-based commercial agreements with the Company relating to assets associated with the Contribution Agreements, PBF Holding entered into long-term, fee-based,the majority of which include minimum volume commitmentcommitments (“MVC”MVCs”) commercial agreements with PBFX.and are supported by contractual fee escalations for inflation adjustments and certain increases in operating costs. Under these agreements, PBFX provides various pipeline, rail and truck terminaling and storage services to PBF Holdingthe Company and PBF Holdingthe Company has committed, under certain of these agreements, to provide PBFX with minimum fees based on minimum monthly throughput volumes. The fees under each of these agreements are supported by contractual fee escalations for inflation adjustments and certain increases in operating costs. PBF HoldingCompany believes the terms and conditions under these agreements, as well as the Omnibus Agreement (as defined below) and the Services Agreement (as defined below) each with PBFX, are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services.
TheseRefer to the Company’s 2018 Annual Report on Form 10-K (Note 10 - Related Party Transactions) for a more complete description of the Company’s commercial agreements (as defined in the table below) with PBFX, include:
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
including those identified as leases, that were entered into prior to 2019. The following are commercial agreements entered into between the Company and PBFX during 2019:
|
| | | | | |
Service Agreements | Initiation Date | Initial Term | Renewals (a) | Minimum Volume CommitmentsMVC | Force Majeure |
TransportationAmended and Terminaling | | | | | |
Delaware CityRestated Rail Terminaling Services AgreementAgreements (b) | 5/8/2014 | 7 years, 8 months | 2 x 5N/A | 85,000125,000 barrels per day (“bpd”) | PBFX or PBF Holding or PBFX can declare |
Toledo Truck Unloading & Terminaling Services Agreement | 5/8/2014 | 7 years, 8 months | 2 x 5 | 5,500 bpd |
Delaware West Ladder Rack Terminaling Services Agreement | 10/1/2014 | 7 years, 3 months | 2 x 5 | 40,000 bpd |
Toledo Storage Facility Storage and Terminaling Services Agreement- Terminaling Facility | 12/12/2014 | 10 years | 2 x 5 | 4,400 bpd |
Delaware Pipeline Services Agreement | 5/15/2015 | 10 years, 8 months | 2 x 5 | 50,000 bpd |
Delaware Pipeline Services Agreement- Magellan Connection | 11/1/2016 | 2 years, 5 months | See note (c) | N/A | 14,500 bpd |
Delaware City Truck Loading Services Agreement- Gasoline | 5/15/2015 | 10 years, 8 months | 2 x 5 | 30,000 bpd |
Delaware City Truck Loading Services Agreement- LPGs | 5/15/2015 | 10 years, 8 months | 2 x 5 | 5,000 bpd |
East Coast Terminals Terminaling Services AgreementsAgreement (d) | 5/1/20161/2022 | Various (f) | Evergreen | 15,000 bpd (e) |
East Coast Terminals Tank Lease Agreements | 5/1/2016 | Various (f) | Evergreen | 350,000 barrels (c) |
Torrance Valley Pipeline Transportation Services Agreement- North Pipeline | 8/31/2016 | 104 years | 2 x 5 | 50,00095,000 bpd |
Torrance Valley Pipeline Transportation Services Agreement- South PipelineEast Coast Storage Assets Terminal Storage Agreement | 8/31/20161/1/2019 | 10 years | 2 x 5 | 70,000 bpd |
Torrance Valley Pipeline Transportation Services Agreement- Midway Storage Tank | 8/31/2016 | 10 years | 2 x 5 | 55,000 barrels (c) |
Torrance Valley Pipeline Transportation Services Agreement- Emidio Storage Tank | 8/31/2016 | 10 years | 2 x 5 | 900,000 barrels per month |
Torrance Valley Pipeline Transportation Services Agreement- Belridge Storage Tank | 8/31/2016 | 10 years | 2 x 5 | 770,000 barrels per month |
Paulsboro Natural Gas Pipeline Services Agreement (b) | 8/4/2017 | 158 years | Evergreen | 60,000 dekatherms per day |
Toledo Terminal Services Agreement (g) | 5/1/2016 | 1 year | Evergreen | N/A |
Storage | | | | | |
Toledo Storage Facility Storage and Terminaling Services Agreement- Storage Facility | 12/12/2014 | 10 years | 2 x 5 | 3,849,2712,953,725 barrels (c) | PBFX or PBF Holding can declare |
Chalmette Storage Agreement (d) | See note (d) | 10 years | 2 x 5 | 625,000 barrels(e) |
_______________________________________
| |
(a) | PBF HoldingThe Company has the option to extend the agreements for up to two additional five-year terms, as applicable. |
| |
(b) | In 2019, the Company amended (effective as of January 1, 2019) the existing Amended and Restated Rail Agreements between the Company and Delaware City Terminaling Company LLC (“DCTC”), a wholly- |
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
owned subsidiary of PBFX, for the inclusion of services through certain rail infrastructure at the PBFX East Coast Storage Facility.
| |
(b)(c) | In August 2017, PBFX’s new pipeline commenced service. Concurrentconnection with the commencementinclusion of operations,an additional destination at the Magellan connection under the Delaware Pipeline Services Agreement, Delaware Pipeline Company LLC (“DPC”), a new service agreement was entered into between PBF Holdingwholly-owned subsidiary of PBFX, and PNGPC.the Company (the “Delaware Pipeline Services Agreement”) agreed to a two-year, five-month MVC (the “Magellan MVC”) under the Delaware Pipeline Services Agreement. The Magellan MVC expired on March 31, 2019. |
| |
(c)(d) | The Delaware City Terminaling Services Agreement between DCTC and the Company will commence in 2022 subsequent to the expiration of the Amended and Restated Rail Agreements and includes additional services to be provided by PBFX as operator of other rail facilities owned by the Company’s subsidiaries. |
| |
(e) | Reflects the overall capacity as stipulated by the storage agreement. The storage MVC is subject to the effective operating capacity of each tank, which can be impacted by routine tank maintenance and other factors. |
| |
(d) | The Chalmette Storage Agreement was entered into on February 15, 2017 but commences at the earlier of November 1, 2017 or the completion of the Chalmette Storage Tank (as defined below), which is currently expected to be completed in November 2017. |
| |
(e) | The East Coast Terminals terminaling service agreements have no MVCs and are billed based on actual volumes throughput, other than a terminaling services agreement between the East Coast Terminals' Paulsboro, New Jersey location and PBF Holding with a 15,000 bpd MVC. |
| |
(f) | The East Coast Terminal related party agreements include varying term lengths, ranging from one to five years. |
| |
(g) | Subsequent to the Toledo Terminal Acquisition, the Toledo Terminal was added to the East Coast Terminals Terminaling Service Agreements. |
Other Agreements
In addition to the commercial agreements described above, at the closing of the PBFX Offering, PBFXCompany has entered into an omnibus agreement with PBFX, PBF GP and PBF LLC, which has been amended and restated in connection with the closing of certain of the contribution agreements with PBF GP, PBF LLC and PBF HoldingContribution Agreements (as amended, the “Omnibus Agreement”). The Omnibus AgreementThis agreement addresses the payment of an annual fee for the provision of various general and administrative services and reimbursement of salary and benefit costs for certain PBF Energy employees. The annual fee was increased to $6,900 per year effective as
Additionally, the Company and certain of January 1, 2017.
In connection with the PBFX Offering, PBFX alsoits subsidiaries have entered into an operation and management services and secondment agreement with PBF Holding and certain of its subsidiaries,PBFX (as amended, the “Services Agreement”), pursuant to which PBF Holdingthe Company and its subsidiaries provide PBFX with the personnel necessary for PBFX to perform its obligations under its commercial agreements. PBFX reimburses PBF Holdingthe Company for the use of such employees and the provision of certain infrastructure-related services to the extent applicable to its operations, including storm water discharge and waste water treatment, steam, potable water, access to certain roads and grounds, sanitary sewer access, electrical power, emergency response, filter press, fuel gas, API solids treatment, fire water and compressed air. On February 28, 2017, PBF Holding and PBFX entered into a fifth amended and restated services agreement (as amended, the “Services Agreement”) in connection with the PNGPC Contribution Agreement, resulting in an increase to the annual fee to $6,696. The Services Agreement will terminate upon the termination of the Omnibus Agreement, provided that PBFX may terminate any service on 30 days’upon 30-days’ notice.
In connectionSummary of Transactions with PBFX
A summary of transactions with PBFX is as follows:
|
| | | | | | | |
| Three Months Ended March 31, |
(in millions) | 2019 | | 2018 |
Reimbursements under affiliate agreements: | | | |
Services Agreement | $ | 2.1 |
| | $ | 1.7 |
|
Omnibus Agreement | 1.8 |
| | 1.7 |
|
Total expenses under affiliate agreements | 71.3 |
| | 60.9 |
|
Total reimbursements under the Chalmette StorageOmnibus Agreement PBF Holding’s subsidiary, Chalmette Refining, entered into a twenty-year lease forare included in General and administrative expenses and reimbursements under the premises upon which a new tank atServices Agreement and expenses under affiliate agreements are included in Cost of products and other in the Chalmette refinery (the “Chalmette Storage Tank”) will be located (the “Lease”) and a project management agreement (the “Project Management Agreement”) pursuant to which Chalmette Refining has managed the constructionCompany’s Condensed Consolidated Statements of the tank. The Lease can be extended by PBFX Op Co for two additional ten year terms.Operations.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
Summary of Transactions with PBFX
A summary of revenue and expense transactions with PBFX is as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues under affiliate agreements: | | | | | | | |
Services Agreement | $ | 1,639 |
| | $ | 1,280 |
| | $ | 4,918 |
| | $ | 3,523 |
|
Omnibus Agreement | 1,890 |
| | 1,201 |
| | 5,174 |
| | 3,460 |
|
Total expenses under affiliate agreements | 62,359 |
| | 43,842 |
| | 176,916 |
| | 118,356 |
|
9.5. COMMITMENTS AND CONTINGENCIES
Environmental Matters
The Company’s refineries, pipelines and related operations 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 Paulsboro environmental liability of $10,809$11.7 million recorded as of September 30, 2017March 31, 2019 ($10,79211.0 million as of December 31, 2016)2018) represents the present value of expected future costs discounted at a rate of 8.0%. The current portion of the environmental liability is recorded in Accrued expenses and the non-current portion is recorded in Other long-term liabilities. ThisAs of March 31, 2019, a portion of this liability is self-guaranteed by the Company.Company with the remainder being guaranteed through an irrevocable standby letter of credit issued by BNP Paribas.
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$20.0 million 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$75.0 million 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$3.9 million 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 30thirty years. Further, in connection with the acquisition of the Chalmette refinery, the Company purchased a ten year, $100,000$100.0 million environmental insurance policy to insure against unknown environmental liabilities at the refinery.
As of November 1, 2015, the Company acquired Chalmette Refining, which was in discussions with the Louisiana Department of Environmental Quality (“LDEQ”) to resolve self-reported deviations from refinery operations relating to certain Clean Air Act Title V permit conditions, limits and other requirements. LDEQ commenced an enforcement action against Chalmette Refining on November 14, 2014 by issuing a Consolidated Compliance Order and Notice of Potential Penalty (the “Order”) covering deviations from 2009 and 2010. Chalmette Refining and LDEQ subsequently entered into a dispute resolution agreement, the enforcement of which has been suspended while negotiations are ongoing, which may include the resolution of deviations outside the periods covered by the
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
Order. In February 2017, Chalmette Refining and the LDEQ met to resolve the issues under the Order, including the assessment of an administrative penalty against Chalmette Refining. Although a resolution has not been finalized, the administrative penalty is anticipated to be approximately $700, including beneficial environmental projects. To the extent the administrative penalty exceeds such amount, it is not expected to be material to the Company.
On December 23, 2016, the Delaware City refinery received a Notice of Violation (“NOV”) from DNREC concerning a potential violation of the DNREC order authorizing the shipment of crude oil by barge from the refinery. The NOV alleges that DCR made shipments to locations other than the Paulsboro refinery in violation of the order and requests certain additional information. On February 7, 2017, DCR responded to the NOV. On March 10, 2017, DNREC issued a $150 fine in a Notice of Penalty Assessment and Secretary’s Order to the Delaware City refinery for violating the 2013 Secretary’s Order. DNREC determined that the Delaware City refinery had violated the order by failing to make timely and full disclosure to DNREC about the nature and extent of those shipments, and had misrepresented the number of shipments that went to other facilities. The penalty assessment and Secretary’s Order conclude that the 2013 Secretary’s Order was violated by the Delaware City refinery by shipping crude oil from the Delaware City terminal to three locations other than the Paulsboro refinery, on 15 days in 2014, making a total of 17 separate barge shipments containing approximately 35.7 million gallons of crude oil in total. On April 28, 2017, DCR appealed the Notice of Penalty Assessment and Secretary’s Order. The hearing of the appeal is scheduled for February 2018. To the extent that the penalty and Secretary’s Order are upheld, there will not be a material adverse effect on the Company’s financial position, results of operations or cash flows.
On December 28, 2016, DNREC issued a Coastal Zone Act permit (the “Ethanol permit”Permit”) to DCR allowing the utilization of existing tanks and existing marine loading equipment at their existing facilities to enable denatured ethanol to be loaded from storage tanks to marine vessels and shipped to offsite facilities. On January 13, 2017, the issuance of the Ethanol Permit was appealed by two environmental groups. On February 27, 2017, the Coastal Zone Industrial Board (the “Coastal Zone Board”) held a public hearing and dismissed the appeal, determining that the appellants did not have standing. The final opinion and order of the Board was issued March 16, 2017. The appellants filed an appeal of the Coastal Zone Board’s decision with the Delaware Superior Court (the “Superior Court”) on March 30, 2017. On September 28, 2017,January 19, 2018, the Delaware Superior Court issued it scheduling order governing briefing inrendered an Opinion regarding the decision of the Coastal Zone Board to dismiss the appeal of the Coastal Zone Board’s decision to sustain the permit issuedEthanol Permit for the ethanol project. The filing of briefs has been scheduled for October and November 2017.
On October 19, 2017,Judge determined that the Delaware City Refinery received approval from DNRECrecord created by the Coastal Zone Board was insufficient for the constructionSuperior Court to make a decision, and operationtherefore remanded the case back to the Coastal Zone Board to address the deficiency in the record. Specifically, the Superior Court directed the Coastal Zone Board to address any evidence concerning whether the appellants’ claimed injuries would be affected by the increased quantity of ethanol shipments. On remand, the Coastal Zone Board met on January 28, 2019 and reversed its previous decision on standing, ruling that the appellants have standing to appeal the issuance of the ethanol marketing project to allow for a combined total loadingEthanol Permit. DCR is currently evaluating its appeal options.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At the time the Company acquired the Toledo refinery, EPA had initiated an investigation into the compliance of up to 10,000 bpd, on an annual average basis, of ethanol on to marine vessels at the marine piers and the terminal truck loading rack, subject to certain operational and emissions limitations as well as other conditions. On the same date, Delaware City Logistics Company LLC received DNREC approval for the construction of (i) four additional loading arms for each of lanes 4, 10 and 11 for purposes of loading ethanol at its truck loading rack and (ii) a vapor vacuum control system for loading lanes connected to the existing vapor recovery unit located at its terminal in Delaware City. This approval is also subject to certain operational and emission limitations as well as other conditions.
On February 3, 2011,refinery with EPA sent a request for informationstandards governing flaring pursuant to Section 114 of the Clean Air Act. On February 1, 2013, EPA issued an Amended Notice of Violation, and on September 20, 2013, EPA issued a Notice of Violation and Finding of Violation to Toledo refinery, alleging certain violations of the Clean Air Act at its Plant 4 and Plant 9 flares since the acquisition of the refinery on March 1, 2011. Toledo refinery and EPA subsequently entered into tolling agreements pending settlement discussions. A tentative settlement has been reached, including flare emission reduction and controls, enhancements to the Paulsboro refinery with respect to compliance with EPA standards governing flaring. The refineryexisting leak detection and the EPA have reached agreement on settlement, which includesrepair program, closure of an existing Consent Decree, implementation of supplemental environmental projects, and payment of a civil penalty in the amount of $180.$0.4 million. On July 13, 2017February 5, 2019, a Notice of Lodging of the U.S. Department of JusticeConsent Decree was published in the Federal Register, starting a 30-day public comment period. On March 7, 2019 the Environmental Law & Policy Center and the Environmental Advocacy Clinic at Northwestern Law School filed withadverse comments to the Court the motionConsent Decree. TRC is currently waiting on EPA to enter the consent decree. On September 19, 2017, the Court approved the consent decree and in connection therewith the Paulsboro refinery has paid a penalty of $180.respond to these comments.
In connection with the acquisition of the Torrance refinery and related logistics assets, the Company assumed certain pre-existing environmental liabilities totaling $138,511$129.2 million as of September 30, 2017March 31, 2019 ($142,456130.8 million as of December 31, 2016)2018), related to certain environmental remediation obligations to address existing soil and groundwater contamination and monitoring activities and other clean-up activities, which reflects the current estimated cost of the remediation obligations. The current portion of the environmental liability is recorded in Accrued expenses and the non-current portion is recorded in Other long-term liabilities. In addition, in connection with the acquisition of the Torrance refinery and related logistics assets, the Company purchased a ten year, $100,000$100.0 million environmental
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
insurance policy to insure against unknown environmental liabilities. Furthermore, in connection with the acquisition, the Company assumed responsibility for certain specified environmental matters that occurred prior to the Company’s ownership of the refinery and the logistics assets, including specified incidents and/or NOVsnotices of violations (“NOVs”) issued by regulatory agencies in various years before the Company’s ownership, including the Southern California Air Quality Management District (“SCAQMD”) and the Division of Occupational Safety and Health of the State of California (“Cal/OSHA”).
Additionally, subsequentIn connection with the acquisition of the Torrance refinery and related logistics assets, the Company agreed to take responsibility for NOV No. P63405 that ExxonMobil had received from the SCAQMD for Title V deviations that are alleged to have occurred in 2015. On August 14, 2018, the Company received a letter from SCAQMD offering to settle this NOV for $0.5 million. On February 22, 2019, the SCAQMD reduced their settlement offer to $0.3 million. The Company is currently in communication with SCAQMD to resolve this NOV.
Subsequent to the acquisition, further NOVs were issued by the SCAQMD, Cal/OSHA, the City of Torrance, and the City of Torrance Fire Department, and the Los Angeles County Sanitation District related to alleged operational violations, emission discharges and/or flaring incidents at the refinery and the logistics assets both before and after the Company’s acquisition. WithEPA in November 2016 conducted a Risk Management Plan (“RMP”) inspection following the exceptionacquisition related to Torrance operations and issued preliminary findings in March 2017 concerning RMP potential operational violations. Since the EPA’s issuance of one NOVthe preliminary findings in March 2017, the Company has been in substantive discussions to resolve the preliminary findings. In the course of these discussions, on November 8, 2018, EPA made an offer to settle all preliminary findings for which$0.5 million. The Company is currently in communication with EPA to resolve the RMP preliminary findings.
EPA and the California Department of Toxic Substances Control (“DTSC”) in December 2016 conducted a proposedResource Conservation and Recovery Act (“RCRA”) inspection following the acquisition related to Torrance operations and also issued in March 2017 preliminary findings concerning RCRA potential operational violations. On June 14, 2018, the Torrance refinery and DTSC reached settlement is lessregarding the oil bearing materials in the form of a stipulation and order, wherein the Torrance refinery agreed that it would recycle or properly dispose of the oil bearing materials by the end of 2018 and pay an administrative penalty of $0.2 million. The Torrance refinery has complied with these requirements. Following this settlement, in June 2018, DTSC referred the remaining alleged RCRA violations from EPA’s and DTSC’s December 2016 inspection to the California Attorney General for final resolution. The Torrance refinery and the California Attorney General are in discussions to resolve these remaining alleged RCRA violations. Other than $100,the $0.2 million DTSC administrative penalty, no other settlement or penalty
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
demands have been received to date with respect to any of the other NOVs.NOVs, preliminary findings, or order that are in excess of $0.1 million. As the ultimate outcomes are uncertain, the Company cannot currently estimate the final amount or timing of their resolution. It is reasonably possible that SCAQMD, Cal/OSHA and/or the City of Torrance will assess penalties in the other matters in excess of $100resolution but any such amount is not expected to have a material impact on the Company’s financial position, results of operations or cash flows, individually or in the aggregate.
Applicable Federal and State Regulatory Requirements
The Company’s operations and many of the products it manufactures are subject to certain specific requirements of the Clean Air Act (the “CAA”) and related state and local regulations. The CAA contains provisions that require capital expenditures for the installation of certain air pollution control devices at the Company’s refineries. Subsequent rule making authorized by the CAA or similar laws or new agency interpretations of existing rules, may necessitate additional expenditures in future years.
In 2010, New York State adopted a Low-Sulfur Heating Oil mandate that, beginning July 1, 2012, requires all heating oil sold in New York State to contain no more than 15 parts per million (“PPM”) sulfur. Since July 1, 2012, other states in the Northeast market began requiring heating oil sold in their state to contain no more than 15 PPM sulfur. Currently, all of the Northeastern states and Washington DC have adopted sulfur controls on heating oil. MostAs of July 1, 2018 most of the Northeastern states will now require heating oil with 15 PPM or less sulfur by July 1, 2018 (except for Pennsylvania and Maryland - where less than 500 ppmPPM sulfur is required). All of the heating oil the Company currently produces meets these specifications. The mandate and other requirements do not currently have a material impact on the Company’s financial position, results of operations or cash flows.
The EPA issued the final Tier 3 Gasoline standards on March 3, 2014 under the CAA. This final rule establishes more stringent vehicle emission standards and further reduces the sulfur content of gasoline starting in January 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 refineries are complying with these new requirements as planned, either directly or using flexibility provided by sulfur credits generated or purchased in advance as an economic optimization. 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 published the final 2014-2016 standards underCompany is required to comply with the Renewable FuelsFuel Standard (“RFS”) lateimplemented by EPA, which sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into motor fuels consumed in 2015 and issued final 2017 RFS standards in November 2016.the United States. In July 2017, the2018, EPA issued proposed 2018amendments to the RFS program regulations that would establish annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel, and renewable fuels that whilewould apply to all gasoline and diesel produced in the Company is still reviewing, appear to slightly reduce renewableU.S. or imported in the year 2019. In addition, the separate proposal includes a proposed biomass-based diesel applicable volume standards from final 2017 levels. It is not clear that renewable fuel producers will be able to produce the volumes of these fuels required for blending in accordance with the 2017 standards. The final 2017 cellulosic standard is at approximately 135% of the 2016 standard.2020. It is likely that cellulosic RIN production will continue to be lower than needed forcing obligated parties, such as the Company, to purchase cellulosic “waiver credits” to comply in 2017 (the waiver credit option by regulation is only available for the cellulosic standard). The advanced and total RIN requirements were raised (by 7% and 3%, respectively) above the original proposed level in May 2016. Production of advancedcredits or purchase excess RINs has been below what is needed for compliance in 2016. Obligated parties, such as the Company, will likely be relyingfrom suppliers on the nesting feature of the biodiesel RIN to comply with the advanced standard in 2017. While the Company believes that total RIN production will be adequate for 2016 needs, the new 2017 standard will put obligated parties up
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
against the E10 blendwall leaving little flexibility. Compliance in 2017 will likely rely on obligated parties drawing down the supply of excess RINs collectively known as the “RIN bank” and could tighten the RIN market potentially raising RIN prices further. The Company is supporting a proposal to change the point of obligation under the RFS program to the “blender” of renewable fuels, of which the new presidential administration may be supportive. Depending on how the new administration addresses this proposal and any future changes to the RFS 2 program, there could be a material impact on the Company’s cost of compliance with RFS 2.open market.
In addition, on December 1, 2015 theNovember 26, 2018 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 needwas implemented prior to be implemented bythe deadline of January 30, 2018. The Company is currently evaluatingin the final standards to evaluateprocess of implementing the impactrequirements of this regulation. The 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.
The PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EPA published a Final Rule to the Clean Water Act (“CWA”) Section 316(b) in August 2014 regarding cooling water intake structures, which includes requirements for petroleum refineries. The purpose of this rule is to prevent fish from being trapped against cooling water intake screens (impingement) and to prevent fish from being drawn through cooling water systems (entrainment). Facilities will be required to implement Best Technology Available (“BTA”) as soon as possible, but state agencies have the discretion to establish implementation time lines. The Company continues to evaluate the impact of this regulation, and at this time does not anticipate it having a material impact on the Company’s financial position, results of operations or cash flows.
As a result of the Torrance Acquisition, the Company is subject to greenhouse gas emission control regulations in the state of California pursuant to Assembly Bill 32 (“AB32”).AB32. AB32 imposes a statewide cap on greenhouse gas emissions, including emissions from transportation fuels, with the aim of returning the state to 1990 emission levels by 2020. AB32 is implemented through two market mechanisms including the Low Carbon Fuel Standard (“LCFS”) and Cap and Trade, which was extended for an additional ten years to 2030 in July 2017. The Company is responsible for the AB32 obligations related to the Torrance refinery beginning on July 1, 2016 and must purchase emission credits to comply with these obligations. Additionally, in September 2016, the state of California enacted Senate Bill 32 (“SB32”) which further reduces greenhouse gas emissions targets to 40 percent below 1990 levels by 2030.
However, subsequent to the acquisition, the Company is recovering the majority of these costs from its customers, and as such does not expect this obligation to materially impact the Company’s financial position, results of operations, or cash flows. To the degree there are unfavorable changes to AB32 or SB32 regulations or the Company is unable to recover such compliance costs from customers, these regulations could have a material adverse effect on our financial position, results of operations and cash flows.
The Company is subject to obligations to purchase RINs. On February 15, 2017, the Company received a notification that EPA records indicated that PBF Holding used potentially invalid RINs that were in fact verified under the EPA’s RIN Quality Assurance Program (“QAP”) by an independent auditor as QAP A RINs. Under the regulations, use of potentially invalid QAP A RINs provided the user with an affirmative defense from civil penalties provided certain conditions are met. The Company has asserted the affirmative defense and if accepted by the EPA will not be required to replace these RINs and will not be subject to civil penalties under the program. It is reasonably possible that the EPA will not accept the Company’s defense and may assess penalties in these matters but any such amount is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
As of January 1, 2011, the Company is required to comply with EPA’s Control of Hazardous Air Pollutants From Mobile Sources, or MSAT2, regulations on gasoline that impose reductions in the benzene content of its produced gasoline. The Company purchases benzene credits to meet these requirements. The Company’s planned capital projects will reduce the amount of benzene credits that it needs to purchase. In addition, the renewable fuel standards mandate the blending of prescribed percentages of renewable fuels (e.g., ethanol and biofuels) into the Company’s produced gasoline and diesel. These new requirements, other requirements of the CAA and other presently existing or future environmental regulations may cause the Company to make substantial capital expenditures as well as the purchase of credits at significant cost, to enable its refineries to produce products that meet applicable requirements.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), also known as “Superfund,” imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current or former owner or operator of the disposal site or sites where the release occurred and companies that disposed of or arranged for the disposal of the hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for investigation and the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. As discussed more fully above, certain of the Company’s sites are subject to these laws and the Company may be held liable for investigation and remediation costs or claims for natural resource damages. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. Analogous state laws impose similar responsibilities and liabilities on responsible parties. In the Company’s current normal operations, it has generated waste, some of which falls within the statutory definition of a “hazardous substance” and some of which may have been disposed of at sites that may require cleanup under Superfund.
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 HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
PBF LLC Limited Liability Company Agreement
The holders of limited liability company interests in PBF LLC, including PBF Energy, generally have to include for purposes of calculating their U.S. federal, state and local income taxes their share of any taxable income of PBF LLC, regardless of whether such holders receive cash distributions from PBF LLC. PBF Energy ultimately may not receive cash distributions from PBF LLC equal to its share of such taxable income or even equal to the actual tax due with respect to that income. For example, PBF LLC is required to include in taxable income PBF LLC’s allocable share of PBFX’s taxable income and gains (such share to be determined pursuant to the partnership agreement of PBFX), regardless of the amount of cash distributions received by PBF LLC from PBFX, and such taxable income and gains will flow-through to PBF Energy to the extent of its allocable share of the taxable income of PBF LLC. As a result, at certain times, the amount of cash otherwise ultimately available to PBF Energy on account of its indirect interest in PBFX may not be sufficient for PBF Energy to pay the amount of taxes it will owe on account of its indirect interests in PBFX.
Taxable income of PBF LLC generally is allocated to the holders of PBF LLC units (including PBF Energy) pro-rata in accordance with their respective share of the net profits and net losses of PBF LLC. In general, PBF LLC is required to make periodic tax distributions to the members of PBF LLC, including PBF Energy, pro-rata in accordance with their respective percentage interests for such period (as determined under the amended and restated limited liability company agreement of PBF LLC), subject to available cash and applicable law and contractual restrictions (including pursuant to our debt instruments) and based on certain assumptions. Generally, these tax distributions are required to be in an amount equal to our estimate of the taxable income of PBF LLC for the year multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses). If, with respect to any given calendar year, the aggregate periodic tax distributions were less than the actual taxable income of PBF LLC multiplied by the assumed tax rate, PBF LLC is required to make a “true up” tax distribution, no later than March 1515th of the following year, equal to such difference, subject to the available cash and borrowings of PBF LLC. PBF LLC generally obtains funding to pay its tax distributions by causing PBF Holding to distribute cash to PBF LLC and from distributions it receives from PBFX.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tax Receivable Agreement
PBF Energy (the Company’s indirect parent) entered into a tax receivable agreement with the PBF LLC Series A and PBF LLC Series B Unit holdersunitholders (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’sEnergy Class A common stock and had PBF Energy not entered into the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless: (i) PBF Energy exercises its right to terminate the Tax Receivable Agreement, (ii) PBF Energy breaches any of its material obligations under the Tax Receivable Agreement or (iii) certain changes of control occur, in which case all obligations under the Tax Receivable Agreement will generally be accelerated and due as calculated under certain assumptions.
The payment obligations under the Tax Receivable Agreement are obligations of PBF Energy and not of PBF LLC or the Company.PBF Holding. 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 96.6%99.0% interest in PBF LLC as of September 30, 2017 (96.5%March 31, 2019 (99.0% as of December 31, 2016)2018). PBF LLC generally obtains funding to pay its tax distributions by causing PBF Holding to distribute cash to PBF LLC and from distributions it receives from PBFX.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. LEASES
28The Company leases office space, office equipment, refinery facilities and equipment, and railcars under non-cancelable operating leases, with terms typically ranging from one to twenty years, subject to certain renewal options as applicable. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of lease liabilities and right-of-use assets. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
The Company determines whether a contract is or contains a lease at inception of the contract and whether the lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.
The Company does not separate lease and nonlease components of contracts. There are no material residual value guarantees associated with any of the Company’s leases. There are no significant restrictions or covenants included in the Company’s lease agreements other than those that are customary in such arrangements. Certain of the Company’s leases, primarily for the Company’s commercial, logistics asset classes, include provisions for variable payments. These variable payments are typically determined based on a measure of throughput or actual days the asset is operated during the contract term or another measure of usage and are not included in the initial measurement of lease liabilities and right-of-use assets.
Lease Position as of March 31, 2019
The table below presents the lease related assets and liabilities recorded on the Company’s Condensed Consolidated Balance Sheets as of March 31, 2019:
|
| | | | | | |
(in millions) | | Classification on the Balance Sheet | | March 31, 2019 |
Assets | | | | |
Operating lease assets - third party | | Operating lease right of use assets - third party | | $ | 245.1 |
|
Operating lease assets - affiliate | | Operating lease right of use assets - affiliate | | 655.6 |
|
Total lease assets | | | | $ | 900.7 |
|
| | | | |
Liabilities | | | | |
Current liabilities: | | | | |
Operating lease liabilities - third party | | Current operating lease liabilities - third party | | $ | 80.9 |
|
Operating lease liabilities - affiliate | | Current operating lease liabilities - affiliate | | 73.3 |
|
Noncurrent liabilities: | | | | |
Operating lease liabilities - third party | | Long-term operating lease liabilities - third party | | 164.7 |
|
Operating lease liabilities - affiliate | | Long-term operating lease liabilities - affiliate | | 582.3 |
|
Total lease liabilities | | | | $ | 901.2 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
10.Lease Costs
The table below presents certain information related to lease costs associated with the Company’s operating leases for the three months ended March 31, 2019:
|
| | | | |
| | Three Months Ended March 31, |
Lease Costs (in millions) | | 2019 |
Components of total lease cost: | | |
Operating lease cost | | $ | 53.3 |
|
Short-term lease cost | | 23.3 |
|
Variable lease cost | | 10.1 |
|
Total lease cost | | $ | 86.7 |
|
There were no net gains or losses on any sale-leaseback transactions for the three months ended March 31, 2019.
Other Information
The table below presents supplemental cash flow information related to leases for the three months ended March 31, 2019:
|
| | | | |
| | Three Months Ended March 31, |
(in millions) | | 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | | |
Operating cash flows for operating leases | | $ | 35.4 |
|
Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets | | 82.7 |
|
Lease Term and Discount Rate
The table below presents certain information related to the weighted average remaining lease term and weighted average discount rate for the Company’s operating leases as of March 31, 2019:
|
| | | |
| | March 31, 2019 |
Weighted average remaining lease term - operating leases | | 7.1 years |
|
Weighted average discount rate - operating leases | | 8.33 | % |
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Undiscounted Cash Flows
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheets as of March 31, 2019:
|
| | | | |
Amounts due within twelve months of March 31, (in millions) | | Operating Leases |
2019 | | $ | 218.7 |
|
2020 | | 193.0 |
|
2021 | | 155.2 |
|
2022 | | 142.6 |
|
2023 | | 135.9 |
|
Thereafter | | 369.8 |
|
Total minimum lease payments | | 1,215.2 |
|
Less: effect of discounting | | 314.0 |
|
Present value of future minimum lease payments | | 901.2 |
|
Less: current obligations under leases | | 154.2 |
|
Long-term lease obligations | | $ | 747.0 |
|
As of March 31, 2019, the Company has entered into an additional third party lease for hydrogen supply, with future lease payments expected to total approximately $212.6 million. The lease is expected to commence in the second quarter of 2020 with a term of 15 years.
There are no material lease arrangements where the Company is the lessor.
In the normal course of business, the Company enters into certain affiliate lease arrangements with PBFX for the use of certain storage, terminaling and pipeline assets. The Company believes the terms and conditions under these leases are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. The terms for these affiliate leases generally range from seven to fifteen years. The Company uses the same methodology for discounting the lease payments on affiliate leases as it does for third party leases as described above. For the three months ended March 31, 2019, the Company incurred operating lease costs, related to affiliate operating leases, of $27.1 million. As of March 31, 2019, the Company had recorded right-of-use assets, short-term lease obligations and long-term lease obligations of $655.6 million, $73.3 million and $582.3 million, respectively, associated with these affiliate leases.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. EMPLOYEE BENEFIT PLANS
The components of net periodic benefit cost related to the Company’s defined benefit plans consisted of the following:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | | Three Months Ended March 31, |
Pension Benefits | 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
Components of net periodic benefit cost: | | | | | | | | | | |
Service cost | $ | 10,142 |
| | $ | 10,064 |
| | $ | 30,429 |
| | $ | 24,743 |
| $ | 10.9 |
| | $ | 11.8 |
|
Interest cost | 1,084 |
| | 772 |
| | 3,252 |
| | 2,323 |
| 2.1 |
| | 1.4 |
|
Expected return on plan assets | (1,441 | ) | | (1,234 | ) | | (4,325 | ) | | (3,447 | ) | (2.4 | ) | | (2.1 | ) |
Amortization of prior service cost | 13 |
| | 13 |
| | 39 |
| | 39 |
| |
Amortization of actuarial loss (gain) | 113 |
| | 328 |
| | 339 |
| | 716 |
| |
Amortization of prior service cost and actuarial loss | | 0.1 |
| | 0.1 |
|
Net periodic benefit cost | $ | 9,911 |
| | $ | 9,943 |
| | $ | 29,734 |
| | $ | 24,374 |
| $ | 10.7 |
| | $ | 11.2 |
|
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | | Three Months Ended March 31, |
Post-Retirement Medical Plan | 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
Components of net periodic benefit cost: | | | | | | | | | | |
Service cost | $ | 316 |
| | $ | 304 |
| | $ | 948 |
| | $ | 743 |
| $ | 0.2 |
| | $ | 0.3 |
|
Interest cost | 172 |
| | 131 |
| | 516 |
| | 398 |
| 0.2 |
| | 0.1 |
|
Amortization of prior service cost | 162 |
| | 161 |
| | 484 |
| | 379 |
| 0.1 |
| | 0.2 |
|
Amortization of actuarial loss (gain) | — |
| | — |
| | — |
| | — |
| |
Net periodic benefit cost | $ | 650 |
| | $ | 596 |
| | $ | 1,948 |
| | $ | 1,520 |
| $ | 0.5 |
| | $ | 0.6 |
|
11.8. REVENUES
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The following table provides information relating to the Company’s revenues from external customers for each product or group of similar products for the periods presented:
|
| | | | | | | |
| Three Months Ended March 31, |
(in millions) | 2019 | | 2018 |
Gasoline and distillates | $ | 4,433.0 |
| | $ | 4,994.3 |
|
Asphalt and blackoils | 353.0 |
| | 308.9 |
|
Feedstocks and other | 200.7 |
| | 238.7 |
|
Chemicals | 151.7 |
| | 176.1 |
|
Lubricants | 70.3 |
| | 81.6 |
|
Total Revenues | $ | 5,208.7 |
| | $ | 5,799.6 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s revenues are generated from the sale of refined petroleum products. These revenues are largely based on the current spot (market) prices of the products sold, which represent consideration specifically allocable to the products being sold on a given day, and the Company recognizes those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and transfer of title occurs is the point when the Company’s control of the products is transferred to the Company’s customers and when its performance obligation to its customers is fulfilled. Delivery and transfer of title are specifically agreed to between the Company and customers within the contracts. The Company also has contracts which contain fixed pricing, tiered pricing, minimum volume features with makeup periods, or other factors that have not materially been affected by ASC 606.
Deferred Revenues
The Company records deferred revenues when cash payments are received or are due in advance of our performance, including amounts which are refundable. Deferred revenue was $63.6 million and $17.1 million as of March 31, 2019 and December 31, 2018, respectively. Fluctuations in the deferred revenue balance are primarily driven by the timing and extent of cash payments received or due in advance of satisfying the Company’s performance obligations.
The Company’s payment terms vary by type and location of customers and the products offered. The period between invoicing and when payment is due is not significant (i.e. generally within two months). For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.
9. INCOME TAXES
PBF Holding is a limited liability company treated as a “flow-through” entity for income tax purposes. Accordingly, there is generally no benefit or expense for federal or state income tax in the PBF Holding financial statements apart from the income tax attributable to two subsidiaries acquired in connection with the acquisition of Chalmette Refining and the Company’s wholly-owned Canadian subsidiary, PBF Energy Limited (“PBF Ltd.”), which are treated as C-Corporations for income tax purposes.
The reported income tax benefit in the PBF Holding Condensed Consolidated Financial Statements of Operations consists of the following:
|
| | | | | | | |
| Three Months Ended March 31, |
(in millions) | 2019 | | 2018 |
Current income tax expense | $ | — |
| | $ | — |
|
Deferred income tax benefit | (7.2 | ) | | (0.7 | ) |
Total income tax benefit | $ | (7.2 | ) | | $ | (0.7 | ) |
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. FAIR VALUE MEASUREMENTS
The tables below present information about the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis and indicate the fair value hierarchy of the inputs utilized to determine the fair values as of September 30, 2017March 31, 2019 and December 31, 20162018.
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.
Condensed Consolidated Balance Sheets.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
|
| | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2019 |
| Fair Value Hierarchy | | Total Gross Fair Value | | Effect of Counter-party Netting | | Net Carrying Value on Balance Sheet |
(in millions) | Level 1 | | Level 2 | | Level 3 | | |
Assets: | | | | | | | | | | | |
Money market funds | $ | 2.9 |
| | $ | — |
| | $ | — |
| | $ | 2.9 |
| | N/A |
| | $ | 2.9 |
|
Commodity contracts | 3.5 |
| | 11.7 |
| | — |
| | 15.2 |
| | (5.3 | ) | | 9.9 |
|
Derivatives included with inventory intermediation agreement obligations | — |
| | 9.8 |
| | — |
| | 9.8 |
| | — |
| | 9.8 |
|
Liabilities: | | | | | | | | | | | |
Commodity contracts | 5.0 |
| | 0.3 |
| | — |
| | 5.3 |
| | (5.3 | ) | | — |
|
Catalyst lease obligations | — |
| | 47.4 |
| | — |
| | 47.4 |
| | — |
| | 47.4 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2017 |
| 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 | $ | 14,458 |
| | $ | — |
| | $ | — |
| | $ | 14,458 |
| | N/A |
| | $ | 14,458 |
|
Commodity contracts | 18,257 |
| | 4,248 |
| | — |
| | 22,505 |
| | (22,505 | ) | | — |
|
Liabilities: | | | | | | | | | | | |
Commodity contracts | 11,671 |
| | 15,850 |
| | — |
| | 27,521 |
| | (22,505 | ) | | 5,016 |
|
Catalyst lease obligations | — |
| | 46,981 |
| | — |
| | 46,981 |
| | — |
| | 46,981 |
|
Derivatives included with inventory intermediation agreement obligations | — |
| | 20,601 |
| | — |
| | 20,601 |
| | — |
| | 20,601 |
|
| | | As of December 31, 2016 | As of December 31, 2018 |
| Fair Value Hierarchy | | Total Gross Fair Value | | Effect of Counter-party Netting | | Net Carrying Value on Balance Sheet | Fair Value Hierarchy | | Total Gross Fair Value | | Effect of Counter-party Netting | | Net Carrying Value on Balance Sheet |
| Level 1 | | Level 2 | | Level 3 | | |
(in millions) | | Level 1 | | Level 2 | | Level 3 | | Total Gross Fair Value | | Effect of Counter-party Netting | | Net Carrying Value on Balance Sheet |
Assets: | | | | | | | | | | | | | | | | | |
Money market funds | $ | 342,837 |
| | $ | — |
| | $ | — |
| | $ | 342,837 |
| | N/A |
| | $ | 342,837 |
| $ | 2.8 |
| | $ | — |
| | $ | — |
| | $ | 2.8 |
| | N/A |
| | $ | 2.8 |
|
Commodity contracts | 948 |
| | 35 |
| | — |
| | 983 |
| | (983 | ) | | — |
| 1.2 |
| | 8.9 |
| | — |
| | 10.1 |
| | (2.9 | ) | | 7.2 |
|
Derivatives included with inventory intermediation agreement obligations | — |
| | 6,058 |
| | — |
| | 6,058 |
| | — |
| | 6,058 |
| — |
| | 24.1 |
| | — |
| | 24.1 |
| | — |
| | 24.1 |
|
| | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | 859 |
| | 3,548 |
| | 84 |
| | 4,491 |
| | (983 | ) | | 3,508 |
| 2.7 |
| | 0.2 |
| | — |
| | 2.9 |
| | (2.9 | ) | | — |
|
Catalyst lease obligations | — |
| | 45,969 |
| | — |
| | 45,969 |
| | — |
| | 45,969 |
| — |
| | 44.3 |
| | — |
| | 44.3 |
| | — |
| | 44.3 |
|
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.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 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 September 30, 2017March 31, 2019 and December 31, 2016, $9,6422018, $9.8 million and $9,440,$9.7 million, respectively, were included within Deferred charges and other assets, net for these non-qualified pension plan assets.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
The table below summarizes the changes in fair value measurements of commodity contracts categorized in Level 3 of the fair value hierarchy:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Balance at beginning of period | $ | — |
| | $ | 493 |
| | $ | (84 | ) | | $ | 3,543 |
|
Purchases | — |
| | — |
| | — |
| | — |
|
Settlements | — |
| | (90 | ) | | 45 |
| | (1,093 | ) |
Unrealized gain (loss) included in earnings | — |
| | (21 | ) | | 39 |
| | (2,068 | ) |
Transfers into Level 3 | — |
| | — |
| | — |
| | — |
|
Transfers out of Level 3 | — |
| | — |
| | — |
| | — |
|
Balance at end of period | $ | — |
| | $ | 382 |
| | $ | — |
| | $ | 382 |
|
There were no transfers between levels during the three and nine months ended September 30, 2017March 31, 2019 or 2016.2018.
Fair value of debt
The table below summarizes the fair value and carrying value of debt as of September 30, 2017March 31, 2019 and December 31, 2016.2018.
| | | September 30, 2017 | | December 31, 2016 | March 31, 2019 | | December 31, 2018 |
| Carrying value | | Fair value | | Carrying value | | Fair value | |
Senior secured notes due 2020 (a) | $ | — |
| | $ | — |
| | $ | 670,867 |
| | $ | 696,098 |
| |
Senior notes due 2023 (a) (d) | 500,000 |
| | 514,575 |
| | 500,000 |
| | 498,801 |
| |
Senior notes due 2025 (a) | 725,000 |
| | 740,982 |
| | — |
| | — |
| |
Revolving Loan (b) | 350,000 |
| | 350,000 |
| | 350,000 |
| | 350,000 |
| |
(in millions) | | Carrying value | | Fair value | | Carrying value | | Fair value |
2025 Senior Notes (a) | | $ | 725.0 |
| | $ | 745.9 |
| | $ | 725.0 |
| | $ | 688.4 |
|
2023 Senior Notes (a) | | 500.0 |
| | 515.6 |
| | 500.0 |
| | 479.4 |
|
Revolving Credit Facility (b) | | 250.0 |
| | 250.0 |
| | — |
| | — |
|
PBF Rail Term Loan (b) | 30,041 |
| | 30,041 |
| | 35,000 |
| | 35,000 |
| 19.8 |
| | 19.8 |
| | 21.6 |
| | 21.6 |
|
Catalyst leases (c) | 46,981 |
| | 46,981 |
| | 45,969 |
| | 45,969 |
| 47.4 |
| | 47.4 |
| | 44.3 |
| | 44.3 |
|
| 1,652,022 |
| | 1,682,579 |
| | 1,601,836 |
| | 1,625,868 |
| 1,542.2 |
| | 1,578.7 |
| | 1,290.9 |
| | 1,233.7 |
|
Less - Current debt (c) | | (2.5 | ) | | (2.5 | ) | | (2.4 | ) | | (2.4 | ) |
Less - Unamortized deferred financing costs | 26,821 |
| | n/a |
| | 25,277 |
| | n/a |
| (29.0 | ) | | n/a |
| | (30.5 | ) | | n/a |
|
Long-term debt | $ | 1,625,201 |
| | $ | 1,682,579 |
| | $ | 1,576,559 |
| | $ | 1,625,868 |
| $ | 1,510.7 |
| | $ | 1,576.2 |
| | $ | 1,258.0 |
| | $ | 1,231.3 |
|
____________________________
(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 7.00% senior secured notes due 2023 and the 7.25% senior notes.notes due 2025 (collectively, the “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.
(d) As discussed During 2018, Toledo Refining and Chalmette Refining entered into two platinum bridge leases which were settled in “Note 5 - Debt”,April 2019 and Delaware City Refining entered into a new platinum bridge lease, which will expire in the second quarter of 2019. These leases are payable at maturity and are not anticipated to be renewed. The total outstanding balance related to these notes became unsecured followingbridge leases as of March 31, 2019 and December 31, 2018 was $2.5 million and $2.4 million, respectively, and is included in Current debt in the Collateral Fall-Away Event on May 30, 2017.Company’s Condensed Consolidated Balance Sheets.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
12.11. DERIVATIVES
The Company uses derivative instruments to mitigate certain exposures to commodity price risk. The Company entered into the A&RInventory Intermediation Agreements that contain purchase obligations for certain volumes of crude oil, intermediates and refined products. The purchase obligations related to crude oil, 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, intermediates and refined products. The level of activity for these derivatives is based on the level of operating inventories.
As of September 30, 2017,March 31, 2019, there were 3,306,154754,419 barrels of crude oil and feedstocks (no barrels at December 31, 2018) outstanding under these derivative instruments designated as fair value hedges. As of March 31, 2019, there were 3,232,956 barrels of intermediates and refined products (2,942,348(3,350,166 barrels at December 31, 2016)2018) outstanding under these derivative instruments designated as fair value hedges. These volumes represent the notional value of the contract.
The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of September 30, 2017,March 31, 2019, there were 37,496,0006,558,000 barrels of crude oil and 8,163,0004,904,000 barrels of refined products (5,950,000(5,801,000 and 2,831,000,1,609,000, respectively, as of December 31, 2016)2018), outstanding under short and long term commodity derivative contracts not designated as hedges representing the notional value of the contracts.
The following tables provide information about the fair values of these derivative instruments as of September 30, 2017March 31, 2019 and December 31, 20162018 and the line items in the condensed consolidated balance sheetCondensed Consolidated Balance Sheets in which the fair values are reflected.
| | Description |
Balance Sheet Location | Fair Value Asset/(Liability) |
Balance Sheet Location | Fair Value Asset/(Liability) |
| | | (in millions) |
Derivatives designated as hedging instruments: | | | | |
September 30, 2017: | | | |
March 31, 2019: | | | |
Derivatives included with the inventory intermediation agreement obligations | Accrued expenses | $ | (20,601 | ) | Accrued expenses | $ | 9.8 |
|
December 31, 2016: | | | |
December 31, 2018: | | | |
Derivatives included with the inventory intermediation agreement obligations | Accrued expenses | $ | 6,058 |
| Accrued expenses | $ | 24.1 |
|
| | | | |
Derivatives not designated as hedging instruments: | | | | |
September 30, 2017: | | | |
March 31, 2019: | | | |
Commodity contracts | Accrued expenses | $ | (5,016 | ) | Accounts receivable | $ | 9.9 |
|
December 31, 2016: | | | |
December 31, 2018: | | | |
Commodity contracts | Accrued expenses | $ | 3,508 |
| Accounts receivable | $ | 7.2 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
The following table provides information about the gains or losses recognized in income on these derivative instruments and the line items in the condensed consolidated statementsCondensed Consolidated Statements of operationsOperations 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 | Location of Gain or (Loss) Recognized in Income on Derivatives | Gain or (Loss) Recognized in Income on Derivatives |
| | | (in millions) |
Derivatives designated as hedging instruments: | | | | |
For the three months ended September 30, 2017: | | | |
For the three months ended March 31, 2019: | | | |
Derivatives included with the inventory intermediation agreement obligations | Cost of products and other | $ | (29,766 | ) | Cost of products and other | $ | (14.2 | ) |
For the three months ended September 30, 2016: | | | |
Derivatives included with the inventory intermediation agreement obligations | Cost of products and other | $ | (3,145 | ) | |
For the nine months ended September 30, 2017: | | | |
Derivatives included with the inventory intermediation agreement obligations | Cost of products and other | $ | (26,659 | ) | |
For the nine months ended September 30, 2016: | | | |
For the three months ended March 31, 2018: | | | |
Derivatives included with the inventory intermediation agreement obligations | Cost of products and other | $ | (29,317 | ) | Cost of products and other | $ | (8.8 | ) |
| | | | |
Derivatives not designated as hedging instruments: | | | | |
For the three months ended September 30, 2017: | | | |
For the three months ended March 31, 2019: | | | |
Commodity contracts | Cost of products and other | $ | (17,291 | ) | Cost of products and other | $ | 31.7 |
|
For the three months ended September 30, 2016: | | | |
Commodity contracts | Cost of products and other | $ | (15,559 | ) | |
For the nine months ended September 30, 2017: | | | |
Commodity contracts | Cost of products and other | $ | (2,606 | ) | |
For the nine months ended September 30, 2016: | | | |
For the three months ended March 31, 2018: | | | |
Commodity contracts | Cost of products and other | $ | (54,646 | ) | Cost of products and other | $ | (13.3 | ) |
| | | | |
Hedged items designated in fair value hedges: | | | | |
For the three months ended September 30, 2017: | | | |
For the three months ended March 31, 2019: | | | |
Crude oil, intermediate and refined product inventory | | Cost of products and other | $ | 14.2 |
|
For the three months ended March 31, 2018: | | | |
Intermediate and refined product inventory | Cost of products and other | $ | 29,766 |
| Cost of products and other | $ | 8.8 |
|
For the three months ended September 30, 2016: | | | |
Intermediate and refined product inventory | Cost of products and other | $ | 3,145 |
| |
For the nine months ended September 30, 2017: | | | |
Intermediate and refined product inventory | Cost of products and other | $ | 26,659 |
| |
For the nine months ended September 30, 2016: | | | |
Intermediate and refined product inventory | Cost of products and other | $ | 29,317 |
| |
The Company had no ineffectiveness related to the Company’s fair value hedges for the three and nine months ended September 30, 2017March 31, 2019 or 2016.2018.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
13.12. SUBSEQUENT EVENTS
Dividend Declared
On November 2, 2017,May 1, 2019, PBF Energy, PBF Holding’s indirect parent, announced a dividend of $0.30 per share on its outstanding Class A common stock. The dividend is payable on November 29, 2017May 30, 2019 to PBF Energy Class A common stockholders of record at the close of business on November 13, 2017.May 15, 2019.
TVPC Acquisition
On April 24, 2019, PBFX entered into a Contribution Agreement with PBF LLC, pursuant to which the Company will contribute to PBF LLC, which in turn, will contribute to PBFX all of the issued and outstanding limited liability interests of TVP Holding Company LLC (“TVP Holding”) for total consideration of $200.0 million (the “TVPC Acquisition”). Prior to the TVPC Acquisition, TVP Holding owned a 50% equity investment in TVPC. Subsequent to the completion of the transaction, which is expected to close in the second quarter of 2019, PBFX will own 100% of TVPC.
34
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
PBF Services Company, Delaware City Refining Company LLC, PBF Power Marketing LLC, Paulsboro Refining Company LLC, Toledo Refining Company LLC, Chalmette Refining, L.L.C., PBF Energy Western Region LLC, Torrance Refining Company LLC, Torrance Logistics Company LLC, PBF International Inc. and PBF Investments LLC are 100% owned subsidiaries of PBF Holding and serve as guarantors of the obligations under the senior notes.Senior Notes. These guarantees are full and unconditional and joint and several. For purposes of the following footnote, PBF Holding is referred to as “Issuer”. The indentures dated November 24, 2015 and May 30, 2017, among PBF Holding, PBF Finance, the guarantors party thereto and Wilmington Trust, National Association, governs subsidiaries designated as “Guarantor Subsidiaries”. PBF International Inc., PBF Energy Limited, PBF Transportation Company LLC, PBF Rail Logistics Company LLC, Chalmette Logistics Company LLC, MOEM Pipeline LLC, Collins Pipeline Company, T&M Terminal Company, TVP Holding, Company LLC (“TVP Holding”), Torrance Basin Pipeline Company LLC and Torrance Pipeline Company LLC are consolidated subsidiaries of the Company that are not guarantors of the senior notes.Senior Notes. Additionally, our 50% equity investment in Torrance Valley Pipeline Company, held by TVP Holding is included in our Non-Guarantor financial position and results of operations and cash flows as TVP Holding is not a guarantor of the senior notes.Senior Notes.
The senior notesSenior Notes were co-issued by PBF Finance. For purposes of the following footnote, PBF Finance is referred to as “Co-Issuer.” The Co-Issuer has no independent assets or operations.
The following supplemental combining and condensed consolidating financial information reflects the Issuer’s separate accounts, the combined accounts of the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, the combining and consolidating adjustments and eliminations and the Issuer’s consolidated accounts for the dates and periods indicated. For purposes of the following combining and consolidating information, the Issuer’s investment in its subsidiaries and the Guarantor subsidiaries’ investments in their subsidiaries are accounted for under the equity method of accounting.
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED, IN MILLIONS)35
|
| | | | | | | | | | | | | | | | | | | |
| March 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 342.1 |
| | $ | 12.8 |
| | $ | 29.7 |
| | $ | — |
| | $ | 384.6 |
|
Accounts receivable | 838.5 |
| | 7.0 |
| | 17.9 |
| | — |
| | 863.4 |
|
Accounts receivable - affiliate | 1.4 |
| | 2.6 |
| | 0.7 |
| | — |
| | 4.7 |
|
Inventories | 2,368.6 |
| | — |
| | 196.2 |
| | — |
| | 2,564.8 |
|
Prepaid and other current assets | 63.5 |
| | 57.2 |
| | 1.7 |
| | — |
| | 122.4 |
|
Due from related parties | 35,050.5 |
| | 25,514.7 |
| | 10,076.4 |
| | (70,641.6 | ) | | — |
|
Total current assets | 38,664.6 |
| | 25,594.3 |
| | 10,322.6 |
| | (70,641.6 | ) | | 3,939.9 |
|
| | | | | | | | | |
Property, plant and equipment, net | 16.8 |
| | 2,767.5 |
| | 230.0 |
| | — |
| | 3,014.3 |
|
Investment in subsidiaries | — |
| | 397.0 |
| | — |
| | (397.0 | ) | | — |
|
Investment in equity method investee | — |
| | — |
| | 167.7 |
| | — |
| | 167.7 |
|
Operating lease right of use assets - third party | 181.1 |
| | 64.0 |
| | — |
| | — |
| | 245.1 |
|
Operating lease right of use assets - affiliate | 589.9 |
| | 65.7 |
| | — |
| | — |
| | 655.6 |
|
Deferred charges and other assets, net | 13.4 |
| | 984.8 |
| | — |
| | — |
| | 998.2 |
|
Total assets | $ | 39,465.8 |
| | $ | 29,873.3 |
| | $ | 10,720.3 |
| | $ | (71,038.6 | ) | | $ | 9,020.8 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable | $ | 310.9 |
| | $ | 223.0 |
| | $ | 12.1 |
| | $ | — |
| | $ | 546.0 |
|
Accounts payable - affiliate | 43.2 |
| | 0.7 |
| | — |
| | — |
| | 43.9 |
|
Accrued expenses | 1,453.7 |
| | 143.5 |
| | 246.5 |
| | — |
| | 1,843.7 |
|
Current operating lease liabilities - third party | 67.1 |
| | 13.8 |
| | — |
| | — |
| | 80.9 |
|
Current operating lease liabilities - affiliate | 70.6 |
| | 2.7 |
| | — |
| | — |
| | 73.3 |
|
Current debt | — |
| | 2.5 |
| | — |
| | — |
| | 2.5 |
|
Deferred revenue | 62.1 |
| | 1.5 |
| | — |
| | — |
| | 63.6 |
|
Due to related parties | 29,119.6 |
| | 31,496.3 |
| | 10,025.7 |
| | (70,641.6 | ) | | — |
|
Total current liabilities | 31,127.2 |
| | 31,884.0 |
| | 10,284.3 |
| | (70,641.6 | ) | | 2,653.9 |
|
| | | | | | | | | |
| | | | | | | | | |
Long-term debt | 1,446.2 |
| | 44.9 |
| | 19.6 |
| | — |
| | 1,510.7 |
|
Deferred tax liabilities | — |
| | — |
| | 33.2 |
| | — |
| | 33.2 |
|
Long-term operating lease liabilities - third party | 113.9 |
| | 50.8 |
| | — |
| | — |
| | 164.7 |
|
Long-term operating lease liabilities - affiliate | 519.2 |
| | 63.1 |
| | — |
| | — |
| | 582.3 |
|
Other long-term liabilities | 53.1 |
| | 194.8 |
| | 3.1 |
| | — |
| | 251.0 |
|
Investment in subsidiaries | 2,381.2 |
| | — |
| | — |
| | (2,381.2 | ) | | — |
|
Total liabilities | 35,640.8 |
| | 32,237.6 |
| | 10,340.2 |
| | (73,022.8 | ) | | 5,195.8 |
|
| | | | | | | | | |
Commitments and contingencies (Note 5) |
| |
| |
| |
| |
|
| | | | | | | | | |
Equity: | | | | | | | | | |
PBF Holding Company LLC equity | | | | | | | | | |
Member’s equity | 2,658.4 |
| | 1,743.2 |
| | 317.1 |
| | (2,060.3 | ) | | 2,658.4 |
|
Retained earnings / (accumulated deficit) | 1,179.4 |
| | (4,110.9 | ) | | 63.0 |
| | 4,047.9 |
| | 1,179.4 |
|
Accumulated other comprehensive loss | (23.7 | ) | | (7.5 | ) | | — |
| | 7.5 |
| | (23.7 | ) |
Total PBF Holding Company LLC equity | 3,814.1 |
| | (2,375.2 | ) | | 380.1 |
| | 1,995.1 |
| | 3,814.1 |
|
Noncontrolling interest | 10.9 |
| | 10.9 |
| | — |
| | (10.9 | ) | | 10.9 |
|
Total equity | 3,825.0 |
| | (2,364.3 | ) | | 380.1 |
| | 1,984.2 |
| | 3,825.0 |
|
Total liabilities and equity | $ | 39,465.8 |
| | $ | 29,873.3 |
| | $ | 10,720.3 |
| | $ | (71,038.6 | ) | | $ | 9,020.8 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING BALANCE SHEETSHEETS (UNAUDITED, IN MILLIONS)
| | | September 30, 2017 | December 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
ASSETS | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 200,136 |
| | $ | 9,124 |
| | $ | 32,485 |
| | $ | — |
| | $ | 241,745 |
| $ | 526.0 |
| | $ | 9.1 |
| | $ | 26.6 |
| | $ | — |
| | $ | 561.7 |
|
Accounts receivable | 718,960 |
| | 9,781 |
| | 46,166 |
| | — |
| | 774,907 |
| 690.1 |
| | 7.2 |
| | 13.4 |
| | — |
| | 710.7 |
|
Accounts receivable - affiliate | 1,392 |
| | 17,946 |
| | 600 |
| | — |
| | 19,938 |
| 1.8 |
| | 9.5 |
| | 0.7 |
| | — |
| | 12.0 |
|
Affiliate notes receivable | — |
| | 11,600 |
| | — |
| | — |
| | 11,600 |
| |
Inventories | 2,064,678 |
| | — |
| | 246,014 |
| | — |
| | 2,310,692 |
| 1,685.4 |
| | — |
| | 178.7 |
| | — |
| | 1,864.1 |
|
Prepaid expense and other current assets | 23,245 |
| | 21,194 |
| | — |
| | — |
| | 44,439 |
| |
Prepaid and other current assets | | 20.7 |
| | 30.0 |
| | 1.8 |
| | — |
| | 52.5 |
|
Due from related parties | 27,591,736 |
| | 22,923,564 |
| | 6,144,950 |
| | (56,660,250 | ) | | — |
| 33,793.1 |
| | 25,057.3 |
| | 9,534.2 |
| | (68,384.6 | ) | | — |
|
Total current assets | 30,600,147 |
| | 22,993,209 |
| | 6,470,215 |
| | (56,660,250 | ) | | 3,403,321 |
| 36,717.1 |
| | 25,113.1 |
| | 9,755.4 |
| | (68,384.6 | ) | | 3,201.0 |
|
| | | | | | | | | | | | | | | | | | |
Property, plant and equipment, net | 23,884 |
| | 2,543,193 |
| | 238,072 |
| | — |
| | 2,805,149 |
| 17.3 |
| | 2,722.7 |
| | 231.2 |
| | — |
| | 2,971.2 |
|
Investment in subsidiaries | — |
| | 429,035 |
| | — |
| | (429,035 | ) | | — |
| — |
| | 421.4 |
| | — |
| | (421.4 | ) | | — |
|
Investment in equity method investee | — |
| | — |
| | 172,752 |
| | — |
| | 172,752 |
| — |
| | — |
| | 169.5 |
| | — |
| | 169.5 |
|
Deferred charges and other assets, net | 27,934 |
| | 773,447 |
| | 34 |
| | — |
| | 801,415 |
| 16.0 |
| | 855.8 |
| | — |
| | — |
| | 871.8 |
|
Total assets | $ | 30,651,965 |
| | $ | 26,738,884 |
| | $ | 6,881,073 |
| | $ | (57,089,285 | ) | | $ | 7,182,637 |
| $ | 36,750.4 |
| | $ | 29,113.0 |
|
| $ | 10,156.1 |
| | $ | (68,806.0 | ) | | $ | 7,213.5 |
|
| | | | | | | | | | | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | |
Accounts payable | $ | 310,158 |
| | $ | 112,773 |
| | $ | 18,552 |
| | $ | — |
| | $ | 441,483 |
| $ | 278.2 |
| | $ | 189.7 |
| | $ | 15.9 |
| | $ | — |
| | $ | 483.8 |
|
Accounts payable - affiliate | 34,815 |
| | 1,327 |
| | (97 | ) | | — |
| | 36,045 |
| 34.2 |
| | 14.8 |
| | 0.5 |
| | — |
| | 49.5 |
|
Accrued expenses | 1,467,974 |
| | 125,490 |
| | 216,107 |
| | — |
| | 1,809,571 |
| 1,364.0 |
| | 156.1 |
| | 58.9 |
| | — |
| | 1,579.0 |
|
Current debt | | — |
| | 2.4 |
| | — |
| | — |
| | 2.4 |
|
Deferred revenue | 3,214 |
| | 74 |
| | 8 |
| | — |
| | 3,296 |
| 15.6 |
| | 1.5 |
| | — |
| | — |
| | 17.1 |
|
Due to related parties | 23,949,841 |
| | 26,558,885 |
| | 6,151,524 |
| | (56,660,250 | ) | | — |
| 28,340.7 |
| | 30,433.4 |
| | 9,610.5 |
| | (68,384.6 | ) | | — |
|
Notes payable | — |
| | 6,831 |
| | — |
| | — |
| | 6,831 |
| |
Total current liabilities | 25,766,002 |
| | 26,805,380 |
| | 6,386,094 |
| | (56,660,250 | ) | | 2,297,226 |
| 30,032.7 |
| | 30,797.9 |
| | 9,685.8 |
| | (68,384.6 | ) | | 2,131.8 |
|
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Long-term debt | 1,548,591 |
| | 46,938 |
| | 29,672 |
| | — |
| | 1,625,201 |
| 1,194.7 |
| | 42.0 |
| | 21.3 |
| | — |
| | 1,258.0 |
|
Deferred tax liabilities | — |
| | — |
| | 46,340 |
| | — |
| | 46,340 |
| — |
| | — |
| | 40.4 |
| | — |
| | 40.4 |
|
Other long-term liabilities | 27,906 |
| | 181,293 |
| | 4,145 |
| | — |
| | 213,344 |
| 54.9 |
| | 194.5 |
| | 4.1 |
| | — |
| | 253.5 |
|
Investment in subsidiaries | 308,940 |
| | — |
| | — |
| | (308,940 | ) | | — |
| 1,938.3 |
| | — |
| | — |
| | (1,938.3 | ) | | — |
|
Total liabilities | 27,651,439 |
| | 27,033,611 |
| | 6,466,251 |
| | (56,969,190 | ) | | 4,182,111 |
| 33,220.6 |
| | 31,034.4 |
| | 9,751.6 |
| | (70,322.9 | ) | | 3,683.7 |
|
| | | | | | | | | | | | | | | | | | |
Commitments and contingencies (Note 9) |
| |
| |
| |
| |
| |
Commitments and contingencies (Note 5) | |
| |
| |
| |
| |
|
| | | | | | | | | | | | | | | | | | |
Equity: | | | | | | | | | | | | | | | | | | |
PBF Holding Company LLC equity | | | | | | | | | | |
Member’s equity | 2,352,772 |
| | 1,723,480 |
| | 357,332 |
| | (2,080,812 | ) | | 2,352,772 |
| 2,652.5 |
| | 1,737.2 |
| | 323.7 |
| | (2,060.9 | ) | | 2,652.5 |
|
Retained earnings / (accumulated deficit) | 659,891 |
| | (2,022,858 | ) | | 57,490 |
| | 1,965,368 |
| | 659,891 |
| |
Retained earnings | | 890.3 |
| | (3,662.0 | ) | | 80.8 |
| | 3,581.2 |
| | 890.3 |
|
Accumulated other comprehensive loss | (25,024 | ) | | (8,236 | ) | | — |
| | 8,236 |
| | (25,024 | ) | (23.9 | ) | | (7.5 | ) | | — |
| | 7.5 |
| | (23.9 | ) |
Total PBF Holding Company LLC equity | 2,987,639 |
| | (307,614 | ) | | 414,822 |
| | (107,208 | ) | | 2,987,639 |
| 3,518.9 |
| | (1,932.3 | ) | | 404.5 |
| | 1,527.8 |
| | 3,518.9 |
|
Noncontrolling interest | 12,887 |
| | 12,887 |
| | — |
| | (12,887 | ) | | 12,887 |
| 10.9 |
| | 10.9 |
| | — |
| | (10.9 | ) | | 10.9 |
|
Total equity | 3,000,526 |
| | (294,727 | ) | | 414,822 |
| | (120,095 | ) | | 3,000,526 |
| 3,529.8 |
| | (1,921.4 | ) | | 404.5 |
| | 1,516.9 |
| | 3,529.8 |
|
Total liabilities and equity | $ | 30,651,965 |
| | $ | 26,738,884 |
| | $ | 6,881,073 |
| | $ | (57,089,285 | ) | | $ | 7,182,637 |
| $ | 36,750.4 |
| | $ | 29,113.0 |
| | $ | 10,156.1 |
| | $ | (68,806.0 | ) | | $ | 7,213.5 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING BALANCE SHEETSTATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED, IN MILLIONS)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2016 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 530,085 |
| | $ | 56,717 |
| | $ | 41,366 |
| | $ | (1,463 | ) | | $ | 626,705 |
|
Accounts receivable | 599,147 |
| | 7,999 |
| | 8,735 |
| | — |
| | 615,881 |
|
Accounts receivable - affiliate | 2,432 |
| | 4,504 |
| | 695 |
| | — |
| | 7,631 |
|
Inventories | 1,680,058 |
| | — |
| | 183,502 |
| | — |
| | 1,863,560 |
|
Prepaid expense and other current assets | 27,443 |
| | 12,933 |
| | 160 |
| | — |
| | 40,536 |
|
Due from related parties | 24,141,120 |
| | 21,883,569 |
| | 4,692,799 |
| | (50,717,488 | ) | | — |
|
Total current assets | 26,980,285 |
| | 21,965,722 |
| | 4,927,257 |
| | (50,718,951 | ) | | 3,154,313 |
|
| | | | | | | | | |
Property, plant and equipment, net | 33,772 |
| | 2,452,877 |
| | 242,050 |
| | — |
| | 2,728,699 |
|
Investment in subsidiaries | 705,034 |
| | 440,377 |
| | — |
| | (1,145,411 | ) | | — |
|
Investment in equity method investee | — |
| | — |
| | 179,882 |
| | — |
| | 179,882 |
|
Deferred charges and other assets, net | 12,317 |
| | 491,673 |
| | 13 |
| | — |
| | 504,003 |
|
Total assets | $ | 27,731,408 |
| | $ | 25,350,649 |
|
| $ | 5,349,202 |
| | $ | (51,864,362 | ) | | $ | 6,566,897 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable | $ | 360,260 |
| | $ | 157,277 |
| | $ | 14,291 |
| | $ | (1,463 | ) | | $ | 530,365 |
|
Accounts payable - affiliate | 37,077 |
| | 786 |
| | — |
| | — |
| | 37,863 |
|
Accrued expenses | 1,094,581 |
| | 201,935 |
| | 166,213 |
| | — |
| | 1,462,729 |
|
Deferred revenue | 10,901 |
| | 1,438 |
| | 1 |
| | — |
| | 12,340 |
|
Due to related parties | 22,027,065 |
| | 24,031,520 |
| | 4,658,903 |
| | (50,717,488 | ) | | — |
|
Total current liabilities | 23,529,884 |
| | 24,392,956 |
| | 4,839,408 |
| | (50,718,951 | ) | | 2,043,297 |
|
| | | | | | | | | |
Long-term debt | 1,496,085 |
| | 45,908 |
| | 34,566 |
| | — |
| | 1,576,559 |
|
Affiliate notes payable | 86,298 |
| | — |
| | — |
| | — |
| | 86,298 |
|
Deferred tax liabilities | — |
| | — |
| | 45,699 |
| | — |
| | 45,699 |
|
Other long-term liabilities | 30,208 |
| | 192,204 |
| | 3,699 |
| | — |
| | 226,111 |
|
Total liabilities | 25,142,475 |
| | 24,631,068 |
| | 4,923,372 |
| | (50,718,951 | ) | | 3,977,964 |
|
| | | | | | | | | |
Commitments and contingencies (Note 9) |
| |
| |
| |
| |
|
| | | | | | | | | |
Equity: | | | | | | | | | |
Member’s equity | 2,155,863 |
| | 1,714,997 |
| | 374,067 |
| | (2,089,064 | ) | | 2,155,863 |
|
Retained earnings / (accumulated deficit) | 446,519 |
| | (999,693 | ) | | 51,763 |
| | 947,930 |
| | 446,519 |
|
Accumulated other comprehensive loss | (25,962 | ) | | (8,236 | ) | | — |
| | 8,236 |
| | (25,962 | ) |
Total PBF Holding Company LLC equity | 2,576,420 |
| | 707,068 |
| | 425,830 |
| | (1,132,898 | ) | | 2,576,420 |
|
Noncontrolling interest | 12,513 |
| | 12,513 |
| | — |
| | (12,513 | ) | | 12,513 |
|
Total equity | 2,588,933 |
| | 719,581 |
| | 425,830 |
| | (1,145,411 | ) | | 2,588,933 |
|
Total liabilities and equity | $ | 27,731,408 |
| | $ | 25,350,649 |
| | $ | 5,349,202 |
| | $ | (51,864,362 | ) | | $ | 6,566,897 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
| | | | | | | | | |
Revenues | $ | 5,188.9 |
| | $ | 850.3 |
| | $ | 604.7 |
| | $ | (1,435.2 | ) | | $ | 5,208.7 |
|
| | | | | | | | | |
Cost and expenses: | | | | | | | | | |
Cost of products and other | 4,355.1 |
| | 730.6 |
| | 625.7 |
| | (1,435.2 | ) | | 4,276.2 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | — |
| | 446.1 |
| | 7.3 |
| | — |
| | 453.4 |
|
Depreciation and amortization expense | — |
| | 92.4 |
| | 1.9 |
| | — |
| | 94.3 |
|
Cost of sales | 4,355.1 |
| | 1,269.1 |
| | 634.9 |
| | (1,435.2 | ) | | 4,823.9 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 43.3 |
| | 8.6 |
| | (0.7 | ) | | — |
| | 51.2 |
|
Depreciation and amortization expense | 2.8 |
| | — |
| | — |
| | — |
| | 2.8 |
|
Equity income in investee | — |
| | — |
| | (4.7 | ) | | — |
| | (4.7 | ) |
Total cost and expenses | 4,401.2 |
| | 1,277.7 |
| | 629.5 |
| | (1,435.2 | ) | | 4,873.2 |
|
| | | | | | | | | |
Income (loss) from operations | 787.7 |
| | (427.4 | ) | | (24.8 | ) | | — |
| | 335.5 |
|
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Equity in loss of subsidiaries | (448.6 | ) | | (17.8 | ) | | — |
| | 466.4 |
| | — |
|
Change in fair value of catalyst leases | — |
| | (3.1 | ) | | — |
| | — |
| | (3.1 | ) |
Interest expense, net | (26.8 | ) | | (0.4 | ) | | (0.2 | ) | | — |
| | (27.4 | ) |
Other non-service components of net periodic benefit cost | (0.2 | ) | | 0.1 |
| | — |
| | — |
| | (0.1 | ) |
Income (loss) before income taxes | 312.1 |
| | (448.6 | ) | | (25.0 | ) | | 466.4 |
| | 304.9 |
|
Income tax benefit | — |
| | — |
| | (7.2 | ) | | — |
| | (7.2 | ) |
Net income (loss) | 312.1 |
| | (448.6 | ) | | (17.8 | ) | | 466.4 |
| | 312.1 |
|
Less: net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) attributable to PBF Holding Company LLC | $ | 312.1 |
| | $ | (448.6 | ) | | $ | (17.8 | ) | | $ | 466.4 |
| | $ | 312.1 |
|
| | | | | | | | | |
Comprehensive income (loss) attributable to PBF Holding Company LLC | $ | 312.3 |
| | $ | (448.6 | ) | | $ | (17.8 | ) | | $ | 466.4 |
| | $ | 312.3 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENTSTATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)(UNAUDITED, IN MILLIONS)
| | | Three Months Ended September 30, 2017 | Three Months Ended March 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
| | | | | | | | | | | | | | | | | | |
Revenues | $ | 5,410,245 |
| | $ | 223,582 |
| | $ | 536,386 |
| | $ | (694,397 | ) | | $ | 5,475,816 |
| $ | 5,734.7 |
| | $ | 711.7 |
| | $ | 685.6 |
| | $ | (1,332.4 | ) | | $ | 5,799.6 |
|
| | | | | | | | | | | | | | | | | | |
Cost and expenses: | | | | | | | | | | | | | | | | | | |
Cost of products and other | 4,483,164 |
| | 85,031 |
| | 538,011 |
| | (694,397 | ) | | 4,411,809 |
| 5,238.1 |
| | 604.3 |
| | 679.6 |
| | (1,332.4 | ) | | 5,189.6 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 289 |
| | 380,951 |
| | 8,351 |
| | — |
| | 389,591 |
| — |
| | 405.0 |
| | 6.4 |
| | — |
| | 411.4 |
|
Depreciation and amortization expense | — |
| | 68,419 |
| | 1,919 |
| | — |
| | 70,338 |
| — |
| | 74.9 |
| | 1.9 |
| | — |
| | 76.8 |
|
Cost of sales | 4,483,453 |
| | 534,401 |
| | 548,281 |
| | (694,397 | ) | | 4,871,738 |
| 5,238.1 |
| | 1,084.2 |
| | 687.9 |
| | (1,332.4 | ) | | 5,677.8 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 49,880 |
| | 4,959 |
| | (146 | ) | | — |
| | 54,693 |
| 51.0 |
| | 6.0 |
| | 1.3 |
| | — |
| | 58.3 |
|
Depreciation and amortization expense | 2,572 |
| | — |
| | — |
| | — |
| | 2,572 |
| 2.7 |
| | — |
| | — |
| | — |
| | 2.7 |
|
Equity income in investee | — |
| | — |
| | (3,799 | ) | | — |
| | (3,799 | ) | — |
| | — |
| | (4.0 | ) | | — |
| | (4.0 | ) |
Loss on sale of assets | — |
| | 28 |
| | — |
| | — |
| | 28 |
| — |
| | 0.1 |
| | — |
| | — |
| | 0.1 |
|
Total cost and expenses | 4,535,905 |
| | 539,388 |
| | 544,336 |
| | (694,397 | ) | | 4,925,232 |
| 5,291.8 |
| | 1,090.3 |
| | 685.2 |
| | (1,332.4 | ) | | 5,734.9 |
|
| | | | | | | | | | | | | | | | | | |
Income (loss) from operations | 874,340 |
| | (315,806 | ) | | (7,950 | ) | | — |
| | 550,584 |
| 442.9 |
| | (378.6 | ) | | 0.4 |
| | — |
| | 64.7 |
|
| | | | | | | | | | | | | | | | | | |
Other income (expenses): | | | | | | | | | | |
Equity in earnings (loss) of subsidiaries | (319,568 | ) | | 2,467 |
| | — |
| | 317,101 |
| | — |
| |
Change in fair value of catalyst leases | — |
| | 473 |
| | — |
| | — |
| | 473 |
| |
Debt extinguishment costs | — |
| | — |
| | — |
| | — |
| | — |
| |
Other income (expense): | | | | | | | | | | |
Equity in (loss) earnings of subsidiaries | | (377.7 | ) | | 0.9 |
| | — |
| | 376.8 |
| | — |
|
Interest expense, net | (28,692 | ) | | (305 | ) | | (272 | ) | | — |
| | (29,269 | ) | (32.7 | ) | | (0.4 | ) | | (0.2 | ) | | — |
| | (33.3 | ) |
Other non-service components of net periodic benefit cost | | (0.1 | ) | | 0.4 |
| | — |
| | — |
| | 0.3 |
|
Income (loss) before income taxes | 526,080 |
| | (313,171 | ) | | (8,222 | ) | | 317,101 |
| | 521,788 |
| 32.4 |
| | (377.7 | ) | | 0.2 |
| | 376.8 |
| | 31.7 |
|
Income tax benefit | — |
| | — |
| | (4,292 | ) | | — |
| | (4,292 | ) | — |
| | — |
| | (0.7 | ) | | — |
| | (0.7 | ) |
Net income (loss) | 526,080 |
| | (313,171 | ) | | (3,930 | ) | | 317,101 |
| | 526,080 |
| 32.4 |
| | (377.7 | ) | | 0.9 |
| | 376.8 |
| | 32.4 |
|
Less: net loss attributable to noncontrolling interests | (6 | ) | | (6 | ) | | — |
| | 6 |
| | (6 | ) | |
Less: net income attributable to noncontrolling interests | | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) attributable to PBF Holding Company LLC | $ | 526,086 |
| | $ | (313,165 | ) | | $ | (3,930 | ) | | $ | 317,095 |
| | $ | 526,086 |
| $ | 32.4 |
| | $ | (377.7 | ) | | $ | 0.9 |
| | $ | 376.8 |
| | $ | 32.4 |
|
| | | | | | | | | | | | | | | | | | |
Comprehensive income (loss) attributable to PBF Holding Company LLC | $ | 526,373 |
| | $ | (313,165 | ) | | $ | (3,930 | ) | | $ | 317,095 |
| | $ | 526,373 |
| $ | 32.7 |
| | $ | (377.7 | ) | | $ | 0.9 |
| | $ | 376.8 |
| | $ | 32.7 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENTSTATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)CASH FLOWS (UNAUDITED, IN MILLIONS)
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
| | | | | | | | | |
Revenues | $ | 4,488,925 |
| | $ | 441,554 |
| | $ | 345,215 |
| | $ | (767,081 | ) | | $ | 4,508,613 |
|
| | | | | | | | | |
Cost and expenses: | | | | | | | | | |
Cost of products and other | 3,914,018 |
| | 428,587 |
| | 328,734 |
| | (767,081 | ) | | 3,904,258 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 25 |
| | 385,761 |
| | 18,259 |
| | — |
| | 404,045 |
|
Depreciation and amortization expense | — |
| | 47,471 |
| | 3,865 |
| | — |
| | 51,336 |
|
Cost of sales | 3,914,043 |
| | 861,819 |
| | 350,858 |
| | (767,081 | ) | | 4,359,639 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 34,820 |
| | 4,312 |
| | 780 |
| | — |
| | 39,912 |
|
Depreciation and amortization expense | 1,342 |
| | — |
| | — |
| | — |
| | 1,342 |
|
Equity income in investee | — |
| | — |
| | (1,621 | ) | | — |
| | (1,621 | ) |
Loss on sale of assets | 2,418 |
| | 73 |
| | 5,668 |
| | — |
| | 8,159 |
|
Total cost and expenses | 3,952,623 |
| | 866,204 |
| | 355,685 |
| | (767,081 | ) | | 4,407,431 |
|
| | | | | | | | | |
Income (loss) from operations | 536,302 |
| | (424,650 | ) | | (10,470 | ) | | — |
| | 101,182 |
|
| | | | | | | | | |
Other income (expenses): | | | | | | | | | |
Equity in earnings (loss) of subsidiaries | (438,249 | ) | | — |
| | — |
| | 438,249 |
| | — |
|
Change in fair value of catalyst leases | — |
| | 77 |
| | — |
| | — |
| | 77 |
|
Interest expense, net | (32,982 | ) | | (447 | ) | | (467 | ) | | — |
| | (33,896 | ) |
Income (loss) before income taxes | 65,071 |
| | (425,020 | ) | | (10,937 | ) | | 438,249 |
| | 67,363 |
|
Income tax expense | — |
| | — |
| | 2,291 |
| | — |
| | 2,291 |
|
Net income (loss) | 65,071 |
| | (425,020 | ) | | (13,228 | ) | | 438,249 |
| | 65,072 |
|
Less: net income attributable to noncontrolling interests | 45 |
| | 45 |
| | — |
| | (45 | ) | | 45 |
|
Net income (loss) attributable to PBF Holding Company LLC | $ | 65,026 |
| | $ | (425,065 | ) | | $ | (13,228 | ) | | $ | 438,294 |
| | $ | 65,027 |
|
| | | | | | | | | |
Comprehensive income (loss) attributable to PBF Holding Company LLC | $ | 65,452 |
| | $ | (425,065 | ) | | $ | (13,228 | ) | | $ | 438,294 |
| | $ | 65,453 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2017 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
| | | | | | | | | |
Revenues | $ | 15,064,488 |
| | $ | 983,917 |
| | $ | 1,578,553 |
| | $ | (2,387,693 | ) | | $ | 15,239,265 |
|
| | | | | | | | | |
Cost and expenses: | | | | | | | | | |
Cost of products and other | 13,547,358 |
| | 615,093 |
| | 1,551,638 |
| | (2,387,693 | ) | | 13,326,396 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | (42 | ) | | 1,200,370 |
| | 24,686 |
| | — |
| | 1,225,014 |
|
Depreciation and amortization expense | — |
| | 175,543 |
| | 5,695 |
| | — |
| | 181,238 |
|
Cost of sales | 13,547,316 |
| | 1,991,006 |
| | 1,582,019 |
| | (2,387,693 | ) | | 14,732,648 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 112,418 |
| | 18,410 |
| | (736 | ) | | — |
| | 130,092 |
|
Depreciation and amortization expense | 10,355 |
| | — |
| | — |
| | — |
| | 10,355 |
|
Equity income in investee | — |
| | — |
| | (11,218 | ) | | — |
| | (11,218 | ) |
Loss on sale of assets | — |
| | 940 |
| | — |
| | — |
| | 940 |
|
Total cost and expenses | 13,670,089 |
| | 2,010,356 |
| | 1,570,065 |
| | (2,387,693 | ) | | 14,862,817 |
|
| | | | | | | | | |
Income (loss) from operations | 1,394,399 |
| | (1,026,439 | ) | | 8,488 |
| | — |
| | 376,448 |
|
| | | | | | | | | |
Other income (expenses): | | | | | | | | | |
Equity in earnings (loss) of subsidiaries | (1,022,866 | ) | | 5,802 |
| | — |
| | 1,017,064 |
| | — |
|
Change in fair value of catalyst leases |
| | (1,011 | ) | | — |
| | — |
| | (1,011 | ) |
Debt extinguishment costs | (25,451 | ) | | — |
| | — |
| | — |
| | (25,451 | ) |
Interest expense, net | (90,918 | ) | | (1,143 | ) | | (721 | ) | | — |
| | (92,782 | ) |
Income (loss) before income taxes | 255,164 |
| | (1,022,791 | ) | | 7,767 |
| | 1,017,064 |
| | 257,204 |
|
Income tax expense | — |
| | — |
| | 2,040 |
| | — |
| | 2,040 |
|
Net income (loss) | 255,164 |
| | (1,022,791 | ) | | 5,727 |
| | 1,017,064 |
| | 255,164 |
|
Less: net income attributable to noncontrolling interests | 374 |
| | 374 |
| | — |
| | (374 | ) | | 374 |
|
Net income (loss) attributable to PBF Holding Company LLC | $ | 254,790 |
| | $ | (1,023,165 | ) | | $ | 5,727 |
| | $ | 1,017,438 |
| | $ | 254,790 |
|
| | | | | | | | | |
Comprehensive income (loss) attributable to PBF Holding Company LLC | $ | 255,728 |
| | $ | (1,023,165 | ) | | $ | 5,727 |
| | $ | 1,017,438 |
| | $ | 255,728 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2016 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
| | | | | | | | | |
Revenues | $ | 11,119,301 |
| | $ | 586,336 |
| | $ | 1,005,656 |
| | $ | (1,546,722 | ) | | $ | 11,164,571 |
|
| | | | | | | | | |
Cost and expenses: | | | | | | | | | |
Cost of products and other | 9,653,945 |
| | 532,040 |
| | 995,726 |
| | (1,546,722 | ) | | 9,634,989 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | (375 | ) | | 948,403 |
| | 24,195 |
| | — |
| | 972,223 |
|
Depreciation and amortization expense | — |
| | 143,994 |
| | 7,479 |
| | — |
| | 151,473 |
|
Cost of sales | 9,653,570 |
| | 1,624,437 |
| | 1,027,400 |
| | (1,546,722 | ) | | 10,758,685 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 92,126 |
| | 20,372 |
| | (1,226 | ) | | — |
| | 111,272 |
|
Depreciation and amortization expense | 4,417 |
| | — |
| | — |
| | — |
| | 4,417 |
|
Equity income in investee | — |
| | — |
| | (1,621 | ) | | — |
| | (1,621 | ) |
Loss on sale of assets | 2,418 |
| | 97 |
| | 8,866 |
| | — |
| | 11,381 |
|
Total cost and expenses | 9,752,531 |
| | 1,644,906 |
| | 1,033,419 |
| | (1,546,722 | ) | | 10,884,134 |
|
| | | | | | | | | |
Income (loss) from operations | 1,366,770 |
| | (1,058,570 | ) | | (27,763 | ) | | — |
| | 280,437 |
|
| | | | | | | | | |
Other income (expenses): | | | | | | | | | |
Equity in earnings (loss) of subsidiaries | (1,123,054 | ) | | — |
| | — |
| | 1,123,054 |
| | — |
|
Change in fair value of catalyst leases | — |
| | (4,556 | ) | | — |
| | — |
| | (4,556 | ) |
Interest expense, net | (95,568 | ) | | (1,289 | ) | | (1,589 | ) | | — |
| | (98,446 | ) |
Income (loss) before income taxes | 148,148 |
| | (1,064,415 | ) | | (29,352 | ) | | 1,123,054 |
| | 177,435 |
|
Income tax expense | — |
| | — |
| | 29,287 |
| | — |
| | 29,287 |
|
Net income (loss) | 148,148 |
| | (1,064,415 | ) | | (58,639 | ) | | 1,123,054 |
| | 148,148 |
|
Less: net income attributable to noncontrolling interests | 438 |
| | 438 |
| | — |
| | (438 | ) | | 438 |
|
Net income (loss) attributable to PBF Holding Company LLC | $ | 147,710 |
| | $ | (1,064,853 | ) | | $ | (58,639 | ) | | $ | 1,123,492 |
| | $ | 147,710 |
|
| | | | | | | | | |
Comprehensive income (loss) attributable to PBF Holding Company LLC | $ | 149,173 |
| | $ | (1,064,853 | ) | | $ | (58,639 | ) | | $ | 1,123,492 |
| | $ | 149,173 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net income (loss) | $ | 312.1 |
| | $ | (448.6 | ) | | $ | (17.8 | ) | | $ | 466.4 |
| | $ | 312.1 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | 4.4 |
| | 92.4 |
| | 1.9 |
| | — |
| | 98.7 |
|
Stock-based compensation | 0.3 |
| | 6.8 |
| | — |
| | — |
| | 7.1 |
|
Change in fair value of catalyst leases | — |
| | 3.1 |
| | — |
| | — |
| | 3.1 |
|
Deferred income taxes | — |
| | — |
| | (7.2 | ) | | — |
| | (7.2 | ) |
Non-cash change in inventory repurchase obligations | 14.2 |
| | — |
| | — |
| | — |
| | 14.2 |
|
Non-cash lower of cost or market inventory adjustment | (506.0 | ) | | — |
| | — |
| | — |
| | (506.0 | ) |
Pension and other post-retirement benefit costs | 2.0 |
| | 9.2 |
| | — |
| | — |
| | 11.2 |
|
Income from equity method investee | — |
| | — |
| | (4.7 | ) | | — |
| | (4.7 | ) |
Distributions from equity method investee | — |
| | — |
| | 4.7 |
| | — |
| | 4.7 |
|
Equity in earnings of subsidiaries | 448.6 |
| | 17.8 |
| | — |
| | (466.4 | ) | | — |
|
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable | (148.4 | ) | | 0.3 |
| | (4.6 | ) | | — |
| | (152.7 | ) |
Due to/from affiliates | (482.3 | ) | | 619.9 |
| | (127.3 | ) | | — |
| | 10.3 |
|
Inventories | (177.2 | ) | | — |
| | (17.5 | ) | | — |
| | (194.7 | ) |
Prepaid and other current assets | (42.9 | ) | | (27.2 | ) | | 0.1 |
| | — |
| | (70.0 | ) |
Accounts payable | 32.7 |
| | 11.7 |
| | (3.8 | ) | | — |
| | 40.6 |
|
Accrued expenses | 85.7 |
| | (60.3 | ) | | 187.9 |
| | — |
| | 213.3 |
|
Deferred revenue | 46.5 |
| | — |
| | — |
| | — |
| | 46.5 |
|
Other assets and liabilities | (1.4 | ) | | (2.5 | ) | | (7.6 | ) | | — |
| | (11.5 | ) |
Net cash (used in) provided by operating activities | $ | (411.7 | ) | | $ | 222.6 |
| | $ | 4.1 |
| | $ | — |
| | $ | (185.0 | ) |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Expenditures for property, plant and equipment | (2.2 | ) | | (90.9 | ) | | (1.1 | ) | | — |
| | (94.2 | ) |
Expenditures for deferred turnaround costs | — |
| | (133.0 | ) | | — |
| | — |
| | (133.0 | ) |
Expenditures for other assets | — |
| | (22.2 | ) | | — |
| | — |
| | (22.2 | ) |
Equity method investment - return of capital | — |
| | — |
| | 1.8 |
| | — |
| | 1.8 |
|
Net cash (used in) provided by investing activities | $ | (2.2 | ) | | $ | (246.1 | ) | | $ | 0.7 |
| | $ | — |
| | $ | (247.6 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Distribution to members | (22.8 | ) | | (0.2 | ) | | — |
| | — |
| | (23.0 | ) |
Repayments of PBF Rail Term Loan | — |
| | — |
| | (1.7 | ) | | — |
| | (1.7 | ) |
Proceeds from revolver borrowings | 575.0 |
| | — |
| | — |
| | — |
| | 575.0 |
|
Repayments of revolver borrowings | (325.0 | ) | | — |
| | — |
| | — |
| | (325.0 | ) |
Proceeds from insurance premium financing | 2.8 |
| | 27.4 |
| | — |
| | — |
| | 30.2 |
|
Net cash provided by (used in) financing activities | $ | 230.0 |
| | $ | 27.2 |
| | $ | (1.7 | ) | | $ | — |
| | $ | 255.5 |
|
| | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | (183.9 | ) | | 3.7 |
| | 3.1 |
| | — |
| | (177.1 | ) |
Cash and cash equivalents, beginning of period | 526.0 |
| | 9.1 |
| | 26.6 |
| | — |
| | 561.7 |
|
Cash and cash equivalents, end of period | $ | 342.1 |
| | $ | 12.8 |
| | $ | 29.7 |
| | $ | — |
| | $ | 384.6 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14.13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENTSTATEMENTS OF CASH FLOW
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2017 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net income (loss) | $ | 255,164 |
| | $ | (1,022,791 | ) | | $ | 5,727 |
| | $ | 1,017,064 |
| | $ | 255,164 |
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations: | | | | | | | | | |
Depreciation and amortization | 15,746 |
| | 175,859 |
| | 5,760 |
| | — |
| | 197,365 |
|
Stock-based compensation | — |
| | 13,549 |
| | — |
| | — |
| | 13,549 |
|
Change in fair value of catalyst leases | — |
| | 1,011 |
| | — |
| | — |
| | 1,011 |
|
Deferred income taxes | — |
| | — |
| | 641 |
| | — |
| | 641 |
|
Non-cash lower of cost or market inventory adjustment | (97,943 | ) | | — |
| | — |
| | — |
| | (97,943 | ) |
Non-cash change in inventory repurchase obligations | (26,659 | ) | | — |
| | — |
| | — |
| | (26,659 | ) |
Debt extinguishment costs | 25,451 |
| | — |
| | — |
| | — |
| | 25,451 |
|
Pension and other post-retirement benefit costs | 4,956 |
| | 26,726 |
| | — |
| | — |
| | 31,682 |
|
(Income) from equity method investee |
| | — |
| | (11,218 | ) | | — |
| | (11,218 | ) |
Distributions from equity method investee | — |
| | — |
| | 16,897 |
| | — |
| | 16,897 |
|
Loss on sale of assets | — |
| | 940 |
| | — |
| | — |
| | 940 |
|
Equity in earnings (loss) of subsidiaries | 1,022,866 |
| | (5,802 | ) | | — |
| | (1,017,064 | ) | | — |
|
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable | (119,813 | ) | | (1,782 | ) | | (37,431 | ) | | — |
| | (159,026 | ) |
Due to/from affiliates | (1,494,632 | ) | | 1,451,846 |
| | 40,468 |
| | — |
| | (2,318 | ) |
Inventories | (286,677 | ) | | — |
| | (62,512 | ) | | — |
| | (349,189 | ) |
Prepaid expense and other current assets | 4,200 |
| | (8,467 | ) | | 160 |
| | — |
| | (4,107 | ) |
Accounts payable | (50,102 | ) | | (58,691 | ) | | 4,261 |
| | 1,463 |
| | (103,069 | ) |
Accrued expenses | 365,132 |
| | (13,352 | ) | | 49,894 |
| | — |
| | 401,674 |
|
Deferred revenue | (7,687 | ) | | (1,364 | ) | | 7 |
| | — |
| | (9,044 | ) |
Other assets and liabilities | (14,472 | ) | | (26,189 | ) | | (16,726 | ) | | — |
| | (57,387 | ) |
Net cash (used in) provided by operations | (404,470 | ) | | 531,493 |
| | (4,072 | ) | | 1,463 |
| | 124,414 |
|
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Expenditures for property, plant and equipment | (847 | ) | | (210,076 | ) | | (301 | ) | | — |
| | (211,224 | ) |
Expenditures for deferred turnaround costs | — |
| | (341,598 | ) | | — |
| | — |
| | (341,598 | ) |
Expenditures for other assets | — |
| | (31,096 | ) | | — |
| | — |
| | (31,096 | ) |
Equity method investment - return of capital | — |
| | — |
| | 451 |
| | — |
| | 451 |
|
Due to/from affiliates | (3,684 | ) | | — |
| | — |
| | 3,684 |
| | — |
|
Net cash (used in) provided by investing activities | (4,531 | ) | | (582,770 | ) | | 150 |
| | 3,684 |
| | (583,467 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Contributions from PBF LLC | 97,000 |
| | — |
| | — |
| | — |
| | 97,000 |
|
Distribution to members | (39,315 | ) | | — |
| | — |
| | — |
| | (39,315 | ) |
Proceeds from 2025 7.25% Senior Notes | 725,000 |
| | — |
| | — |
| | — |
| | 725,000 |
|
Cash paid to extinguish 2020 8.25% Senior Secured Notes | (690,209 | ) | | — |
| | — |
| | — |
| | (690,209 | ) |
Repayments of PBF Rail Term Loan | — |
| | — |
| | (4,959 | ) | | — |
| | (4,959 | ) |
Proceeds from revolver borrowings | 490,000 |
| | — |
| | — |
| | — |
| | 490,000 |
|
Repayments of revolver borrowings | (490,000 | ) | | — |
| | — |
| | — |
| | (490,000 | ) |
Due to/from affiliates | — |
| | 3,684 |
| | — |
| | (3,684 | ) | | — |
|
Deferred financing costs and other | (13,424 | ) | | — |
| | — |
| | — |
| | (13,424 | ) |
Net cash provided by (used in) financing activities | 79,052 |
| | 3,684 |
| | (4,959 | ) | | (3,684 | ) | | 74,093 |
|
| | | | | | | | | |
Net decrease in cash and cash equivalents | (329,949 | ) | | (47,593 | ) | | (8,881 | ) | | 1,463 |
| | (384,960 | ) |
Cash and cash equivalents, beginning of period | 530,085 |
| | 56,717 |
| | 41,366 |
| | (1,463 | ) | | 626,705 |
|
Cash and cash equivalents, end of period | $ | 200,136 |
| | $ | 9,124 |
| | $ | 32,485 |
| | $ | — |
| | $ | 241,745 |
|
PBF HOLDING COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED,FLOWS (UNAUDITED, IN THOUSANDS, EXCEPT UNIT, BARREL AND PER BARREL DATA)
14. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF PBF HOLDING
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
| | | Nine Months Ended September 30, 2016 | Three Months Ended March 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
Net income (loss) | $ | 148,148 |
| | $ | (1,064,415 | ) | | $ | (58,639 | ) | | $ | 1,123,054 |
| | $ | 148,148 |
| $ | 32.4 |
| | $ | (377.7 | ) | | $ | 0.9 |
| | $ | 376.8 |
| | $ | 32.4 |
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations: | | | | | | | | | | |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | | | | | | | | | | |
Depreciation and amortization | 10,828 |
| | 144,011 |
| | 7,726 |
| | — |
| | 162,565 |
| 4.3 |
| | 74.9 |
| | 1.9 |
| | — |
| | 81.1 |
|
Stock-based compensation | — |
| | 12,658 |
| | — |
| | — |
| | 12,658 |
| — |
| | 4.3 |
| | — |
| | — |
| | 4.3 |
|
Change in fair value of catalyst leases | — |
| | 4,556 |
| | — |
| | — |
| | 4,556 |
| |
Deferred income taxes | — |
| | — |
| | 27,813 |
| | — |
| | 27,813 |
| — |
| | — |
| | (0.7 | ) | | — |
| | (0.7 | ) |
Non-cash change in inventory repurchase obligations | | 8.8 |
| | — |
| | — |
| | — |
| | 8.8 |
|
Non-cash lower of cost or market inventory adjustment | (320,833 | ) | | — |
| | — |
| | — |
| | (320,833 | ) | (87.7 | ) | | — |
| | — |
| | — |
| | (87.7 | ) |
Non-cash change in inventory repurchase obligations | 29,317 |
| | — |
| | — |
| | — |
| | 29,317 |
| |
Debt extinguishment costs | | — |
| | — |
| | — |
| | — |
| | — |
|
Pension and other post-retirement benefit costs | 5,249 |
| | 20,645 |
| | — |
| | — |
| | 25,894 |
| 1.6 |
| | 10.2 |
| | — |
| | — |
| | 11.8 |
|
Equity income in investee | — |
| | — |
| | (1,621 | ) | | — |
| | (1,621 | ) | |
Income from equity method investee | | — |
| | — |
| | (4.0 | ) | | — |
| | (4.0 | ) |
Distributions from equity method investee | | — |
| | — |
| | 4.0 |
| | — |
| | 4.0 |
|
Loss on sale of assets | 2,418 |
| | 97 |
| | 8,866 |
| | — |
| | 11,381 |
| — |
| | 0.1 |
| | — |
| | — |
| | 0.1 |
|
Equity in earnings of subsidiaries | 1,123,054 |
| | — |
| | — |
| | (1,123,054 | ) | | — |
| |
Equity in earnings (loss) of subsidiaries | | 377.7 |
| | (0.9 | ) | | — |
| | (376.8 | ) | | — |
|
Changes in operating assets and liabilities: | | | | | | | | |
| | | | | | | | |
|
Accounts receivable | (205,816 | ) | | 3,695 |
| | 7,223 |
| | — |
| | (194,898 | ) | 116.3 |
| | 0.7 |
| | 4.4 |
| | — |
| | 121.4 |
|
Due to/from affiliates | (1,624,741 | ) | | 1,588,690 |
| | 44,245 |
| | — |
| | 8,194 |
| (522.3 | ) | | 453.0 |
| | 63.9 |
| | — |
| | (5.4 | ) |
Inventories | 56,792 |
| | — |
| | (2,740 | ) | | — |
| | 54,052 |
| (247.4 | ) | | — |
| | (30.9 | ) | | — |
| | (278.3 | ) |
Prepaid expense and other current assets | (6,330 | ) | | (11,768 | ) | | (2,105 | ) | | — |
| | (20,203 | ) | |
Prepaid and other current assets | | (6.9 | ) | | (29.6 | ) | | 0.3 |
| | — |
| | (36.2 | ) |
Accounts payable | 37,074 |
| | 16,943 |
| | (5,126 | ) | | 1,406 |
| | 50,297 |
| 69.4 |
| | (31.4 | ) | | (5.8 | ) | | — |
| | 32.2 |
|
Accrued expenses | 661,974 |
| | (353,030 | ) | | (897 | ) | | — |
| | 308,047 |
| 55.4 |
| | (45.8 | ) | | (32.5 | ) | | — |
| | (22.9 | ) |
Deferred revenue | 6,559 |
| | — |
| | 1,470 |
| | — |
| | 8,029 |
| (2.0 | ) | | — |
| | — |
| | — |
| | (2.0 | ) |
Other assets and liabilities | (7,573 | ) | | (14,210 | ) | | (97 | ) | | — |
| | (21,880 | ) | 0.5 |
| | (1.6 | ) | | (4.9 | ) | | — |
| | (6.0 | ) |
Net cash (used in) provided by operations | (83,880 | ) | | 347,872 |
| | 26,118 |
| | 1,406 |
| | 291,516 |
| |
Net cash (used in) provided by operating activities | | $ | (199.9 | ) | | $ | 56.2 |
| | $ | (3.4 | ) | | $ | — |
| | $ | (147.1 | ) |
| | | | | | | | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
Acquisition of Torrance refinery and related logistic assets | (971,932 | ) | | — |
| | — |
| | — |
| | (971,932 | ) | |
Expenditures for property, plant and equipment | (16,244 | ) | | (172,174 | ) | | 675 |
| | — |
| | (187,743 | ) | (1.0 | ) | | (19.7 | ) | | (0.3 | ) | | — |
| | (21.0 | ) |
Expenditures for deferred turnaround costs | — |
| | (138,936 | ) | | — |
| | — |
| | (138,936 | ) | — |
| | (58.8 | ) | | — |
| | — |
| | (58.8 | ) |
Expenditures for other assets | — |
| | (27,735 | ) | | — |
| | — |
| | (27,735 | ) | — |
| | (9.5 | ) | | — |
| | — |
| | (9.5 | ) |
Investment in subsidiaries | 12,800 |
| | — |
| | — |
| | (12,800 | ) | | — |
| |
Chalmette Acquisition working capital settlement | — |
| | (2,659 | ) | | — |
| | — |
| | (2,659 | ) | |
Proceeds from sale of assets | — |
| | — |
| | 13,030 |
| | — |
| | 13,030 |
| |
Net cash provided by (used in) investing activities | (975,376 | ) | | (341,504 | ) | | 13,705 |
| | (12,800 | ) | | (1,315,975 | ) | |
Equity method investment - return of capital | | — |
| | — |
| | 1.0 |
| | — |
| | 1.0 |
|
Due to/from affiliates | | (4.3 | ) | | — |
| | — |
| | 4.3 |
| | — |
|
Net cash (used in) provided by investing activities | | $ | (5.3 | ) | | $ | (88.0 | ) | | $ | 0.7 |
| | $ | 4.3 |
| | $ | (88.3 | ) |
| | | | | | | | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
Proceeds from catalyst lease | — |
| | 7,927 |
| | — |
| | — |
| | 7,927 |
| |
Distributions to Parent | — |
| | — |
| | (12,800 | ) | | 12,800 |
| | — |
| |
Contributions from PBF LLC related to TVPC | 175,000 |
| | — |
| | — |
| | — |
| | 175,000 |
| |
Distributions to members | (92,503 | ) | | — |
| | — |
| | — |
| | (92,503 | ) | |
Proceeds from affiliate notes payable | 635 |
| | — |
| | — |
| | — |
| | 635 |
| |
Repayment of affiliate notes payable | (517 | ) | | — |
| | — |
| | — |
| | (517 | ) | |
Repayment of Rail Facility revolver borrowings | — |
| | — |
| | (11,457 | ) | | — |
| | (11,457 | ) | |
Proceeds from revolver borrowings | 550,000 |
| | — |
| | — |
| | — |
| | 550,000 |
| |
Repayment of notes payable | | — |
| | (1.2 | ) | | — |
| | — |
| | (1.2 | ) |
Repayments of PBF Rail Term Loan | | — |
| | — |
| | (1.7 | ) | | — |
| | (1.7 | ) |
Due to/from affiliates | | — |
| | 4.3 |
| | — |
| | (4.3 | ) | | — |
|
Proceeds from insurance premium financing | | 2.0 |
| | 25.9 |
| | — |
| | — |
| | 27.9 |
|
Net cash provided by (used in) financing activities | 632,615 |
| | 7,927 |
| | (24,257 | ) | | 12,800 |
| | 629,085 |
| 2.0 |
| | 29.0 |
| | (1.7 | ) | | (4.3 | ) | | 25.0 |
|
| | | | | | | | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | (426,641 | ) | | 14,295 |
| | 15,566 |
| | 1,406 |
| | (395,374 | ) | |
Net decrease in cash and cash equivalents | | (203.2 | ) | | (2.8 | ) | | (4.4 | ) | | — |
| | (210.4 | ) |
Cash and cash equivalents, beginning of period | 882,820 |
| | 6,236 |
| | 28,968 |
| | (3,275 | ) | | 914,749 |
| 486.6 |
| | 13.5 |
| | 26.1 |
| | — |
| | 526.2 |
|
Cash and cash equivalents, end of period | $ | 456,179 |
| | $ | 20,531 |
| | $ | 44,534 |
| | $ | (1,869 | ) | | $ | 519,375 |
| $ | 283.4 |
| | $ | 10.7 |
| | $ | 21.7 |
| | $ | — |
| | $ | 315.8 |
|
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 Holding Company LLC included in the Annual Report on Form 10-K for the year ended December 31, 20162018 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 Holding and its consolidated 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, Gulf Coast and West Coast of the United States, as well as in other regions of the United States, Canada and Canada,Mexico and are able to ship products to other international destinations. As of September 30, 2017,March 31, 2019, we own and operate five domestic oil refineries and related assets with a combined processing capacity, known as throughput, of approximately 900,000 barrels per day (“bpd”), and a weighted-average Nelson Complexity Index of 12.2. Our five oil refineries are aggregated into one reportable segment.
Our five refineries are located in Delaware City, Delaware, Paulsboro, New Jersey, Toledo, Ohio, New Orleans, Louisiana and Torrance, California. Each of these refineriesrefinery is briefly described in the table below:
| | Refinery | Region | Nelson Complexity | Throughput Capacity (in barrels per day) | PADD | Crude Processed (1) | Source (1) | Region | Nelson Complexity Index | Throughput Capacity (in barrels per day) | PADD | Crude Processed (1) | Source (1) |
Delaware City | East Coast | 11.3 |
| 190,000 |
| 1 |
| medium and heavy sour crude | water, rail | East Coast | 11.3 | 190,000 | 1 | light sweet through heavy sour | water, rail |
Paulsboro | East Coast | 13.2 |
| 180,000 |
| 1 |
| medium and heavy sour crude | water, rail | East Coast | 13.2 | 180,000 | 1 | light sweet through heavy sour | water |
Toledo | Mid-Continent | 9.2 |
| 170,000 |
| 2 |
| light, sweet crude | pipeline, truck, rail | Mid-Continent | 9.2 | 170,000 | 2 | light sweet | pipeline, truck, rail |
Chalmette | Gulf Coast | 12.7 |
| 189,000 |
| 3 |
| light and heavy crude | water, pipeline | Gulf Coast | 12.7 | 189,000 | 3 | light sweet through heavy sour | water, pipeline |
Torrance | West Coast | 14.9 |
| 155,000 |
| 5 |
| heavy and medium crude | pipeline, water, truck | West Coast | 14.9 | 155,000 | 5 | medium and heavy | pipeline, water, truck |
________
(1) Reflects the typical crude and feedstocks and related sources utilized under normal operating conditions and prevailing market environments.
We are a wholly-owned subsidiary of PBF LLC and an indirect subsidiary of PBF Energy. PBF Finance is a wholly-owned subsidiary of PBF Holding. We are the parent company for PBF LLC’s refinery operating subsidiaries.
Factors Affecting Comparability Between Periods
Our results have been affected by the following events, the understanding of which will aid in assessing the comparability of our period to period financial performance and financial condition.
Senior Notes Offering
On May 30, 2017, we and PBF Finance issued $725.0 million in aggregate principal amount of 7.25% Senior Notes due 2025 (the “2025 Senior Notes”). We used the net proceeds to fund the cash tender offer (the “Tender Offer”) for any and all of our outstanding 8.25% senior secured notes due 2020 (the “2020 Senior Secured Notes”), to pay the related redemption price and accrued and unpaid interest for any 2020 Senior Secured Notes that remained outstanding after the completion of the Tender Offer, and for general corporate purposes. As described in “Note 5 - Debt”, upon the satisfaction and discharge of the 2020 Senior Secured Notes in connection with the closing of the Tender Offer and the redemption, the 2023 Senior Notes became unsecured and certain covenants were modified, as provided for in the indenture governing the 2023 Senior Notes and related documents.
Inventory Intermediation Agreements
On May 4, 2017 and September 8, 2017,certain dates subsequent to the inception of the Inventory Intermediation Agreements, we and our subsidiaries, DCR and PRC, entered into amendments to the amended and restated inventory intermediation agreements (as amended in the second and third quartersfirst quarter of 2017,2019, the "A&R“Inventory Intermediation Agreements"Agreements”) with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. “J.(“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 terms. The most recent of these amendments was executed on March 29, 2019. As a result of the amendments (i) the A&RInventory Intermediation Agreement by and among J. Aron, usPBF Holding and PRC relating to the Paulsboro refinery extendsDRC (i) extended the term to December 31, 2019,February 28, 2020, which term may be further extended by mutual consent of the parties to December 31, 2020February 26, 2021 and (ii) added the A&R Intermediation Agreement by and among J. Aron, us and DCR relatingPBFX East Coast Storage Facility (as defined in “Note 2 - Inventories” of our Notes to the Delaware City refinery extends the term to July 1, 2019,Condensed Consolidated Financial Statements) as a location which term may be further extended by mutual consent of the parties to July 1, 2020.
Torrance Acquisition
On July 1, 2016, we acquired from ExxonMobil Oil Corporation (“ExxonMobil”) and its subsidiary, Mobil Pacific Pipeline Company (together, the “Torrance Sellers”), the Torrance refinery and related logistics assets (collectively, the “Torrance Acquisition”). The Torrance refinery 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.
In addition to refining assets, the Torrance Acquisition included a number of high-quality logistics assets consisting of 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 189-mile crude gathering and transportation system which delivers San Joaquin Valleywill sell crude oil, directly from the fielda new product type to the refinery. Additionally,be included in the transaction were several pipelines which provide accessProducts (as defined in “Note 2 - Inventories” of our Notes to sources of crude oil including the Ports of Long BeachCondensed Consolidated Financial Statements), to J. Aron by DCR. Pursuant to each Inventory Intermediation Agreement, J. Aron continues to purchase and Los Angeles, as well as clean product outlets with a direct pipeline supplying jet fuelhold title to the Los Angeles airport. The Torrance refinery alsoProducts produced by the Paulsboro and Delaware City refineries (the “Refineries”), and delivered into the Storage Tanks (as defined in “Note 2 - Inventories” of our Notes to Condensed Consolidated Financial Statements). Furthermore, J. Aron agrees to sell the Products back to the Refineries as the Products are discharged out of the Storage Tanks. J. Aron has crudethe right to store the Products purchased in tanks under the Inventory Intermediation Agreements and productwill retain these storage facilities with approximately 8.6 million barrels of shell capacity.
The purchase pricerights for the assets was approximately $521.4 million in cash after post-closing purchase price adjustments, plus final working capital of $450.6 million. The final purchase price and fair value allocation were completed as of June 30, 2017. During the measurement period, which ended in June 2017, adjustments were made to the Company’s preliminary fair value estimates related primarily to Property, plant and equipment and Other long-term liabilities reflecting the finalizationterm of the Company’s assessmentagreements. PBF Holding continues to market and sell the Products independently to third parties.
Adoption of Accounting Standards Codification (“ASC”) Topic 842, “Leases”
As disclosed in “Note 6 - Leases” of our Notes to Condensed Consolidated Financial Statements, prior to January 1, 2019, we accounted for leases under ASC 840 and did not record a right of use asset or corresponding lease liability for operating leases on our Condensed Consolidated Balance Sheets. We adopted ASC 842 using a modified retrospective approach, and elected the coststransition method to apply the new standard at the adoption date of January 1, 2019. As such, financial information for prior periods has not been adjusted and durationcontinues to be reported under ASC 840.
Revolving Credit Facility
On May 2, 2018, we and certain of certain assumed pre-existing environmental obligations. The transaction was financed through a combination of cash on hand, including proceeds from certain PBF Energy equity offerings, and borrowings under our asset basedwholly-owned subsidiaries, as borrowers or subsidiary guarantors, replaced our existing asset-based revolving credit agreement (“dated as of August 15, 2014 (the “August 2014 Revolving Loan”Credit Agreement”).
PNGPC Contribution Agreement
On February 15, 2017, PBFX entered into with a contributionnew asset-based revolving credit agreement (the “PNGPC Contribution Agreement”“Revolving Credit Facility") between PBFX. Among other things, the Revolving Credit Facility increases the maximum commitment available to us from $2.6 billion to $3.4 billion, extends the maturity date to May 2023 and PBF LLC. Pursuant to the PNGPC Contribution Agreement, we contributed to PBF LLC, which, in turn, contributed to PBFX’s wholly owned subsidiary PBFX Operating Company LLC (“PBFX Op Co”) allredefines certain components of the issuedBorrowing Base, as defined in the agreement governing the Revolving Credit Facility (the “Revolving Credit Agreement”), to make more funding available for working capital and other general corporate purposes. In addition, an accordion feature allows for commitments of up to $3.5 billion. The commitment fees on the unused portion, the interest rate on advances and the fees for letters of credit are consistent with the August 2014 Revolving Credit Agreement.
The outstanding limited liability company interests of Paulsboro Natural Gas Pipeline Company LLC (“PNGPC”). PNGPC owns and operates an existing interstate natural gas pipeline that runsbalance under the Delaware River and terminates at our Paulsboro refinery. In August 2017, PBFX Op Co completedRevolving Credit Facility was $250.0 million as of March 31, 2019. There were no outstanding borrowings under the constructionRevolving Credit Facility as of a new pipeline which replaced the existing pipeline and commenced services. In consideration for the PNGPC limited liability company interests, PBFX delivered to PBF LLC (i) an $11.6 million intercompany promissory note in favor of Paulsboro Refining Company LLC, a wholly owned subsidiary of ours (the “Promissory Note”), (ii) an expansion rights and right of first refusal agreement in favor of PBF LLC with respect to the new pipeline and (iii)
an assignment and assumption agreement with respect to certain outstanding litigation involving PNGPC and the existing pipeline.
Chalmette Storage Tank Lease
On February 15, 2017, we and PBFX Op Co entered into a ten-year storage services agreement (the “Chalmette Storage Agreement”) and a twenty-year lease for the premises upon which a new tank at the Chalmette refinery (the “Chalmette Storage Tank”) will be located (the “Lease”). Additionally, we and PBFX entered into a project management agreement (the “Project Management Agreement”) pursuant to which PBFX, through PBFX Op Co, assumed construction of a crude oil storage tank at our Chalmette refinery, commencing upon the earlier of November 1, 2017 or the completion of construction of the Chalmette Storage Tank, which is currently expected to be completed in November 2017. The Lease can be extended by PBFX Op Co for two additional ten year terms. The Chalmette Storage Agreement can be extended by us for two additional five-year periods. Under the Chalmette Storage Agreement, PBFX will provide us with storage services in return for storage fees. The storage services require PBFX to accept, redeliver and store all products tendered by us in the tank and we will pay a monthly fee of $0.60 per barrel of shell capacity. The Lease can be extended by PBFX Op Co for two additional ten year periods.
TVPC Contribution Agreement
On AugustDecember 31, 2016, PBFX entered into a contribution agreement (the “TVPC Contribution Agreement”) between PBFX and PBF LLC. Pursuant to the TVPC Contribution Agreement, PBF Holding distributed to PBF LLC, and PBFX acquired from PBF LLC, 50% of the issued and outstanding limited liability company interests of Torrance Valley Pipeline Company LLC (“TVPC”), whose assets consist of the 189-mile San Joaquin Valley Pipeline system, including the M55, M1 and M70 pipeline system, including 11 pipeline stations with storage capability and truck unloading capacity at two of the stations. Subsequent to the distribution of TVPC pursuant to the TVPC Contribution Agreement, PBF Holding deconsolidated TVPC and has recognized an equity investment in TVPC for its 50% noncontrolling interest.2018.
Agreements with PBFX
PBFX is a fee-based, growth-oriented, publicly traded Delaware master limited partnership formed by our indirect parent company, PBF Energy, to own or lease, operate, develop and acquire crude oil, refined petroleum products and natural gas terminals, pipelines, storage facilities and similar logistics assets. PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of certain of our refineries, as well as for third partythird-party customers.
On May 14, 2014, PBFX completed its initial public offering (the “PBFX Offering”). Beginning with the completion of the PBFX Offering, we
We have entered into a series of agreements with PBFX, including contribution, commercial and operational agreements. EachRefer to “Note 4 - Related Party Transactions” of our Notes to Condensed Consolidated Financial Statements, for descriptions of these agreements and their impact to our operationsoperations. Transactions that have an impact on the comparability of our period to period financial performance and financial condition are listed below.
Development Assets Acquisition
On July 16, 2018, PBFX entered into four contribution agreements with PBF LLC pursuant to which we contributed to PBF LLC certain of our subsidiaries (the “Development Assets Contribution Agreements”). Pursuant to the Development Asset Contribution Agreements, we contributed all of the issued and outstanding limited liability company interests of: Toledo Rail Logistics Company LLC (“TRLC”), whose assets consist of a loading and unloading rail facility located at the Toledo Refinery (the “Toledo Rail Products Facility”); Chalmette Logistics Company LLC (“CLC”), whose assets consist of a truck loading rack facility (the “Chalmette Truck Rack”) and a rail yard facility (the “Chalmette Rosin Yard”), both of which are located at the Chalmette Refinery; Paulsboro Terminaling Company LLC (“PTC”), whose assets consist of a lube oil terminal facility located at the Paulsboro Refinery (the “Paulsboro Lube Oil Terminal”); and DCR Storage and Loading Company LLC (“DSLC”), whose assets consist of an ethanol storage facility located at the Delaware City Refinery (the “Delaware Ethanol Storage Facility” and collectively with the Toledo Rail Products Facility, the Chalmette Truck Rack, the Chalmette Rosin Yard, and the Paulsboro Lube Oil Terminal, the “Development Assets”) to PBF LLC. PBFX Op Co, in turn acquired the limited liability company interests in the Development Assets from PBF LLC in connection with the Development Assets Contribution Agreements. The acquisition of the Development Assets closed on July 31, 2018 for total consideration of $31.6 million consisting of 1,494,134 common units representing limited partner interests in PBFX, issued to PBF LLC (the “Development Assets Acquisition”).
Amended and Restated Rail Agreements
On May 2, 2018, the Delaware City Rail Terminaling Services Agreement and the Delaware West Ladder Rack Terminaling Services Agreement between us and Delaware City Terminaling Company LLC were amended effective as of January 1, 2018 (collectively, the “Amended and Restated Rail Agreements”) with the service fees thereunder being adjusted, including the addition of an ancillary fee paid by us on an actual cost basis. In determining payments due under the Amended and Restated Rail Agreements, excess volumes throughput under the agreements shall apply against required payments in respect to the minimum throughput commitments on a quarterly basis and, to the extent not previously applied, on an annual basis against the minimum volume commitments (“MVCs”). In 2019, we amended (effective as of January 1, 2019) the existing Amended and Restated Rail Agreements for the inclusion of services through certain rail infrastructure at the PBFX East Coast Storage Facility.
Knoxville Terminal Acquisition
On April 16, 2018, PBFX completed the purchase of two refined product terminals located in Knoxville, Tennessee, which include product tanks, pipeline connections to the Colonial and Plantation pipeline systems and truck loading facilities with nine loading bays (the “Knoxville Terminals”) from Cummins Terminals, Inc. (the “Knoxville Terminals Purchase”). In connection with the Knoxville Terminals Purchase, we and PBFX entered into a terminal throughput and storage agreement (the “Knoxville Terminals Agreement”) wherein PBFX provides us terminaling and storage services at the Knoxville Terminals. The initial term of the Knoxville Terminals Agreement is described in “Note 8 - Related Party Transactions” infive years with automatic one year renewals unless canceled by either party through written notice. Under the Knoxville Terminals Agreement, we have an MVC for storage and a minimum revenue commitment for throughput. If we do not throughput or store the aggregate amounts equal to the minimum throughput revenue or available shell capacity, we will be required to pay a shortfall payment equal to the shortfall revenue or capacity.
East Coast Storage Assets Acquisition
On October 1, 2018, the PBFX completed the purchase of CPI Operations LLC (“CPI”), whose assets include a storage facility with multi-use storage capacity, an Aframax-capable marine facility, a rail facility, a truck terminal, equipment, contracts and certain other idled assets (collectively, the “East Coast Storage Assets”) located on the Delaware River near Paulsboro, New Jersey (the “East Coast Storage Assets Acquisition”). Effective January 1, 2019, we and PBFX entered into a terminal storage agreement (the “East Coast Storage Assets Terminal Storage Agreement”) wherein PBFX provides us storage services at the East Coast Storage Assets. The initial term of the East Coast Storage Assets Terminal Storage Agreement is eight years with automatic one year renewals unless canceled by either party through written notice. Under the East Coast Storage Assets Terminal Storage Agreement, we have a minimum storage commitment, which is equal to the available shell capacity for our condensed consolidated financial statements.dedicated tanks.
If we do not store the aggregate amounts equal to the available shell capacity, we will be required to pay a shortfall payment equal to the shortfall capacity.
A summary of revenue and expense transactions with PBFX is as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues under affiliate agreements: | | | | | | | |
Services Agreement | $ | 1.6 |
| | $ | 1.3 |
| | $ | 4.9 |
| | $ | 3.5 |
|
Omnibus Agreement | 1.9 |
| | 1.2 |
| | 5.2 |
| | 3.5 |
|
Total expenses under affiliate agreements | 62.4 |
| | 43.8 |
| | 176.9 |
| | 118.4 |
|
Amended and Restated Revolving Loan
The Third Amended and Restated Revolving Loan is available to be used for working capital and other general corporate purposes. As noted in “Note 2 - Acquisitions”, we took down an advance under our Revolving Loan to partially fund the Torrance Acquisition in 2016. The outstanding balance under our Revolving Loan was $350.0 million, $350.0 million and $550.0 million as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively.
Rail Facility Revolving Credit Facility
Effective March 25, 2014, PBF Rail Logistics Company LLC (“PBF Rail”), an indirect wholly-owned subsidiary of ours, entered into a $250.0 million secured revolving credit agreement (the “Rail Facility”). The primary purpose of the Rail Facility was to fund the acquisition by PBF Rail of crude tank cars (the “Eligible Railcars”) before December 2015.
On December 22, 2016, the Rail Facility was terminated and replaced with the PBF Rail Term Loan (as described below).
PBF Rail Term Loan
On December 22, 2016, PBF Rail entered into a $35.0 million term loan (the “PBF Rail Term Loan”) with a bank previously party to the Rail Facility. The PBF Rail Term Loan amortizes monthly over its five year term and bears interest at the one month LIBOR plus the margin as defined in the credit agreement. As security for the PBF Rail Term Loan, PBF Rail pledged, among other things: (i) certain Eligible Railcars; (ii) the debt service reserve account; and (iii) our member interest in PBF Rail. Additionally, the PBF Rail Term Loan contains customary terms, events of default and covenants for a transaction of this nature. PBF Rail may at any time repay the PBF Rail Term Loan without penalty in the event that railcars collateralizing the loan are sold, scrapped or otherwise removed from the collateral pool.
The outstanding balance of the PBF Rail Term Loan was $30.0 million and $35.0 million as of September 30, 2017 and December 31, 2016, respectively.
Affiliate notes payable with PBF LLC and PBF Energy
Our long-term debt obligations may include outstanding affiliate notes payable with PBF LLC and PBF Energy. The affiliate notes have an interest rate of 2.5% and a five year term but may be prepaid in whole or in part at any time, at the option of PBF Holding, without penalty or premium. Additional borrowings may be made by PBF Holding under such affiliate notes payable from time to time. In the fourth quarter of 2016, the affiliate notes were extended to 2021. Additionally, in the fourth quarter of 2016, PBF LLC converted outstanding affiliate notes payable from PBF Holding of $379.9 million to a capital contribution. In the first quarter of 2017, PBF LLC converted the full amount of outstanding affiliate notes payable from PBF Holding of $86.3 million to a capital contribution. As of September 30, 2017, PBF Holding had no outstanding affiliate notes payable with PBF Energy and PBF LLC ($86.3 million outstanding as of December 31, 2016).
Change in Presentation
As discussed in “Note 1 - Description of the Business and Basis of Presentation,” during the third quarter of 2017, we determined that we would revise the presentation of certain line items on our consolidated statements of operations to enhance our disclosure under the requirements of Rule 5-03 of Regulation S-X. The revised presentation is comprised of the inclusion of a subtotal within costs and expenses referred to as “Cost of sales” and the reclassification of total depreciation and amortization expense between such amounts attributable to cost of sales and other operating costs and expenses. The amount of depreciation and amortization expense that is presented separately within the “Cost of Sales” subtotal represents depreciation and amortization of refining and logistics assets that are integral to the refinery production process.
The historical comparative information has been revised to conform to the current presentation. This revised presentation does not have an effect on our historical consolidated income from operations or net income, nor does it have any impact on our consolidated balance sheets, statements of comprehensive income or statements of cash flows. |
| | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
Reimbursements under affiliate agreements: | | | |
Services Agreement | $ | 2.1 |
| | $ | 1.7 |
|
Omnibus Agreement | 1.8 |
| | 1.7 |
|
Total expenses under affiliate agreements | 71.3 |
| | 60.9 |
|
Results of Operations
The following tables reflect our financial and operating highlights for the three and nine months ended September 30, 2017March 31, 2019 and 20162018 (amounts in thousands).millions):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
Revenues | $ | 5,475,816 |
| | $ | 4,508,613 |
| | $ | 15,239,265 |
| | $ | 11,164,571 |
| $ | 5,208.7 |
| | $ | 5,799.6 |
|
Cost and expenses: | | | | | | | | | | |
Cost of products and other | 4,411,809 |
| | 3,904,258 |
| | 13,326,396 |
| | 9,634,989 |
| 4,276.2 |
| | 5,189.6 |
|
Operating expenses (excluding depreciation and amortization expense as reflected below) | 389,591 |
| | 404,045 |
| | 1,225,014 |
| | 972,223 |
| 453.4 |
| | 411.4 |
|
Depreciation and amortization expense | 70,338 |
| | 51,336 |
| | 181,238 |
| | 151,473 |
| 94.3 |
| | 76.8 |
|
Cost of sales | 4,871,738 |
| | 4,359,639 |
| | 14,732,648 |
| | 10,758,685 |
| 4,823.9 |
| | 5,677.8 |
|
General and administrative expenses (excluding depreciation and amortization expense as reflected below) | 54,693 |
| | 39,912 |
| | 130,092 |
| | 111,272 |
| 51.2 |
| | 58.3 |
|
Depreciation and amortization expense | 2,572 |
| | 1,342 |
| | 10,355 |
| | 4,417 |
| 2.8 |
| | 2.7 |
|
Equity income in investee | (3,799 | ) | | (1,621 | ) | | (11,218 | ) | | (1,621 | ) | (4.7 | ) | | (4.0 | ) |
Loss on sale of assets | 28 |
| | 8,159 |
| | 940 |
| | 11,381 |
| — |
| | 0.1 |
|
Total cost and expenses | 4,925,232 |
| | 4,407,431 |
| | 14,862,817 |
| | 10,884,134 |
| 4,873.2 |
| | 5,734.9 |
|
| | | | | | | | | | |
Income from operations | 550,584 |
| | 101,182 |
| | 376,448 |
| | 280,437 |
| 335.5 |
| | 64.7 |
|
| | | | | | | | | | |
Other income (expenses): | | | | | | | | |
Other income (expense): | | | | |
Change in fair value of catalyst leases | 473 |
| | 77 |
| | (1,011 | ) | | (4,556 | ) | (3.1 | ) | | — |
|
Debt extinguishment costs | — |
| | — |
| | (25,451 | ) | | — |
| |
Interest expense, net | (29,269 | ) | | (33,896 | ) | | (92,782 | ) | | (98,446 | ) | (27.4 | ) | | (33.3 | ) |
Other non-service components of net periodic benefit cost | | (0.1 | ) | | 0.3 |
|
Income before income taxes | 521,788 |
| | 67,363 |
| | 257,204 |
| | 177,435 |
| 304.9 |
| | 31.7 |
|
Income tax (benefit) expense | (4,292 | ) | | 2,291 |
| | 2,040 |
| | 29,287 |
| |
Income tax benefit | | (7.2 | ) | | (0.7 | ) |
Net income | 526,080 |
| | 65,072 |
| | 255,164 |
|
| 148,148 |
| 312.1 |
|
| 32.4 |
|
Less: net (loss) income attributable to noncontrolling interests | (6 | ) | | 45 |
| | 374 |
| | 438 |
| |
Less: net income attributable to noncontrolling interests | | — |
| | — |
|
Net income attributable to PBF Holding Company LLC | $ | 526,086 |
| | $ | 65,027 |
| | $ | 254,790 |
|
| $ | 147,710 |
| $ | 312.1 |
|
| $ | 32.4 |
|
| | | | | | | | | | |
Gross margin | $ | 604,078 |
| | $ | 148,973 |
| | $ | 506,617 |
| | $ | 405,886 |
| |
Consolidated gross margin | | $ | 384.8 |
| | $ | 121.8 |
|
Gross refining margin (1) | $ | 1,064,007 |
| | $ | 604,355 |
| | $ | 1,912,869 |
| | $ | 1,529,582 |
| $ | 932.5 |
| | $ | 610.0 |
|
_____________________
(1) See Non-GAAP Financial Measures.
|
| | | | | | | |
Operating Highlights | Three Months Ended March 31, |
| 2019 | | 2018 |
Key Operating Information | | | |
Production (bpd in thousands) | 737.7 |
| | 803.0 |
|
Crude oil and feedstocks throughput (bpd in thousands) | 743.1 |
| | 799.6 |
|
Total crude oil and feedstocks throughput (millions of barrels) | 66.9 |
| | 72.0 |
|
Consolidated gross margin per barrel of throughput | $ | 5.75 |
| | $ | 1.70 |
|
Gross refining margin, excluding special items, per barrel of throughput (1) | $ | 6.38 |
| | $ | 7.26 |
|
Refinery operating expense, per barrel of throughput | $ | 6.78 |
| | $ | 5.72 |
|
| | | |
Crude and feedstocks (% of total throughput) (2) | | | |
Heavy | 32 | % | | 34 | % |
Medium | 32 | % | | 35 | % |
Light | 24 | % | | 20 | % |
Other feedstocks and blends | 12 | % | | 11 | % |
Total throughput | 100 | % | | 100 | % |
| | | |
Yield (% of total throughput) | | | |
Gasoline and gasoline blendstocks | 46 | % | | 51 | % |
Distillates and distillate blendstocks | 32 | % | | 31 | % |
Lubes | 1 | % | | 1 | % |
Chemicals | 2 | % | | 2 | % |
Other | 18 | % | | 15 | % |
Total yield | 99 | % | | 100 | % |
_____________________ | |
(1) | See Non-GAAP Financial Measures below. |
Operating Highlights
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Key Operating Information | | | | | | | |
Production (bpd in thousands) | 852.6 |
| | 799.1 |
| | 781.6 |
| | 717.6 |
|
Crude oil and feedstocks throughput (bpd in thousands) | 849.7 |
| | 786.3 |
| | 786.1 |
| | 711.8 |
|
Total crude oil and feedstocks throughput (millions of barrels) | 78.2 |
| | 72.3 |
| | 214.6 |
| | 195.0 |
|
Gross margin per barrel of throughput | $ | 7.73 |
| | $ | 2.06 |
| | $ | 2.36 |
| | $ | 2.09 |
|
Gross refining margin, excluding special items, per barrel of throughput (1) | $ | 10.22 |
| | $ | 6.92 |
| | $ | 8.46 |
| | $ | 6.20 |
|
Refinery operating expenses, excluding depreciation, per barrel of throughput | $ | 4.98 |
| | $ | 5.59 |
| | $ | 5.71 |
| | $ | 4.98 |
|
| | | | | | | |
Crude and feedstocks (% of total throughput) (2) | | | | | | | |
Heavy crude | 33 | % | | 34 | % | | 34 | % | | 23 | % |
Medium crude | 30 | % | | 32 | % | | 30 | % | | 38 | % |
Light crude | 22 | % | | 23 | % | | 21 | % | | 28 | % |
Other feedstocks and blends | 15 | % | | 11 | % | | 15 | % | | 11 | % |
Total throughput | 100 | % | | 100 | % | | 100 | % | | 100 | % |
| | | | | | | |
Yield (% of total throughput) | | | | | | | |
Gasoline and gasoline blendstocks | 50 | % | | 51 | % | | 50 | % | | 49 | % |
Distillates and distillate blendstocks | 29 | % | | 31 | % | | 29 | % | | 31 | % |
Lubes | 1 | % | | 1 | % | | 1 | % | | 1 | % |
Chemicals | 2 | % | | 3 | % | | 2 | % | | 4 | % |
Other | 18 | % | | 14 | % | | 17 | % | | 15 | % |
Total yield | 100 | % | | 100 | % | | 99 | % | | 100 | % |
| |
(1) | See Non-GAAP Financial Measures below.Measures. |
| |
(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. |
The table below summarizes certain market indicators relating to our operating results as reported by Platts.
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | 2019 | | 2018 |
| (dollars per barrel, except as noted) | (dollars per barrel, except as noted) |
Dated Brent Crude | $ | 52.16 |
| | $ | 45.90 |
| | $ | 51.79 |
| | $ | 42.05 |
| |
Dated Brent crude oil | | $ | 63.26 |
| | $ | 66.90 |
|
West Texas Intermediate (WTI) crude oil | $ | 48.18 |
| | $ | 44.88 |
| | $ | 49.32 |
| | $ | 41.41 |
| $ | 54.87 |
| | $ | 62.90 |
|
Light Louisiana Sweet (LLS) crude oil | $ | 51.67 |
| | $ | 46.52 |
| | $ | 51.73 |
| | $ | 43.20 |
| $ | 62.38 |
| | $ | 65.84 |
|
Alaska North Slope (ANS) crude oil | $ | 52.04 |
| | $ | 44.65 |
| | $ | 52.15 |
| | $ | 41.58 |
| $ | 64.39 |
| | $ | 67.20 |
|
Crack Spreads | | | | | | | | | | |
Dated Brent (NYH) 2-1-1 | $ | 18.12 |
| | $ | 12.94 |
| | $ | 14.84 |
| | $ | 13.18 |
| $ | 9.85 |
| | $ | 12.80 |
|
WTI (Chicago) 4-3-1 | $ | 18.82 |
| | $ | 13.64 |
| | $ | 14.70 |
| | $ | 13.07 |
| $ | 12.33 |
| | $ | 11.78 |
|
LLS (Gulf Coast) 2-1-1 | $ | 16.69 |
| | $ | 11.51 |
| | $ | 13.75 |
| | $ | 10.35 |
| $ | 9.89 |
| | $ | 12.84 |
|
ANS (West Coast) 4-3-1 | $ | 20.66 |
| | $ | 15.61 |
| | $ | 18.78 |
| | $ | 17.22 |
| $ | 13.54 |
| | $ | 16.42 |
|
Crude Oil Differentials | | | | | | | | | | |
Dated Brent (foreign) less WTI | $ | 3.97 |
| | $ | 1.02 |
| | $ | 2.47 |
| | $ | 0.64 |
| $ | 8.39 |
| | $ | 4.00 |
|
Dated Brent less Maya (heavy, sour) | $ | 8.75 |
| | $ | 6.87 |
| | $ | 6.77 |
| | $ | 7.57 |
| $ | 4.50 |
| | $ | 9.15 |
|
Dated Brent less WTS (sour) | $ | 4.96 |
| | $ | 2.50 |
| | $ | 3.63 |
| | $ | 1.48 |
| $ | 9.55 |
| | $ | 5.40 |
|
Dated Brent less ASCI (sour) | $ | 3.82 |
| | $ | 4.14 |
| | $ | 3.58 |
| | $ | 4.02 |
| $ | 2.35 |
| | $ | 4.57 |
|
WTI less WCS (heavy, sour) | $ | 10.03 |
| | $ | 13.28 |
| | $ | 10.83 |
| | $ | 12.15 |
| $ | 9.96 |
| | $ | 26.06 |
|
WTI less Bakken (light, sweet) | $ | (0.69 | ) | | $ | 1.41 |
| | $ | 0.18 |
| | $ | 1.13 |
| $ | (0.25 | ) | | $ | 1.04 |
|
WTI less Syncrude (light, sweet) | $ | (1.95 | ) | | $ | (0.95 | ) | | $ | (1.86 | ) | | $ | (2.67 | ) | $ | (0.04 | ) | | $ | 0.30 |
|
WTI less LLS (light, sweet) | $ | (3.49 | ) | | $ | (1.65 | ) | | $ | (2.41 | ) | | $ | (1.79 | ) | $ | (7.51 | ) | | $ | (2.94 | ) |
WTI less ANS (light, sweet) | $ | (3.86 | ) | | $ | 0.23 |
| | $ | (2.82 | ) | | $ | (0.17 | ) | $ | (9.52 | ) | | $ | (4.30 | ) |
Natural gas (dollars per MMBTU) | $ | 2.95 |
| | $ | 2.79 |
| | $ | 3.05 |
| | $ | 2.35 |
| $ | 2.87 |
| | $ | 2.79 |
|
Three Months Ended September 30, 2017March 31, 2019 Compared to the Three Months Ended September 30, 2016March 31, 2018
Overview— Net income was $526.1$312.1 million for the three months ended September 30, 2017March 31, 2019 compared to $65.1net income of $32.4 million for the three months ended September 30, 2016.March 31, 2018.
Our results for the three months ended September 30, 2017March 31, 2019 were positively impacted by a special item consisting of a non-cash lower of cost or market (“LCM”) inventory adjustment of approximately $265.1$506.0 million. Our results for the three months ended September 30, 2016March 31, 2018 were positively impacted by an LCM inventory adjustment of approximately $104.0$87.7 million. The LCM inventory adjustments were recorded due to movements in the price of crude oil and refined products in the periods presented.
Excluding the impact of these special items, our results were positivelynegatively impacted by higherunfavorable movements in crude differentials, lower crack spreads and overall lower throughput volumes atand barrels sold across the majority of our refineries and higher crack spreads realized at each of our refineries, whichrefineries. Our results for the three months ended March 31, 2019 were also negatively impacted by increased depreciation and amortization expense associated with our continued investment in our refining assets and the hurricane-related reduction in refining throughput ineffect of significant turnaround activity during the Gulf Coast region and tightening product inventories, specifically distillates. Notably, we benefited from the improved operating performance of our Chalmette and Torrance refineries.quarter.
Revenues— Revenues totaled $5.5$5.2 billion for the three months ended September 30, 2017March 31, 2019 compared to $4.5$5.8 billion for the three months ended September 30, 2016, an increaseMarch 31, 2018, a decrease of approximately $1.0$0.6 billion, or 21.5%10.2%. Revenues per barrel were $63.75$66.10 and $62.32$72.05 for the three months ended September 30, 2017March 31, 2019 and 2016,2018, respectively, an increasea decrease of 2.3%8.3% directly related to higherlower hydrocarbon commodity prices. For the three months ended September 30, 2017,March 31, 2019, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 343,700305,000 bpd, 160,600148,000 bpd, 200,400164,600 bpd and 145,000125,500 bpd, respectively. For the
three months ended September 30, 2016,March 31, 2018, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 315,900332,900 bpd, 165,300122,900 bpd, 165,600169,200 bpd and 139,500174,600 bpd, respectively. OurThe throughput rates at our East Coast and GulfWest Coast refineries’ throughput rates increasedrefineries were lower in the third quarter of 2017 asthree months ended March 31, 2019 compared to the same period in 2018 due to planned downtime associated with turnarounds of 2016 as a result of improved operational performance following the completion of planned turnaroundscoker and associated units at our Delaware City and ChalmetteTorrance refineries and unplanned downtime at Delaware City during 2019. Throughput rates at our Mid-Continent refinery were higher in the first and second quarters of 2017, respectively. Our West Coast refinery underwent its first major turnaround under our ownership for a majority of the second quarter in 2017, following which its throughput rates in the third quarter of 2017 were significantly abovethree months ended March 31, 2019 compared to the same period of 2016.in 2018 due to a planned turnaround beginning in March 2018. Throughput rates at our Gulf Coast refinery were in line with the prior year. For the three months ended September 30, 2017,March 31, 2019, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 359,700349,100 bpd, 167,300158,000 bpd, 233,400215,600 bpd and 173,300152,800 bpd, respectively. For the three months ended September 30, 2016,March 31, 2018, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 345,800354,500 bpd, 177,200135,700 bpd, 209,300214,500 bpd and 177,100189,700 bpd, respectively. Total refined product barrels sold were higher than throughput rates, reflecting sales from inventory as well as sales and purchases of refined products outside the refinery.our refineries.
Consolidated Gross Margin— GrossConsolidated gross margin including refinery operating expenses and depreciation, totaled $604.1$384.8 million or $7.73 per barrel of throughput, for the three months ended September 30, 2017March 31, 2019, compared to $149.0$121.8 million or $2.06 per barrel of throughput, for the three months ended September 30, 2016,March 31, 2018, an increase of approximately $455.1$263.0 million. Gross refining margin (as described below in Non-GAAP Financial Measures) totaled $1,064.0$932.5 million, or $13.61$13.94 per barrel of throughput ($798.9 million or $10.22 per barrel of throughput excluding the impact of special items), for the three months ended September 30, 2017March 31, 2019 compared to $604.4$610.0 million, or $8.36$8.49 per barrel of throughput ($500.4 million or $6.92 per barrel of throughput excluding the impact of special items) for the three months ended September 30, 2016,March 31, 2018, an increase of approximately $459.7$322.5 million. Gross refining margin excluding special items totaled $426.5 million or $298.6 million excluding special items.
Excluding the impact$6.38 per barrel of special items, gross margin and gross refining margin increased due to improved crack spreads and higher throughput rates in the East Coast, Gulf Coast and West Coast and reduced costs to comply with the RFS. Costs to comply with our obligation under the RFS totaled $83.4 million for the three months ended September 30, 2017March 31, 2019 compared to $94.7$522.3 million or $7.26 per barrel of throughput for the three months ended September 30, 2016. In addition,March 31, 2018, a decrease of $95.8 million.
Consolidated gross margin and gross refining margin were positively impacted by a non-cash LCM inventory adjustment of approximately $265.1$506.0 million on a net basis resulting from anthe increase in crude oil and refined product prices in comparisonfrom the year ended 2018 to the prices at the end of the secondfirst quarter of 2017.2019. The non-cash LCM inventory adjustment increased consolidated gross margin and gross refining margin by approximately $104.0$87.7 million in the third quarter of 2016.
Average industry refining margins in the Mid-Continent were stronger duringfor the three months ended September 30, 2017 as comparedMarch 31, 2018. Gross refining margin excluding the impact of special items decreased due to unfavorable movements in crude differentials, lower crack spreads, and reduced throughput in the East Coast and West Coast, partially offset by higher throughput rates in the Mid-Continent.
Additionally, our results continue to be impacted by significant costs to comply with the Renewable Fuel Standard (“RFS”), although at a reduced level from the prior year. Total RFS costs were $29.5 million for the three months ended March 31, 2019 in comparison to $43.9 million for the three months ended March 31, 2018.
Average industry margins were weaker during the quarter ended March 31, 2019 in comparison to the same period in 2016. The WTI (Chicago) 4-3-1 industry crack spread was $18.82 per barrel, or 38.0% higher,2018, primarily as a result of high levels of gasoline inventories pressuring product margins. Crude oil differentials were generally unfavorable in the three months ended September 30, 2017 as comparedcomparison to $13.64 per barrel in the same period in 2016. Our margins were unfavorably impacted by2018, with notable light-heavy crude differential compression negatively impacting our refinery specific crude slate in the Mid-Continent which was impacted by a declining WTI/Bakken differential and a declining WTI/Syncrude differential, which averaged a premium of $1.95 per barrel during the three months ended September 30, 2017 as compared to a premium of $0.95 per barrel in the same period of 2016.gross refining margin.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was approximately $18.12$9.85 per barrel, or 40.0% higher,23.0% lower, in the three months ended September 30, 2017March 31, 2019, as compared to $12.94$12.80 per barrel in the same period in 2016. The Dated Brent/WTI differential and2018. Our margins were negatively impacted from our refinery specific slate on the East Coast by tightening in the Dated Brent/Maya and WTI/Bakken differentials, which decreased by $4.65 per barrel and $1.29 per barrel, respectively, in comparison to the same period in 2018. In addition, the WTI/WCS differential were $2.95 and $1.88decreased significantly to $9.96 per barrel during the three months ended March 31, 2019 compared to $26.06 in the same period of 2018, which unfavorably impacted our cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread was $12.33 per barrel, or 4.7% higher, respectively, in the three months ended September 30, 2017March 31, 2019 as compared to $11.78 per barrel in the same period in 2016, partially offset2018. Our margins were negatively impacted from our refinery specific slate in the Mid-Continent by adverse movements in thea decreasing WTI/Bakken differential, which was approximately $2.10averaged a premium of $0.25 per barrel less favorable (a premium of $0.69 in 2017the three months ended March 31, 2019, as compared to a discount of $1.41$1.04 per barrel in 2016) in the three months ended September 30, 2017 as compared to the same period in 2016.
Gulf Coast industry refining margins improved significantly2018. Additionally, the WTI/Syncrude differential averaged a premium of $0.04 per barrel during the three months ended September 30, 2017March 31, 2019 as compared to a discount of $0.30 per barrel in the same period in 2016. Theof 2018.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $16.69$9.89 per barrel, or 45.0% higher,23.0% lower, in the three months ended September 30, 2017March 31, 2019 as compared to $11.51$12.84 per barrel in the same period in 2016. Crude differentials weakened with2018. Margins on the Gulf Coast were negatively impacted from our refinery specific slate by a declining WTI/LLS differential, averagingwhich averaged a premium of $3.49
$7.51 per barrel during the three months ended September 30, 2017March 31, 2019 as compared to a premium of $1.65$2.94 per barrel in the same period of 2016.2018.
Additionally, we benefited from improvements inOn the West Coast industry refining margins during the three months ended September 30, 2017 as compared to the same period in 2016. The ANS (West Coast) 4-3-1 industry crack spread was $20.66$13.54 per barrel, or 32.4% higher,17.5% lower, in the three months ended September 30, 2017March 31, 2019 as compared to $15.61$16.42 per barrel in the same period in 2016. Partially offsetting2018. Margins on the improved crack spreads, crude differentials weakened with theWest Coast were negatively impacted from our refinery specific slate by a declining WTI/ANS differential, averagingwhich averaged a premium of $3.86$9.52 per barrel during the three months ended September 30, 2017March 31, 2019 as compared to a discountpremium of $0.23$4.30 per barrel in the same period of 2016.2018.
Favorable movements in these benchmark crude differentials typically result in lower crude costs and positively impact our earnings while reductions in these benchmark crude differentials typically result in higher crude costs and negatively impact our earnings.
Operating Expenses— Operating expenses totaled $389.6$453.4 million, or $4.98$6.78 per barrel of throughput, for the three months ended September 30, 2017March 31, 2019 compared to $404.0$411.4 million, or $5.59$5.72 per barrel of throughput, for the three months ended September 30, 2016, a decreaseMarch 31, 2018, an increase of $14.5approximately $42.0 million, or 3.6%10.2%. The decreaseIncreases in operating expenses waswere mainly attributableattributed to lowerhigher outside servicesservice costs related to turnaround and maintenance activity and higher energy and utility costs as compared to the same perioda result of overall increases in 2016 across all of our refineries partially offset by higher maintenance costs due to increased throughput.natural gas prices.
General and Administrative Expenses— General and administrative expenses totaled $54.7$51.2 million for the three months ended September 30, 2017March 31, 2019 compared to $39.9$58.3 million for the three months ended September 30, 2016, an increaseMarch 31, 2018, a decrease of approximately $14.8$7.1 million or 37.0%12.2%. The increasedecrease in general and administrative expenses for the three months ended September 30, 2017 overMarch 31, 2019 in comparison to the same period of 2016three months ended March 31, 2018 primarily relatesrelated to increases inlower employee related expenses, of $21.5 million driven by higher incentive compensation in the third quarter of 2017 as compared to the third quarter of 2016. This increase was partially offset by lower costs associated with acquisition and integration related activities which were $7.0 million lower in the current quarter as compared to the same quarter of 2016.higher legal settlement costs. Our general and administrative expenses are comprised of the personnel, facilities and other infrastructure costs necessary to support our refineries.
Loss on Sale of Assets— There was a de minimisNet loss on sale of assets was less than $0.1 million for the three months ended September 30, 2017 relating to non-operating refinery assetsMarch 31, 2019 compared to a loss of $8.2$0.1 million onfor the three months ended March 31, 2018. These losses are related to the sale of non-operating refinery assets for the three months ended September 30, 2016.assets.
Depreciation and Amortization Expense— Depreciation and amortization expense totaled $72.9$97.1 million for the three months ended September 30, 2017March 31, 2019 (including $70.3$94.3 million recorded within Cost of sales) compared to $52.7$79.5 million for the three months ended September 30, 2016March 31, 2018 (including $51.3$76.8 million recorded within Cost of sales), an increase of $20.2approximately $17.6 million. The increase was a result of additional depreciation expense associated with a general increase in our fixed asset base due to capital projects and turnarounds completed since the third quarter 2016, including the first significant turnaround under our ownership at our Torrance refinery, which was completed early in the third quarter of 2017.
Change in Fair Value of Catalyst Leases— Change in the fair value of catalyst leases represented a gain of $0.5 million for the three months ended September 30, 2017 compared to a gain of $0.1 million for the three months ended September 30, 2016. These gains relate to the change in value of the precious metals underlying the sale and leaseback of our refineries’ precious metals catalyst, which we are obligated to repurchase at fair market value on the lease termination dates.
Interest Expense, net— Interest expense totaled $29.3 million for the three months ended September 30, 2017 compared to $33.9 million for the three months ended September 30, 2016, a decrease of approximately $4.6 million. This net decrease is primarily attributable to lower interest expense on a portion of our senior notes that were refinanced in May 2017 (see “Note 5 - Debt” for additional details). Interest expense includes interest on long-term debt and notes payable, costs2018, as well as accelerated amortization related to the sale and leaseback of our precious metals catalyst, financing
costs associated with the A&R Intermediation Agreements with J. Aron, letter of credit fees associated with the purchase of certain crude oils, and the amortization of deferred financing costs.
Income Tax Expense— As PBF Holding is a limited liability company treated as a “flow-through” entity for income tax purposes, our consolidated financial statements generally do not include a benefit or provision for income taxes for the three months ended September 30, 2017 and September 30, 2016, respectively, apart from the income tax attributable to two subsidiaries acquired in connection with the Chalmette Acquisition in the fourth quarter of 2015 and our wholly-owned Canadian subsidiary, PBF Energy Limited (“PBF Ltd.”). The two subsidiaries acquired in connection with the Chalmette Acquisition are treated as C-Corporations for income tax purposes.
We incurred a net income tax benefit of $4.3 million and income tax expense of $2.3 million for the three months ended September 30, 2017 and September 30, 2016, respectively, reflecting a net loss from our taxable subsidiaries in the three months ended September 30, 2017 as compared to net earnings from our taxable subsidiaries in the three months ended September 30, 2016.
Nine Months EndedSeptember 30, 2017 Compared to the Nine Months Ended September 30, 2016
Overview— Net income was $255.2 million for the nine months ended September 30, 2017 compared to$148.1 million for the nine months ended September 30, 2016.
Our results for the nine months ended September 30, 2017 were net positively impacted by special items. During the nine months ended September 30, 2017, we incurred a positive special item in the form of a non-cash LCM inventory adjustment of approximately $97.9 million, which was partially offset by a special item related to debt extinguishment costs associated with the early retirement of our 2020 Senior Secured Notes of $25.5 million. Our results for the nine months ended September 30, 2016 were positively impacted by an LCM inventory adjustment of approximately $320.8 million. The LCM inventory adjustments were recorded due to movements in the price of crude oil and refined products in the periods presented. Excluding the impact of these special items, our results were positively impacted by higher throughput volumes at the majority of our refineries and higher crack spreads realized at each of our refineries, which were impacted by the hurricane-related reduction in refining throughput in the Gulf Coast region and tightening product inventories, specifically distillates, as well as lower costs to comply with the RFS. Notably, we benefited from the improved operating performance of our ChalmetteDelaware City and Torrance refineries.
Revenues— Revenues totaled $15.2 billion for the nine months ended September 30, 2017 compared to $11.2 billion for the nine months ended September 30, 2016, an increase of approximately $4.1 billion, or 36.5%. Revenues per barrel were $62.34 and $57.25 for the nine months ended September 30, 2017 and 2016, respectively, an increase of 8.9% directly related to higher hydrocarbon commodity prices. For the nine months ended September 30, 2017, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 330,100 bpd, 146,500 bpd, 182,600 bpd and 126,900 bpd, respectively. For the nine months ended September 30, 2016, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 327,900 bpd, 165,700 bpd, 171,300 bpd and 139,600 bpd, respectively. The throughput rates at our East Coast refineries were substantially unchanged in 2017 compared to 2016. Our West Coast refinery was not acquired until the beginning of the third quarter of 2016. The decrease in throughput rates at our West Coast refinery in 2017 compared to 2016 is primarily due to planned downtime at our Torrance refinery for its first significant turnaround under our ownership, which was completed early in the third quarter of 2017. For the nine months ended September 30, 2017, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 358,000 bpd, 160,600 bpd, 221,700 bpd and 155,200 bpd, respectively. For the nine months ended September 30, 2016, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 366,000 bpd, 175,700 bpd, 209,000 bpd and 177,100 bpd, respectively. Total refined product barrels sold were higher than throughput rates, reflecting sales from inventory as well as sales and purchases of refined products outside the refinery.
Gross Margin— Gross margin, including refinery operating expenses and depreciation, totaled $506.6 million, or $2.36 per barrel of throughput, for the nine months ended September 30, 2017 compared to $405.9
million, or $2.09 per barrel of throughput, for the nine months ended September 30, 2016, an increase of $100.7 million. Gross refining margin (as described below in Non-GAAP Financial Measures) totaled $1,912.9 million, or $8.91 per barrel of throughput ($1,814.9 million or $8.46 per barrel of throughput excluding the impact of special items), for the nine months ended September 30, 2017 compared to $1,529.6 million, or $7.85 per barrel of throughput ($1,208.7 million or $6.20 per barrel of throughput excluding the impact of special items) for the nine months ended September 30, 2016, an increase of approximately $383.3 million or $606.2 million excluding special items.
Excluding the impact of special items, gross margin and gross refining margin increased due to improved crack spreads for each of our refineries, reduced costs to comply with the RFS and positive margin contributions from our Torrance refinery following its first significant turnaround under our ownership, which was completed early in the third quarter of 2017. Costs to comply with our obligation under the RFS totaled $203.2 million for the nine months ended September 30, 2017 compared to $251.9 million for the nine months ended September 30, 2016. In addition, gross margin and gross refining margin were positively impacted by a non-cash LCM inventory adjustment of approximately $97.9 million on a net basis resulting from an increase in crude oil and refined product prices in comparison to the prices at year end. The non-cash LCM inventory adjustment increased gross margin and gross refining margin by approximately $320.8 million for the nine months ended September 30, 2016.
Average industry refining margins in the Mid-Continent were stronger during the nine months ended September 30, 2017 as compared to the same period in 2016. The WTI (Chicago) 4-3-1 industry crack spread was $14.70 per barrel, or 12.5% higher, in the nine months ended September 30, 2017 as compared to $13.07 per barrel in the same period in 2016. Our margins were unfavorably impacted by our refinery specific crude slate in the Mid-Continent which was impacted by a declining WTI/Bakken differential partially offset by an improving WTI/Syncrude differential, which averaged a premium of $1.86 per barrel during the nine months ended September 30, 2017 as compared to a premium of $2.67 per barrel in the same period of 2016.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was approximately $14.84 per barrel, or 12.6% higher in the nine months ended September 30, 2017 as compared to $13.18 per barrel in the same period in 2016. The Dated Brent/Maya differential was $0.80 lower in the nine months ended September 30, 2017 as compared to the same period in 2016. The Dated Brent/WTI differential was $1.83 higher in the nine months ended September 30, 2017 as compared to the same period in 2016, partially offset by a narrowing WTI/Bakken differential, which was approximately $0.95 per barrel less favorable in the nine months ended September 30, 2017 as compared to the same period in 2016.
Gulf Coast industry refining margins improved during the nine months ended September 30, 2017 as compared to the same period in 2016. The LLS (Gulf Coast) 2-1-1 industry crack spread was $13.75 per barrel, or 32.9% higher, in the nine months ended September 30, 2017 as compared to $10.35 per barrel in the same period in 2016. Crude differentials slightly decreased with the WTI/LLS differential averaging a premium of $2.41 per barrel during the nine months ended September 30, 2017 as compared to a premium of $1.79 per barrel in the same period of 2016.
Additionally, we benefited from improvements in the West Coast industry refining margins during the nine months ended September 30, 2017 as compared to the same period in 2016. The ANS (West Coast) 4-3-1 industry crack spread was $18.78 per barrel, or 9.1% higher, in the nine months ended September 30, 2017 as compared to $17.22 per barrel in the same period in 2016. Partially offsetting the improved crack spreads, crude differentials weakened with the WTI/ANS differential averaging a premium of $2.82 per barrel during the nine months ended September 30, 2017 as compared to a premium of $0.17 per barrel in the same period of 2016. As the Torrance refinery was not acquired until the beginning of the third quarter of 2016, we did not benefit from the contribution of this refinery for the full nine months of the prior year.
Favorable movements in these benchmark crude differentials typically result in lower crude costs and positively impact our earnings while reductions in these benchmark crude differentials typically result in higher crude costs and negatively impact our earnings.
Operating Expenses— Operating expenses totaled $1,225.0 million, or $5.71 per barrel of throughput, for the nine months ended September 30, 2017 compared to $972.2 million, or $4.98 per barrel of throughput, for the nine months ended September 30, 2016, an increase of $252.8 million, or 26.0%. The increase in operating expenses was mainly attributable to an increase of $237.3 million in costs associated with the Torrance refinery and related logistics assets. Total operating expenses for the nine months ended September 30, 2017, excluding our Torrance refinery, increased due to higher maintenance and utility costs across all our other refineries.
General and Administrative Expenses— General and administrative expenses totaled $130.1 million for the nine months ended September 30, 2017 compared to $111.3 million for the nine months ended September 30, 2016, an increase of approximately $18.8 million or 16.9%. The increase in general and administrative expenses for the nine months ended September 30, 2017 over the same period of 2016 primarily relates to increased employee related expenses of $28.3 million driven by higher incentive compensation costs in the nine months ended September 30, 2017 as compared to the same period in 2016 as well as higher employee headcount. These increases were partially offset by lower costs associated with the acquisition and integration related activities which were approximately $10.1 million lower in the nine months ended September 30, 2017 as compared to the same period of 2016. Our general and administrative expenses are comprised of the personnel, facilities and other infrastructure costs necessary to support our refineries.
Loss on Sale of Assets— There was a loss of $0.9 million on sale of assets for the nine months ended September 30, 2017 relating to non-operating refinery assets as compared to a loss of $11.4 million on the sale of assets for the nine months ended September 30, 2016 relating to the sale of non-operating refinery assets.
Depreciation and Amortization Expense— Depreciation and amortization expense totaled $191.6 million for the nine months ended September 30, 2017 (including $181.2 million recorded within Cost of sales) compared to $155.9 million for the nine months ended September 30, 2016 (including $151.5 million recorded within Cost of sales), an increase of approximately $35.7 million. The increase was a result of additional depreciation expense associated with the assets acquired in the Torrance Acquisition and a general increase in our fixed asset base due to capital projects and turnarounds completed since the third quarter of 2016.turnarounds.
Change in Fair Value of Catalyst Leases— Change in the fair value of catalyst leases represented a loss of $1.0$3.1 million for the ninethree months ended September 30, 2017March 31, 2019 compared to a lossgain of $4.6less than $0.1 million for the ninethree months ended September 30, 2016.March 31, 2018. These gains and losses relate to the change in value of the precious metals underlying the sale and leaseback of our refineries’ precious metals catalyst, which we are obligated to repurchase at fair market value on the lease termination dates.
Debt extinguishment costs - Debt extinguishment costs of $25.5 million incurred in the nine months ended September 30, 2017 relate to nonrecurring charges associated with debt refinancing activity calculated based on the difference between the carrying value of the 2020 Senior Secured Notes on the date that they were reacquired and the amount for which they were reacquired. There were no such costs in the same period of 2016.
Interest Expense, net— Interest expense totaled $92.8$27.4 million for the ninethree months ended September 30, 2017March 31, 2019 compared to $98.4$33.3 million for the ninethree months ended September 30, 2016,March 31, 2018, a decrease of approximately $5.7$5.9 million. This net decrease is mainly attributable to lower interest expense on a portion of our senior notes that were refinanced in May 2017 (see “Note 5 - Debt” for additional details).outstanding revolver borrowings during the three months ended March 31, 2019. Interest expense includes interest on long-term debt, and notes payable, costs related to the sale and leaseback of our precious metals catalyst, financing costs associated with the A&RInventory Intermediation Agreements with J. Aron, letter of credit fees associated with the purchase of certain crude oils and the amortization of deferred financing costs.
Income Tax Expense— As PBF Holding is a limited liability company treated as a “flow-through” entity for income tax purposes, our consolidated financial statementsCondensed Consolidated Financial Statements generally do not include a benefit or provisionexpense for income taxes for the ninethree months ended September 30, 2017March 31, 2019 and September 30, 2016,March 31, 2018, respectively, apart from the income tax attributable to two subsidiaries acquired in connection with the Chalmette Acquisition in the fourth quarter of 2015 and our wholly-owned Canadian subsidiary, PBF Ltd.. The twoLtd. These subsidiaries acquired in connection with the Chalmette Acquisition are treated as C-Corporations for income tax purposes.
Income An income tax expensebenefit of $7.2 million was $2.0 million and $29.3 millionrecorded for the ninethree months ended September 30, 2017 and September 30, 2016, respectively. IncomeMarch 31, 2019 in comparison to income tax expensebenefit of $0.7 million recorded for the ninethree months ended September 30, 2016 included a chargeMarch 31, 2018, primarily attributable to the results of $30.7 million related to a correction of prior periods.PBF Ltd.
Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance that are calculated and presented on the basis of methodologies other than in accordance with GAAP (“non-GAAP”Non-GAAP”). These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies.
Special Items
The non-GAAPNon-GAAP measures presented include EBITDA excluding special items and gross refining margin excluding special items. The specialSpecial items presented for the periods presentedthree months ended March 31, 2019 and March 31, 2018, respectively, relate to an LCM inventory adjustment and debt extinguishment costs (as further explained in “Notesadjustment. See “Notes to Non-GAAP Financial Measures” below for more details on page 60).all special items disclosed. Although we believe that non-GAAPNon-GAAP financial measures, excluding the impact of special items, provide useful supplemental information to investors regarding the results and performance of our business and allow for helpful period-over-period comparisons, such non-GAAPNon-GAAP measures should only be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.
Gross Refining Margin and Gross Refining Margin Excluding Special Items
Gross refining margin is defined as consolidated gross margin excluding refinery depreciation and operating expenses related to the refineries.expenses. We believe both gross refining margin and gross refining margin excluding special items are important measures of operating performance and provide useful information to investors because they are helpful metric comparisons to the industry refining margin benchmarks, as the refining margin benchmarks do not include a charge for refinery operating expenses and depreciation. In order to assess our operating performance, we compare our gross refining margin (revenue less cost of products and other) to industry refining margin benchmarks and crude oil prices as defined in the table below.
Neither gross refining margin nor gross refining margin excluding special items should be considered an alternative to consolidated gross margin, operating income from operations, net cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Gross refining margin and gross refining margin excluding special items presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
The following table presents our GAAP calculation of gross margin and a reconciliation of gross refining margin to the most directly comparable GAAP financial measure, consolidated gross margin, on a historical basis, as applicable, for each of the periods indicated (in thousands,millions, except per barrel amounts):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 |
| $ | | per barrel of throughput | | $ | | per barrel of throughput |
Calculation of gross margin: | | | | | | | |
Revenues | $ | 5,475,816 |
| | $ | 70.05 |
| | $ | 4,508,613 |
| | $ | 62.32 |
|
Less: Cost of products and other | 4,411,809 |
| | 56.44 |
| | 3,904,258 |
| | 53.96 |
|
Less: Refinery operating expenses | 389,591 |
| | 4.98 |
| | 404,045 |
| | 5.59 |
|
Less: Refinery depreciation expenses | 70,338 |
| | 0.90 |
| | 51,337 |
| | 0.71 |
|
Gross margin | $ | 604,078 |
| | $ | 7.73 |
| | $ | 148,973 |
| | $ | 2.06 |
|
Reconciliation of gross margin to gross refining margin: | | | | | | | |
Gross margin | $ | 604,078 |
| | $ | 7.73 |
| | $ | 148,973 |
| | $ | 2.06 |
|
Add: Refinery operating expenses | 389,591 |
| | 4.98 |
| | 404,045 |
| | 5.59 |
|
Add: Refinery depreciation expense | 70,338 |
| | 0.90 |
| | 51,337 |
| | 0.71 |
|
Gross refining margin | $ | 1,064,007 |
| | $ | 13.61 |
| | $ | 604,355 |
| | $ | 8.36 |
|
Special items: | | | | | | | |
Add: Non-cash LCM inventory adjustment (1) | (265,077 | ) | | (3.39 | ) | | (103,990 | ) | | (1.44 | ) |
Gross refining margin excluding special items | $ | 798,930 |
| | $ | 10.22 |
| | $ | 500,365 |
| | $ | 6.92 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2019 | | 2018 |
| $ | | per barrel of throughput | | $ | | per barrel of throughput |
Calculation of consolidated gross margin: | | | | | | | |
Revenues | $ | 5,208.7 |
| | $ | 77.88 |
| | $ | 5,799.6 |
| | $ | 80.59 |
|
Less: Cost of Sales | 4,823.9 |
| | 72.13 |
| | 5,677.8 |
| | 78.89 |
|
Consolidated gross margin | $ | 384.8 |
| | $ | 5.75 |
| | $ | 121.8 |
| | $ | 1.70 |
|
Reconciliation of consolidated gross margin to gross refining margin: | | | | | | | |
Consolidated gross margin | $ | 384.8 |
| | $ | 5.75 |
| | $ | 121.8 |
| | $ | 1.70 |
|
Add: Refinery operating expense | 453.4 |
| | 6.78 |
| | 411.4 |
| | 5.72 |
|
Add: Refinery depreciation expense | 94.3 |
| | 1.41 |
| | 76.8 |
| | 1.07 |
|
Gross refining margin | $ | 932.5 |
| | $ | 13.94 |
| | $ | 610.0 |
| | $ | 8.49 |
|
Special items:(1) | | | | | | | |
Add: Non-cash LCM inventory adjustment | (506.0 | ) | | (7.56 | ) | | (87.7 | ) | | (1.23 | ) |
Gross refining margin excluding special items | $ | 426.5 |
| | $ | 6.38 |
| | $ | 522.3 |
| | $ | 7.26 |
|
| | | | | | | |
——————————
See Notes to Non-GAAP Financial Measures on page 60
|
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| $ | | per barrel of throughput | | $ | | per barrel of throughput |
Calculation of gross margin: | | | | | | | |
Revenues | $ | 15,239,265 |
| | $ | 71.02 |
| | $ | 11,164,571 |
| | $ | 57.25 |
|
Less: Cost of products and other | 13,326,396 |
| | 62.11 |
| | 9,634,989 |
| | 49.40 |
|
Less: Refinery operating expenses | 1,225,014 |
| | 5.71 |
| | 972,223 |
| | 4.98 |
|
Less: Refinery depreciation expenses | 181,238 |
| | 0.84 |
| | 151,473 |
| | 0.78 |
|
Gross margin | $ | 506,617 |
| | $ | 2.36 |
| | $ | 405,886 |
| | $ | 2.09 |
|
Reconciliation of gross margin to gross refining margin: | | | | | | | |
Gross margin | $ | 506,617 |
| | $ | 2.36 |
| | $ | 405,886 |
| | $ | 2.09 |
|
Add: Refinery operating expenses | 1,225,014 |
| | 5.71 |
| | 972,223 |
| | 4.98 |
|
Add: Refinery depreciation expense | 181,238 |
| | 0.84 |
| | 151,473 |
| | 0.78 |
|
Gross refining margin | $ | 1,912,869 |
| | $ | 8.91 |
| | $ | 1,529,582 |
| | $ | 7.85 |
|
Special items: | | | | | | | |
Add: Non-cash LCM inventory adjustment (1) | (97,943 | ) | | (0.45 | ) | | (320,833 | ) | | (1.65 | ) |
Gross refining margin excluding special items | $ | 1,814,926 |
| | $ | 8.46 |
| | $ | 1,208,749 |
| | $ | 6.20 |
|
| | | | | | | |
——————————
See Notes to Non-GAAP Financial Measures on page 60
Measures.
EBITDA, EBITDA Excluding Special Items and Adjusted EBITDA
Our management uses EBITDA (earnings before interest, income taxes, depreciation and amortization), EBITDA excluding special items and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our board of directors, creditors, analysts and investors concerning our financial performance. Our outstanding indebtedness for borrowed money and other contractual obligations also include similar measures as a basis for certain covenants under those agreements which may differ from the Adjusted EBITDA definition described below.
EBITDA, EBITDA excluding special items and Adjusted EBITDA are not presentations made in accordance with GAAP and our computation of EBITDA, EBITDA excluding special items and Adjusted EBITDA may vary from others in our industry. In addition, Adjusted EBITDA contains some, but not all, adjustments that are taken into account in the calculation of the components of various covenants in the agreements governing our senior notes and other credit facilities. EBITDA, EBITDA excluding special items and Adjusted EBITDA should not be considered as alternatives to operating income (loss)from operations or net income (loss) as measures of operating performance. In addition, EBITDA, EBITDA excluding special items and Adjusted EBITDA are not presented as, and should not be considered, an alternative to cash flows from operations as a measure of liquidity. Adjusted EBITDA is defined as EBITDA before adjustments for items such as equity-basedstock-based compensation expense, gains (losses) from certain derivative activities and contingent consideration, the non-cash change in the deferralfair value of gross profit related to the sale of certain finished products,catalyst leases, the write down of inventory to the LCM, and debt extinguishment costs related to refinancing activities.activities, and certain other non-cash items. Other companies, including other companies in our industry, may calculate EBITDA, EBITDA excluding special items and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures. EBITDA, EBITDA excluding special items and Adjusted EBITDA also have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results
as reported under GAAP. Some of these limitations include that EBITDA, EBITDA excluding special items and Adjusted EBITDA:
do not reflect depreciation expense or our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
do not reflect changes in, or cash requirements for, our working capital needs;
do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
do not reflect realized and unrealized gains and losses from certain hedging activities, which may have a substantial impact on our cash flow;
do not reflect certain other non-cash income and expenses; and
exclude income taxes that may represent a reduction in available cash.
The following tables reconcile net income as reflected in our results of operations to EBITDA, EBITDA excluding special items and Adjusted EBITDA for the periods presented (in thousands)millions):
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2019 | | 2018 |
| | | | | | | | | | | | |
Reconciliation of net income to EBITDA and EBITDA excluding special items: | Reconciliation of net income to EBITDA and EBITDA excluding special items: | | | | | | | | Reconciliation of net income to EBITDA and EBITDA excluding special items: | | | |
Net income | Net income | $ | 526,080 |
| | $ | 65,072 |
| | $ | 255,164 |
| | $ | 148,148 |
| Net income | $ | 312.1 |
| | $ | 32.4 |
|
Add: Depreciation and amortization expense | Add: Depreciation and amortization expense | 72,910 |
| | 52,678 |
| | 191,593 |
| | 155,890 |
| Add: Depreciation and amortization expense | 97.1 |
| | 79.5 |
|
Add: Interest expense, net | Add: Interest expense, net | 29,269 |
| | 33,896 |
| | 92,782 |
| | 98,446 |
| Add: Interest expense, net | 27.4 |
| | 33.3 |
|
Add: Income tax (benefit) expense | (4,292 | ) | | 2,291 |
| | 2,040 |
| | 29,287 |
| |
Add: Income tax benefit | | Add: Income tax benefit | (7.2 | ) | | (0.7 | ) |
EBITDA | EBITDA | $ | 623,967 |
| | $ | 153,937 |
| | $ | 541,579 |
| | $ | 431,771 |
| EBITDA | $ | 429.4 |
| | $ | 144.5 |
|
Special Items:(1) | Special Items:(1) | | | | | | | | Special Items:(1) | | | |
Add: Non-cash LCM inventory adjustment (1) | (265,077 | ) | | (103,990 | ) | | (97,943 | ) | | (320,833 | ) | |
Add: Debt extinguishment costs (1) | — |
| | — |
| | 25,451 |
| | — |
| |
Add: Non-cash LCM inventory adjustment | | Add: Non-cash LCM inventory adjustment | (506.0 | ) | | (87.7 | ) |
EBITDA excluding special items | EBITDA excluding special items | $ | 358,890 |
| | $ | 49,947 |
| | $ | 469,087 |
| | $ | 110,938 |
| EBITDA excluding special items | $ | (76.6 | ) | | $ | 56.8 |
|
| | | | | | | | | | | | |
Reconciliation of EBITDA to Adjusted EBITDA: | Reconciliation of EBITDA to Adjusted EBITDA: | | | | | | | | Reconciliation of EBITDA to Adjusted EBITDA: | | | |
EBITDA | EBITDA | $ | 623,967 |
| | $ | 153,937 |
| | $ | 541,579 |
| | $ | 431,771 |
| EBITDA | $ | 429.4 |
| | $ | 144.5 |
|
Add: Stock based compensation | 3,415 |
| | 2,659 |
| | 13,549 |
| | 12,658 |
| |
Add: Stock-based compensation | | Add: Stock-based compensation | 7.1 |
| | 4.3 |
|
Add: Non-cash change in fair value of catalyst leases | Add: Non-cash change in fair value of catalyst leases | (473 | ) | | (77 | ) | | 1,011 |
| | 4,556 |
| Add: Non-cash change in fair value of catalyst leases | 3.1 |
| | — |
|
Add: Non-cash LCM inventory adjustment (1) | Add: Non-cash LCM inventory adjustment (1) | (265,077 | ) | | (103,990 | ) | | (97,943 | ) | | (320,833 | ) | Add: Non-cash LCM inventory adjustment (1) | (506.0 | ) | | (87.7 | ) |
Add: Debt extinguishment costs (1) | — |
| | — |
| | 25,451 |
| | — |
| |
Adjusted EBITDA | Adjusted EBITDA | $ | 361,832 |
| | $ | 52,529 |
| | $ | 483,647 |
| | $ | 128,152 |
| Adjusted EBITDA | $ | (66.4 | ) | | $ | 61.1 |
|
| | | | | | | | | |
——————————
See Notes to Non-GAAP Financial Measures on page 60Measures.
Notes to Non-GAAP Financial Measures
The following notes are applicable to the Non-GAAP Financial Measures above:
| |
(1) | Special items: In accordance with GAAP, we are required to state our inventories at the lower of cost or market. Our inventory cost is determined by the last-in, first-out (“LIFO”) inventory valuation methodology, in which the most recently incurred costs are charged to cost of sales and inventories are valued at base layer acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and net realizable selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may exceed market values. In such instances, we record an adjustment to write down the value of inventory to market value in accordance with GAAP. In subsequent periods, the value of inventory is reassessed and an LCM inventory adjustment is recorded to reflect the net change in the LCM inventory reserve between the prior period and the current period. |
LCM inventory adjustment - LCM is a GAAP requirement related to inventory valuation that mandates inventory to be stated at the lower of cost or market. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) inventory valuation methodology, in which the most recently incurred costs are charged to cost of sales and inventories are valued at base layer acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and net realizable selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may exceed market values. In such instances, we record an adjustment to write down the value of inventory to market value in accordance with GAAP. In subsequent periods, the value of inventory is reassessed and an LCM inventory adjustment is recorded to reflect the net change in the LCM inventory reserve between the prior period and the current period. The net impact of these LCM inventory adjustments are included in income from operations, but are excluded from the operating results presented in the table below in order to make such information comparable between periods.
The following table includes the lower of cost or marketLCM inventory reserve as of each date presented (in thousands)millions):
|
| | | | | | | |
| 2017 | | 2016 |
January 1, | $ | 595,988 |
| | $ | 1,117,336 |
|
June 30, | 763,122 |
| | 900,493 |
|
September 30, | 498,045 |
| | 796,503 |
|
|
| | | | | | | |
| 2019 | | 2018 |
January 1, | $ | 651.8 |
| | $ | 300.5 |
|
March 31, | 145.8 |
| | 212.8 |
|
The following table includes the corresponding impact of changes in the lower of cost or marketLCM inventory reserve on both operating income from operations and net income for the periods presented (in thousands)millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| |
| 2017 | | 2016 | | 2017 | | 2016 |
Net LCM inventory adjustment benefit in both operating and net income | $ | 265,077 |
| | $ | 103,990 |
| | $ | 97,943 |
| | $ | 320,833 |
|
|
| | | | | | | |
| Three Months Ended March 31, |
|
| 2019 | | 2018 |
Net LCM inventory adjustment benefit in both income from operations and net income | $ | 506.0 |
| | $ | 87.7 |
|
Additionally, during the nine months ended September 30, 2017, we recorded debt extinguishment costs of $25.5 million related to the redemption of the 2020 Senior Secured Notes. This nonrecurring charge decreased both operating income and net income by $25.5 million for the nine months ended September 30, 2017. There were no such costs in the three months ended September 30, 2017 nor in either the three or nine months ended September 30, 2016.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are our cash flows from operations and borrowing availability under our credit facilities, as more fully described below. We believe that our cash flows from operations and available capital resources will be sufficient to meet our and our subsidiaries’ capital expenditure, working capital needs, distribution paymentspayment and debt service requirements for the next twelve months. However, our ability to generate sufficient cash flow from operations depends, in part, on petroleum oil market pricing and general economic, political and other factors beyond our control. We are in compliance as of September 30, 2017March 31, 2019 with all of the covenants, including financial covenants, in all of our debt agreements.
Cash Flow Analysis
Cash Flows from Operating Activities
Net cash provided byused in operating activities was $124.4$185.0 million for the ninethree months ended September 30, 2017March 31, 2019 compared to net cash provided byused in operating activities of $291.5$147.1 million for the ninethree months ended September 30, 2016.March 31, 2018. Our operating cash flows for the ninethree months ended September 30, 2017March 31, 2019 included our net income of $255.2$312.1 million, plus depreciation and amortization of $197.4 million, debt extinguishment costs related to refinancing of our 2020 Senior Secured Notes of $25.5$98.7 million, pension and other post-retirement benefits costs of $31.7$11.2 million, equity-basedstock-based compensation of $13.5$7.1 million, changes in the fair value of our catalyst leases of $1.0 million, deferred income taxes of $0.6 million, loss on sale of assets of $0.9 million and $5.7 million of net distributions received from our equity method investment in TVPC in excess of its earnings, partially offset by a non-cash benefit of $97.9 million relating to an LCM inventory adjustment and a change in the fair value of our inventory repurchase obligations of $26.7$14.2 million, a change in the fair value of our catalyst leases of $3.1 million, and distributions from our equity method investment in Torrance Valley Pipeline Company LLC (“TVPC”) of $4.7 million, offset by a non-cash benefit of $506.0 million relating to an LCM inventory adjustment, income from our equity method investment in TVPC of $4.7 million and deferred income taxes of $7.2 million. In addition, net changes in operating assets and liabilities reflected uses of cash of $282.5$118.2 million driven by the timing of inventory purchases, payments for accrued expenses and accounts payablepayables and collections of accounts receivable.receivables. Our operating cash flows for the ninethree months ended September 30, 2016March 31, 2018 included our net income of $148.1$32.4 million, plus net non-cash charges relating to depreciation and amortization of $162.6$81.1 million, thepension and other post-retirement benefits costs of $11.8 million, stock-based compensation of $4.3 million, a change in the fair value of our inventory repurchase obligations of $29.3$8.8 million, deferred income taxes of $27.8 million, pension and other post-retirement benefits costs of $25.9 million, changes in the fair value of our catalyst leases of $4.6 million, equity-based compensation of $12.7 million and a loss on sale of assets of $11.4$0.1 million and distributions from our equity investment in TVPC of $4.0 million, partially offset by a non-cash benefit of $320.8$87.7 million relating to an LCM inventory adjustment, deferred income taxes of $0.7 million and equity income from our equity method investment in TVPC of $1.6$4.0 million. In addition, net changes in operating assets and liabilities reflected sourcesuses of cash of $191.6$197.2 million driven by the timing of inventory purchases, payments for accrued expenses and accounts payables and collections of accounts receivables.
Cash Flows from Investing Activities
Net cash used in investing activities was $583.5$247.6 million for the ninethree months ended September 30, 2017March 31, 2019 compared to net cash used in investing activities of $1,316.0$88.3 million for the ninethree months ended September 30, 2016.March 31, 2018. The net cash flows used in investing activities for the ninethree months ended September 30, 2017 wasMarch 31, 2019 were comprised of capital expenditures totaling $211.2$94.2 million, expenditures for refinery turnarounds of $341.6$133.0 million and expenditures for other assets of $31.1$22.2 million, partially offset by return of capital related to our equity method investment in TVPC of $1.8 million. Net cash used in investing activities for the three months ended March 31, 2018 was comprised of capital expenditures totaling $21.0 million, expenditures for refinery turnarounds of $58.8 million and expenditures for other assets of $9.5 million, slightly offset by a return of capital related to our equity method investment in TVPC of $0.5$1.0 million. Net cash used in investing activities for the nine months ended September 30, 2016 was comprised of cash outflows of $971.9 million used to fund the Torrance Acquisition, capital expenditures totaling $187.7 million, expenditures for refinery turnarounds of $138.9 million, expenditures for other assets of $27.7 million and a final net working capital settlement of $2.7 million associated with the acquisition of the Chalmette refinery, partially offset by $13.0 million of proceeds from the sale of assets.
Cash Flows from Financing Activities
Net cash provided by financing activities was $74.1$255.5 million for the ninethree months ended September 30, 2017March 31, 2019 compared to net cash provided by financing activities of $629.1$25.0 million for the ninethree months ended September 30, 2016.March 31, 2018. For the ninethree months ended September 30, 2017,March 31, 2019, net cash provided by financing activities consisted primarily of a contributionnet borrowings on our Revolving Credit Facility of $250.0 million, proceeds from PBF LLCinsurance premium financing of $97.0$30.2 million, and net cash proceeds of $21.4 million from the issuance of the 2025 Senior Notes net of cash paid to redeem the 2020 Senior Secured Notes and related issuance costs. Additionally, during the nine months ended September 30, 2017, we madepartially offset by distributions to members of $39.3$23.0 million and principal amortization payments of the PBF Rail Term Loan of $5.0$1.7 million. Further, duringFor the ninethree months ended September 30, 2017, we borrowed and repaid $490.0 million under our Revolving Loan resulting in no net change to amounts outstanding for the nine months ended September 30, 2017. For the nine months ended September 30, 2016,March 31, 2018, net cash provided by financing activities consisted primarily of proceeds from the Revolving Loaninsurance premium financing of $550.0$27.9 million, a contribution from our parent of $175.0 million, proceeds from catalyst leases of $7.9 million and a net increase of $0.1 million in proceeds from affiliate notes payable partially offset by $92.5 million of distribution to members and repaymentsprincipal amortization payments of the PBF Rail revolving credit facilityTerm Loan of $11.5$1.7 million and repayments of note payable of $1.2 million.
Credit Facility
Revolving Credit Facility
On May 2, 2018, we and certain of our wholly-owned subsidiaries, as borrowers or subsidiary guarantors, replaced the August 2014 Revolving Credit Agreement with the Revolving Credit Facility. Among other things, the Revolving Credit Facility increased the maximum commitment available to us from $2.6 billion to $3.4 billion, extended the maturity date to May 2023, and redefined certain components of the Borrowing Base (as defined in the Revolving Credit Agreement) to make more funding available for working capital and other general corporate purposes. Borrowings under the Revolving Credit Facility bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR Rate plus the Applicable Margin, all as defined in the Revolving Credit Agreement. In addition, an accordion feature allows for commitments of up to $3.5 billion.
Liquidity
As of September 30, 2017,March 31, 2019, our total liquidity was approximately $1,173.5$1,619.8 million, compared to total liquidity of approximately $1,161.3$1,641.8 million as of December 31, 2016. Total2018. Our total liquidity is equal to the sumamount of excess availability under our Revolving Credit Facility, which includes our cash and cash equivalents plus the estimated amount available under the Revolving Loan.
balance at March 31, 2019.
Working Capital
Our working capital at September 30, 2017March 31, 2019 was $1,106.1$1,286.0 million, consisting of $3,403.3$3,939.9 million in total current assets and $2,297.2$2,653.9 million in total current liabilities. Our working capital at December 31, 20162018 was $1,111.0$1,069.2 million, consisting of $3,154.3$3,201.0 million in total current assets and $2,043.3$2,131.8 million in total current liabilities.
Working capital has decreasedincreased during the three months ended March 31, 2019 primarily as a result of revolver borrowings and the change in our LCM inventory adjustment, partially offset by capital expenditures, including turnaround costs partially offset by earnings during the nine months ended September 30, 2017.and distributions.
Capital Spending
Net capitalCapital spending was $583.9$249.4 million for the ninethree months ended September 30, 2017,March 31, 2019, which primarily included turnaround costs at our Torrance and Delaware City refineries, safety related enhancements and facility improvements at theour refineries. We currently expect to spend an aggregate of approximately $600.0$625.0 million to $675.0 million in net capital expenditures during the full year 20172019 for facility improvements and refinery maintenance and turnarounds, the majority of which have been completed asis expected to be incurred during the first six months of September 30, 2017.2019. Significant capital spending for the full year 2017 has included2019, includes turnarounds forof the FCCcoker at our Torrance refinery, the coker at our Delaware City refinery several major process unitsand the crude unit at our TorrancePaulsboro refinery, and the Chalmette refinery’s crude and ancillary units, as well as expenditures to meet Tier 3environmental and regulatory requirements. Capital spending plans also include strategic capital expenditures for the restart of the idled Chalmette refinery coker and the Delaware City refinery hydrogen plant.
Crude and Feedstock Supply Agreements
Certain of our purchases of crude oil under our agreements with foreign national oil companies require that we post letters of credit and arrange for shipment. We pay for the crude when invoiced, at which time the letters of credit are lifted. OurWe have a contract with Saudi Aramco pursuant to which we have been purchasing up to approximately 100,000 bpd of crude and feedstock supply agreementsoil from Saudi Aramco that is processed at our Paulsboro refinery. In connection with the Chalmette Acquisition we entered into a contract with PDVSA provide thatfor the supply of 40,000 to 60,000 bpd of crude oil that can be processed at any of our East andor Gulf Coast refineries. We have not sourced crude oil under this agreement since the third quarter of 2017 as PDVSA has suspended deliveries due to the parties’ inability to agree to mutually acceptable payment terms. In connection with the closing of the Torrance Acquisition, we entered into a crude supply agreement with ExxonMobil to deliverfor approximately 60,000 bpd of crude oil tothat can be processed at our Torrance refinery. We currently purchase all of our crude and feedstock needs independently from a variety of suppliers on the spot market or through term agreements for our Delaware City and Toledo refineries.
Inventory Intermediation Agreements
On May 4, 2017 and September 8, 2017,March 29, 2019, we and our subsidiaries, DCR and PRC, entered into amendments to the A&RInventory Intermediation Agreements with 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 terms. As a result of the amendments (i) the A&R Intermediation Agreement by and among J. Aron, us and PRC relating to the Paulsboro refinery extends the term to December 31, 2019, which term may be further extended by mutual consent of the parties to December 31, 2020 and (ii) the A&RInventory Intermediation Agreement by and among J. Aron, us and DCR relating to the Delaware City refinery extendsextended the term to July 1, 2019,February 28, 2020, which term may be further extended by mutual consent of the parties to July 1, 2020.February 26, 2021 and (ii) added the PBFX East Coast Storage Facility as a location which will sell crude oil, a new product type to be included in the Products, to J. Aron by DCR.
Pursuant to each A&RInventory Intermediation Agreement, J. Aron continues to purchase and hold title to certain of the intermediate and finished products (the “Products”)Products produced by the Paulsboro and Delaware City refineries (the “Refineries”), respectively,Refineries, and delivered into tanks at the Refineries.Storage Tanks. Furthermore, J. Aron agrees to sell the Products back to the Refineries as the Products are discharged out of the Refineries’ tanks.Storage Tanks. J. Aron has the right to store the Products purchased in tanks under the A&RInventory Intermediation Agreements and will retain these storage rights for the term of the agreements. We continuePBF Holding continues to market and sell independently to third parties.
At September 30, 2017,March 31, 2019, the LIFO value of crude oil, intermediates and finished products owned by J. Aron included within inventory onInventory in our balance sheetCondensed Consolidated Balance Sheets was $343.9$377.9 million. We accrue a corresponding liability for such intermediates and finished products.
Off-Balance Sheet Arrangements and Contractual Obligations and Commitments
We have no off-balance sheet arrangements as of September 30, 2017,March 31, 2019, other than outstanding letters of credit in the amount of approximately $326.8 million and operating leases.$449.4 million.
Distribution Policy
On November 2, 2017May 1, 2019 PBF Energy, PBF Holding’s indirect parent, announced a dividend of $0.30 per share on its outstanding Class A common stock. The dividend is payable on November 29, 2017May 30, 2019 to PBF Energy Class A common stockholders of record at the close of business on November 13, 2017.May 15, 2019. If necessary, PBF Holding will make a distribution of up to approximately $34.2$36.3 million to PBF LLC, which in turn will make pro-rata distributions of $0.30 per unit to its members, including PBF Energy. PBF Energy will then use this distribution to fund the dividend payments to the stockholders of PBF Energy.
As of September 30, 2017,March 31, 2019, we had $1,173.5$1,619.8 million of unused borrowing availability, which includes our cash and cash equivalents of $241.7$384.6 million, under theour Revolving LoanCredit Facility to fund our operations, if necessary. Accordingly, as of September 30, 2017,March 31, 2019, there was sufficient cash and cash equivalents and borrowing capacity under our credit facilities available to make distributions to PBF LLC, if necessary, in order for PBF LLC if necessary, to make pro rata distributions to its members, including PBF Energy, necessary to fund in excess of one year’s cash dividend payments by PBF Energy.
Since, as described above, there was sufficient cash and cash equivalents and borrowing capacity as of September 30, 2017,March 31, 2019, we would have been permitted under our debt agreements to make these distributions; however, our ability to continue to comply with our debt covenants is, to a significant degree, subject to our operating results, which are dependent on a number of factors outside of our control. We believe our and our subsidiaries’ available cash and cash equivalents, other sources of liquidity to operate our business and operating performance provides us with a reasonable basis for our assessment that we can support PBF Energy’s intended distributiondividend policy.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks, including changes in commodity prices and interest rates. Our primary commodity price risk is associated with the difference between the prices we sell our refined products and the prices we pay for crude oil and other feedstocks. We may use derivative instruments to manage the risks from changes in the prices of crude oil and refined products, natural gas, interest rates, or to capture market opportunities.
Commodity Price Risk
Our earnings, cash flow and liquidity are significantly affected by a variety of factors beyond our control, including the supply of, and demand for, crude oil, other feedstocks, refined products and natural gas. The supply of and demand for these commodities depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, planned and unplanned downtime in refineries, pipelines and production facilities, production levels, the availability of imports, the marketing of competitive and alternative fuels, and the extent of government regulation. As a result, the prices of these commodities can be volatile. Our revenues fluctuate significantly with movements in industry refined product prices, our cost of sales fluctuates significantly with movements in crude oil and feedstock prices and our operating expenses fluctuate with movements in the price of natural gas. We manage our exposure to these commodity price risks through our supply and offtake agreements as well as through the use of various commodity derivative instruments.
We may use non-trading derivative instruments to manage exposure to commodity price risks associated with the purchase or sale of crude oil and feedstocks, finished products and natural gas outside of our supply and offtake agreements. The derivative instruments we use include physical commodity contracts and exchange-traded and over-the-counter financial instruments. We mark-to-market our commodity derivative instruments and recognize the changes in their fair value in our statements of operations.
At September 30, 2017March 31, 2019 and December 31, 2016,2018, we had gross open commodity derivative contracts representing 45.711.5 million barrels and 8.87.4 million barrels, respectively, with an unrealized net lossgain of $5.0$9.9 million and $3.5$7.2 million, respectively. The open commodity derivative contracts as of September 30, 2017March 31, 2019 expire at various times during 2017 and 2018.2019.
We carry inventories of crude oil, intermediates and refined products (“hydrocarbon inventories”) on our balance sheet,Condensed Consolidated Balance Sheets, the values of which are subject to fluctuations in market prices. Our hydrocarbon inventories totaled approximately 35.133.3 million barrels and 29.430.5 million barrels at September 30, 2017March 31, 2019 and December 31, 2016,2018, respectively. The average cost of our hydrocarbon inventories was approximately $77.17$78.17 and $80.50$78.78 per barrel on a LIFO basis at September 30, 2017March 31, 2019 and December 31, 2016,2018, respectively, excluding the net impact of LCM inventory adjustments of approximately $498.0$145.8 million and $596.0$651.8 million, respectively. If market prices of our inventory decline to a level below our average cost, we may be required to further write down the carrying value of our hydrocarbon inventories to market.
Our predominant variable operating cost is energy, which is comprised primarily of natural gas and electricity. We are therefore sensitive to movements in natural gas prices. Assuming normal operating conditions, we annually consume a total of approximatelybetween 68 million and 73 million MMBTUs of natural gas amongst our five refineries as of September 30, 2017.March 31, 2019. Accordingly, a $1.00 per MMBTU change in natural gas prices would increase or decrease our natural gas costs by approximately $68.0 million to $73.0 million.
Compliance Program Price Risk
We are exposed to market risks related to the volatility in the price of RINs required to comply with the RFS. Our overall RINs obligation is based on a percentage of our domestic shipments of on-road fuels as established by the EPA.Environmental Protection Agency (“EPA”). To the degree we are unable to blend the required amount of biofuels to satisfy our RINs obligation, we must purchase RINs on the open market. To mitigate the impact of this risk on our results of operations and cash flows we may purchase RINs when the price of these instruments is deemed favorable.
In addition, we are exposed to risks associated with complying with federal and state legislative and regulatory measures to address greenhouse gas and other emissions. Requirements to reduce emissions could result in increased costs to operate and maintain our facilities as well as implement and manage new emission controls and programs put in place. For example, AB32 in California requires the state to reduce its GHG emissions to 1990 levels by 2020.
Interest Rate Risk
The maximum availabilitycommitment under our Revolving LoanCredit Facility is $2.64$3.4 billion. Borrowings under the Revolving LoanCredit Facility bear interest either at the Alternative Base Rate plus the Applicable Margin or at Adjusted LIBOR plus the Applicable Margin, all as defined in the Revolving Loan.Credit Agreement. If this facility was fully drawn, a 1.0% change in the interest rate would increase or decrease our interest expense by approximately $26.4$21.1 million annually.
In addition, the PBF Rail Term Loan, which bears interest at a variable rate, had an outstanding principal balance of $30.0$19.8 million at September 30, 2017.March 31, 2019. A 1.0% change in the interest rate would increase or decrease our interest expense by approximately $0.3$0.2 million annually, assuming the current outstanding principal balance on the PBF Rail Term Loan remained outstanding.
We also have interest rate exposure in connection with our A&RInventory Intermediation Agreements under which we pay a time value of money charge based on LIBOR.
Credit Risk
We are subject to risk of losses resulting from nonpayment or nonperformance by our counterparties. We continue to closely monitor the creditworthiness of customers to whom we grant credit and establish credit limits in accordance with our credit policy.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.Procedures
PBF Holding maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information which is required to be disclosed is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management in a timely manner. Underconducted evaluations under the supervision and with the participation of our management, including PBF Holding’s principal executive officer and the principal financial officer, we have evaluatedof the effectiveness of our system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934 as amended (the “Exchange Act”)) as of September 30, 2017.March 31, 2019. Based on that evaluation, PBF Holding’supon these evaluations, the principal executive officer and the principal financial officer have concluded that PBF Holding’s disclosure controls and procedures are effective as of September 30, 2017.March 31, 2019.
Changes in Internal Control Over Financial Reporting
ManagementThere has not identified any changesbeen no change in PBF Holding’s internal controlscontrol over financial reporting during the quarter ended September 30, 2017March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal controlscontrol over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 24, 2013, the Delaware Department of Natural Resources and Environmental Control (“DNREC”)DNREC issued a Notice of Administrative Penalty Assessment and Secretary’s Order to Delaware City Refining for alleged air emission violations that occurred during the re-start of the refinery in 2011 and subsequent to the re-start. The penalty assessment seeks $460,200 in penalties and $69,030 in cost recovery for DNREC’s expenses associated with investigation of the incidents. We dispute the amount of the penalty assessment and allegations made in the order, and are in discussions with DNREC to resolve the assessment.this assessment in addition to other Notice of Violation (“NOV”) that have occurred since July 24, 2013 and associated Title V Permit deviations. It is possible that DNREC will assess a penaltypenalties in this matterrelation to these matters but any such amount is not expected to be material to us.
As of November 1,On April 7, 2015, we acquired Chalmette Refining, which was in discussions with the Louisiana Department of Environmental Quality (“LDEQ”) to resolve self-reported deviations from refinery operations relating to certain Clean Air Act Title V permit conditions, limits and other requirements. LDEQ commenced an enforcement action against Chalmette Refining on November 14, 2014 by issuingDNREC issued a Consolidated Compliance Order and Notice of Potential Penalty (the “Order”) covering deviations from 2009 and 2010. Chalmette Refining and LDEQ subsequently entered into a dispute resolution agreement,Violation (W-15-SWD-01) alleging violations of the enforcement of which has been suspended while negotiations are ongoing, which may includeDelaware City refinery’s NPDES discharge permit during the resolution of deviations outside the periods covered by the Order. In February 2017, Chalmette Refining and the LDEQ met to resolve the issues under the Order, including the assessment of an administrative penalty against Chalmette Refining. Chalmette Refining and the LDEQ are negotiatingperiod between December 12, 2014 through January 4, 2015. On March 5, 2018, a settlement agreement with administrative penaltieswas finalized resolving the alleged violations contained in the April 7, 2015 Notice of approximately $0.7 million. OnceViolation, as well as additional alleged violations occurring during the period between January 2014 through January 2018. Pursuant to this settlement agreement, is finalized, it is subject to circulated for notice and public comment for a 45-day period and must undergo a review by the Louisiana attorney general’s office.
On December 23, 2016, the Delaware City refinery receivedwas either going to pay a Noticepenalty of Violation$30,000 and fund an approved Environmental Improvement Project (“NOV”EIP”) from DNREC concerningin the amount of $88,000, or pay a potential violationpenalty in the amount of $118,000. A cost recovery payment of $7,433 will be assessed in either case. The Delaware City refinery has elected to pay the DNREC order authorizing$30,000 penalty and fund the shipmentEIP in the amount of crude oil by barge from$88,000. The Delaware City refinery has paid the refinery. penalty and the cost recovery payment and will fund the approved EIP as soon as the project scope is finalized.
The NOV alleges that DCR made shipments to locations other than the PaulsboroDelaware City refinery in violation of the order and requests certain additional information. On February 7, 2017, DCR responded to the NOV. On March 10, 2017, DNREC issued an approximately $0.2 million fine inappealed a Notice of Penalty Assessment and Secretary’s Order to the Delaware City refinery for violating theissued in March 2017, including a $150,000 fine, alleging violation of a 2013 Secretary’s Order.Order authorizing crude oil shipment by barge. DNREC determined that the Delaware City refinery had violated the order by failing to make timely and full disclosure to DNREC about the nature and extent of those shipments, and had misrepresented the number of shipments that went to other facilities. The penalty assessmentPenalty Assessment and Secretary’s Order conclude that the 2013 Secretary’s Order was violated by the refinery by shipping crude oil from the Delaware City terminal to three locations other than the Paulsboro refinery, on 15 days in 2014, making a total of 17 separate barge shipments containing approximately 35.7 million gallons of crude oil in total. On April 28, 2017, DCRthe Delaware City refinery appealed the Notice of Penalty Assessment and Secretary’s Order. On March 5, 2018, Notice of Penalty Assessment was settled by DNREC, the Delaware Attorney General and Delaware City refinery for $100,000. The hearing ofDelaware City refinery made no admissions with respect to the alleged violations and agreed to request a Coastal Zone Act status decision prior to making crude oil shipments to destinations other than Paulsboro. The Delaware City refinery has paid the penalty. The Coastal Zone Act status decision request was submitted to DNREC and the outstanding appeal is scheduled for February 2018. To the extent that the penalty and Secretary’s Order are upheld, there will not be a material adverse effect on the Company’s financial position, results of operations or cash flows.was withdrawn as required under settlement agreement.
On December 28, 2016, DNREC issued a Coastal Zone Act permit (the “Ethanol Permit”)the Ethanol Permit to DCR allowing the utilization of existing tanks and existing marine loading equipment at their existing facilities to enable denatured ethanol to be loaded from storage tanks to marine vessels and shipped to offsite facilities. On January 13, 2017, the issuance of the Ethanol Permit was appealed by two environmental groups. On February 27, 2017, the Coastal Zone Industrial Board held a public hearing and dismissed the appeal, determining that the appellants did not have standing. The final opinion and order of the Board was issued March 16, 2017. The appellants filed an appeal of the Coastal Zone Board’s decision with the Delaware Superior Court on March 30, 2017. The filingOn January 19, 2018, the Superior Court rendered an Opinion regarding the decision of briefs has been scheduled for October and November 2017.
On October 19, 2017, the Delaware City refinery received approval from DNRECCoastal Zone Board to dismiss the appeal of the Ethanol Permit for the constructionethanol project. The judge determined that the record created by the Coastal Zone Board was insufficient for the Superior Court to make a decision, and operationtherefore remanded the case back to the Coastal Zone Board to address the deficiency in the record. Specifically, the Superior Court directed the Coastal Zone Board to address any evidence concerning whether the appellants’ claimed injuries would be affected by the increased quantity of ethanol shipments. On remand, the Coastal Zone Board met on January 28, 2019 and reversed its previous decision on standing ruling that the appellants have standing to appeal the issuance of the ethanol marketing project to allow for a combined total loading of up to 10,000 bpd, on an annual average basis, of ethanol on to marine vessels at the marine piers and the terminal truck loading rack, subject to certain operational and emissions limitations as well as other conditions. On the same date, Delaware City Logistics Company LLC received DNREC approval for the construction of (i) four additional loading arms for each of lanes 4, 10 and 11 for purposes of loading ethanol atEthanol Permit. DCR is currently evaluating its truck loading rack and (ii) a vapor vacuum control system forappeal options.
loading lanes connected toAt the existing vapor recovery unit located at its terminal in Delaware City. This approval is also subject to certain operational and emission limitations as well as other conditions.
On February 3, 2011,time we acquired the Toledo refinery, EPA sent a request for informationhad initiated an investigation into the compliance of the refinery with EPA standards governing flaring pursuant to Section 114 of the Clean Air Act. On February 1, 2013, EPA issued an Amended Notice of Violation (“NOV”), and on September 20, 2013, EPA issued a NOV and Finding of Violation to Toledo refinery, alleging certain violations of the Clean Air Act at its Plant 4 and Plant 9 flares since the acquisition of the refinery on March 1, 2011. Toledo refinery and EPA subsequently entered into tolling agreements pending settlement discussions. Although the resolution has not been finalized, the civil administrative penalty is anticipated to be approximately $645,000 including supplemental environmental projects. To the Paulsboro refinery with respectextent the administrative penalty exceeds such amount, it is not expected to compliance with EPA standards governing flaring. On July 13, 2017 the U.S. Department of Justice filed with the Court the motionbe material to enter the consent decree. On September 19, 2017, the Court approved the consent decree and in connection therewith the Paulsboro refinery has paid a penalty of $0.2 million.us.
In connection with the acquisition of the Torrance refinery and related logistics assets, we assumed certain pre-existing environmental liabilities related to certain environmental remediation obligations to address existing soil and groundwater contamination and monitoring activities, which reflect the estimated cost of the remediation obligations. In addition, in connection with the acquisition of the Torrance refinery and related logistics assets, we purchased a ten year, $100.0 million environmental insurance policy to insure against unknown environmental liabilities. Furthermore, in connection with the acquisition, we assumed responsibility for certain specified environmental matters that occurred prior to our ownership of the refinery and logistics assets, including specified incidents and/or NOVs issued by regulatory agencies in various years before the Company’sour ownership, including the Southern California Air Quality Management District (“SCAQMD”) and the Division of Occupational Safety and Health of the State of California (“Cal/OSHA”). Following
In connection with the closingacquisition of the Torrance refinery and related logistics assets, we agreed to take responsibility for NOV No. P63405 that ExxonMobil had received from the SCAQMD for Title V deviations that are alleged to have occurred in 2015. On August 14, 2018, we received a letter from SCAQMD offering to settle this NOV for $515,250. On February 22, 2019, the SCAQMD reduced their settlement offer to $268,500. We are currently in communication with SCAQMD to resolve this NOV.
Subsequent to the acquisition, further NOVs were issued by the SCAQMD, Cal/OSHA, the City of Torrance, and the Torrance Fire Department. No settlement or penalty demand in excess of $0.1 million has been made or received with respect to these notices. It is reasonably possible that SCAQMD, Cal/OSHA and/or the City of Torrance will assess penaltiesFire Department, and the Los Angeles County Sanitation District related to alleged operational violations, emission discharges and/or flaring incidents at the refinery and the logistics assets both before and after our acquisition. EPA in November 2016 conducted a Risk Management Plan (“RMP”) inspection following the acquisition related to Torrance operations and issued preliminary findings in March 2017 concerning RMP potential operational violations. Since the EPA’s issuance of the preliminary findings in March 2017, the Company has been in substantive discussions to resolve the preliminary findings. In the course of these discussions, on November 8, 2018, EPA made an offer to settle all preliminary findings for $480,000. The Company is currently in communication with EPA to resolve the RMP preliminary findings.
EPA and the California Department of Toxic Substances Control (“DTSC”) in December 2016 conducted a Resource Conservation and Recovery Act (“RCRA”) inspection following the acquisition related to Torrance operations and also issued in March 2017 preliminary findings concerning RCRA potential operational violations. On June 14, 2018, the Torrance refinery and DTSC reached settlement regarding the oil bearing materials in the form of a stipulation and order, wherein the Torrance refinery agreed that it would recycle or properly dispose of the oil bearing materials by the end of 2018 and pay an administrative penalty of $150,000. The Torrance refinery has complied with these requirements. Following this settlement, in June 2018, DTSC referred the remaining alleged RCRA violations from EPA’s and DTSC’s December 2016 inspection to the California Attorney General for final resolution. The Torrance refinery and the California Attorney General are in discussions to resolve these alleged remaining RCRA violations. Other than the $150,000 DTSC administrative penalty, no other matterssettlement or penalty demands have been received to date with respect to any of the other NOVs, preliminary findings, or order that are in excess of $0.1 million$100,000. As the ultimate outcomes are uncertain, we cannot currently estimate the final amount or timing of their resolution but any such amount is not expected to behave a material to us,impact on our financial position, results of operations or cash flows, individually or in the aggregate.
On September 2, 2011, prior to our ownership of the Chalmette refinery, the plaintiff in Vincent Caruso, etal. v. Chalmette Refining, L.L.C., filed an action on behalf of himself and potentially several thousand other Louisiana residents who live or own property in St. Bernard Parish and Orleans Parish and whose property was allegedly contaminated and who allegedly suffered any personal or property damages and clean-up costs as a result of an emission of spent catalyst sulfur dioxide and hydrogen sulfide from the Chalmette refinery on September 6, 2010. Plaintiffs claim to have suffered injuries, symptoms, and property damage as a result of the release.release, although the trial court has limited recovery to property damages and clean-up expenses. Plaintiffs seek to recover unspecified damages, interest and costs. In August 2015,2016, there was a mini-trial for four plaintiffs for property damage relating to home and vehicle cleaning. On April 12, 2016,cleaning and the trial court rendered judgment limitingawarding damages ranging from $100related to $500the cost for home cleaning and $25 to $75 for vehicle cleaning to the four plaintiffs. The trial court found Chalmette Refining and co-defendant Eaton Corporation (“Eaton”), to be solidarily liable for the damages. Chalmette Refining and Eaton filed an appeal in August 2016 of the judgment on the mini-trial. Onmini-trial and on June 28, 2017, the appellate court unanimously reversed the judgment awarding damages to the plaintiffs. On July 12, 2017, the plaintiffs, filedand plaintiffs request for rehearing was later denied. The parties reached a rehearingcomprehensive settlement of the appellatethis matter on December 3, 2018, which received final court judgment, which was deniedapproval on July 31, 2017. As a result of the appellate court’s judgment, the potential amount of the claims isJanuary 17, 2019. The Caruso litigation, and related or consolidated matters, have been dismissed with prejudice. We presently believe this matter will not determinable. Depending upon the ultimate class size and the nature of the claims, the outcome may have a material adverse effectimpact on our financial position, results of operations or cash flows.
On February 14, 2017,December 5, 1990, prior to our ownership of the Chalmette refinery, the plaintiff in Adam TrotterThomas, et al. v. ExxonMobil CorpExxon Mobil Corporation and Chalmette Refining, L.L.C.., ExxonMobil Oil Corp., ExxonMobil Refining and Supply Company, et. al., filed an action on behalf of himself and potentially thousands of other individuals in St. Bernard Parish and Orleans Parish who were allegedly exposed to hydrogen sulfide and sulfur dioxide as a civilresult of more than 100 separate flaring events that occurred between 1989 and 2010. This litigation is proceeding as a mass action against us inwith individually named plaintiffs as a result of a 2008 trial court decision, affirmed by the Superior Courtcourt of appeals that denied class certification. The plaintiffs claim to have suffered physical injuries, property damage, and other damages as a result of the Statereleases. Plaintiffs seek to recover unspecified compensatory and punitive damages, interest, and costs. The parties are preparing for an October 2019 mini-trial of California, Countyup to 10 plaintiffs, relating to as many as 5 separate flaring events that occurred between 2002 and 2007. Because of Los Angeles, Southwest District, claiming public nuisance, battery, a violationthe number of civil rights under 42 U.S.C. §1983, intentional infliction of emotional distress, negligence and strict liability in tort and injuries and symptoms resulting from the February 18, 2015 electrostatic precipitator (“ESP”) explosion at the Torrance Refinery which was then owned and operated by Exxon. The City of Torrancepotential claimants is unknown and the SCAQMD are also named as defendants indiffering events underlying the lawsuit. On September 29, 2017,claims, the court granted our motion to dismiss as well aspotential amount of the SCAQMD’s motion to dismiss with leave for the plaintiff to amend and denied plaintiff’s motion for a preliminary injunction. We believe the ultimateclaims is not determinable. It is possible that an adverse outcome of this matter will notmay have a material impactadverse effect on our financial position, results of operations, or cash flows.
On February 17, 2017, in Arnold Goldstein, et al. v. Exxon Mobil Corporation, et al., PBF Energy Inc.we and PBF Energy Company LLC, and our subsidiaries, PBF Energy Western Region LLC and Torrance Refining
Company LLC and the manager of our Torrance refinery along with Exxon Mobil Corporation were named as defendants in a class action and representative action complaint filed on behalf of Arnold Goldstein, John Covas, Gisela Janette La Bella and others similarly situated. The complaint was filed in the Superior Court of the State of California, County of Los Angeles and alleges negligence, strict liability, ultrahazardous activity, a continuing private nuisance, a permanent private nuisance, a continuing public nuisance, a permanent public nuisance and trespass resulting from the February 18, 2015 electrostatic precipitator (“ESP”) explosion at the Torrance refinery which was then owned and operated by Exxon.ExxonMobil. The operation of the Torrance refinery by the PBF entities subsequent to our acquisition in July 2016 is also referenced in the complaint. To the extent that plaintiffs’ claims relate to the ESP explosion, Exxon has retained responsibility for any liabilities that would arise from the lawsuit pursuant to the agreement relating to the acquisition of the Torrance refinery. ThisOn July 2, 2018, the Court granted leave to plaintiffs’ to file a Second Amended Complaint alleging groundwater contamination. With the filing of the Second Amended Complaint, Plaintiffs’ added an additional plaintiff. On March 18, 2019, the class certification hearing was held and the judge took the matter under submission. On April 1, 2019, the judge issued an order denying class certification. As it is incurrently unclear what the initial stagesplaintiffs plan to do regarding the denial of discovery andclass certification, we cannot currently estimate the amount or the timing of its resolution. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
On September 18, 2018, in Michelle Kendig and Jim Kendig, et al. v. ExxonMobil Oil Corporation, et al., PBF Energy Limited and Torrance Refining Company LLC along with ExxonMobil Oil Corporation and ExxonMobil Pipeline Company were named as defendants in a class action and representative action complaint filed on behalf of Michelle Kendig, Jim Kendig and others similarly situated. The complaint was filed in the Superior Court of the State of California, County of Los Angeles and alleges failure to authorize and permit uninterrupted rest and meal periods, failure to furnish accurate wage statements, violation of the Private Attorneys General Act and violation of the California Unfair Business and Competition Law. Plaintiffs seek to recover unspecified economic damages, statutory damages, civil penalties provided by statute, disgorgement of profits, injunctive relief, declaratory relief, interest, attorney’s fees and costs. To the extent that plaintiffs’ claims accrued prior to July 1, 2016, ExxonMobil has retained responsibility for any liabilities that would arise from the lawsuit pursuant to the agreement relating to the acquisition of the Torrance refinery and logistics assets. On October 26, 2018, the matter was removed to the Federal Court, California Central District. A mediation hearing between the parties is currently scheduled for April 29, 2019. As this matter is in the class certification phase, we cannot currently estimate the amount or the timing of its resolution. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
On September 7, 2018, in Jeprece Roussell, et al. v. PBF Consultants, LLC, etal., the Plaintiff filed an action in the 19th Judicial District Court for the Parish of East Baton Rouge, alleges numerous causes of action, including wrongful death, premises liability, negligence, and gross negligence against PBF Holding Company LLC, PBFX Operating Company LLC, Chalmette Refining, L.L.C., two individual employees of the Chalmette Refinery (“the PBF Defendants”), two entities, PBF Consultants, LLC and PBF Investments, LLC that are Louisiana companies that are not associated with our companies, as well as Clean Harbors, Inc. and Clean Harbors Environmental Services, Inc. (collectively, “Clean Harbors”), Mr. Roussell’s employer. Mr. Roussell was fatally injured on March 31, 2018 while performing clay removal work activities inside a clay treating vessel located at the Chalmette Refinery. Plaintiff seeks unspecified compensatory damages for pain and suffering, past and future mental anguish, impairment, past and future economic loss, attorney’s fees and court costs. The PBF Defendants have issued a tender of defense and indemnity to Clean Harbors and its insurer pursuant to indemnity obligations contained in the associated services agreement. On September 25, 2018, the PBF Defendants filed an Answer in the state court action denying the allegations. On October 10, 2018, the PBF Defendants filed to remove the case to the United States District Court for the Middle District of Louisiana. On November 9, 2018, Plaintiff filed a motion to remand the matter back to state court and the PBF Defendants filed a response on November 30, 2018. On December 21, 2018, Plaintiff filed a motion for leave to file a reply memorandum and the reply memorandum was filed December 27, 2018. On April 15, 2019 the Federal Court denied Plaintiff’s motion to remand and dismissed without prejudice the claims against John Sprafka, Wayne LaCombe, PBF Consultants, LLC and PBF Investments, LLC. As this matter was recently filed, we cannot currently estimate the amount or the timing of its resolution. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
We are subject to obligations to purchase RINs. On February 15, 2017, we received another notification that EPA records indicated that wePBF Holding used potentially invalid RINs that were in fact verified under the EPA’s RIN Quality Assurance Program (“QAP”) by an independent auditor as QAP A RINs. Under the regulations use of potentially invalid QAP A RINs provided the user with an affirmative defense from civil penalties provided certain conditions are met. We have asserted the affirmative defense and if accepted by the EPA will not be required to replace these RINs and will not be subject to civil penalties under the program. It is reasonably possible that the EPA will not accept our defense and may assess penalties in these matters but any such amount is not expected to have a material impact on our financial position, results of operations or cash flows.
CERCLA, also known as “Superfund,” imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current or former owner or operator of the disposal site or sites where the release occurred and companies that disposed of or arranged for the disposal of the hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for investigation and the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. As discussed more fully above, certain of our sites are subject to these laws and we may be held liable for investigation and remediation costs or claims for natural resource damages. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. Analogous state laws impose similar responsibilities and liabilities on responsible parties. In our current normal operations, we have generated waste, some of which falls within the statutory definition of a “hazardous substance” and some of which may have been disposed of at sites that may require cleanup under Superfund.
Item 1A. Risk Factors
There have been no significant changes from the risk factors previously disclosed in “Item 1A. Risk Factors” of our 2018 Annual Report on Form 10-K.
Item 6. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report and such Exhibit Index is incorporated herein by reference.
EXHIBIT INDEX
|
| | |
Exhibit Number | | Description |
| | |
| | Amendment to the Inventory Intermediation Agreement dated as of September 8, 2017,March 29, 2019, among J. Aron & Company, PBF Holding Company LLC and Paulsboro Refining Company LLC (incorporated by reference to Exhibit 10.1 offiled with PBF Energy Inc.’s CurrentQuarterly Report on Form 8-K/A10-Q dated May 1, 2019 (File No. 001-35764) filed on September 18, 2017)). |
| | |
| | Amendment to the Inventory Intermediation Agreement dated as of September 8, 2017,March 29, 2019, among J. Aron & Company, PBF Holding Company LLC and Delaware City Refining Company LLC (incorporated by reference to Exhibit 10.2 offiled with PBF Energy Inc.’s Quarterly Report on Form 10-Q dated May 1, 2019 (File No. 001-35764)). |
| | |
| | Amendment to Amended and Restated Delaware City Rail Terminaling Service Agreement dated February 13, 2019 among PBF Holding Company LLC, Delaware City Terminaling Company LLC and CPI Operations LLC (incorporated by reference to Exhibit 10.2 filed with PBF Energy Inc.’s Current Report on Form 8-K/A8-K dated February 14, 2019 (File No. 001-35764)). |
| | |
| | Terminaling Service Agreement dated February 13, 2019 among PBF Holding Company LLC, Delaware City Terminaling Company LLC and CPI Operations LLC (incorporated by reference to Exhibit 10.3 filed with PBF Energy Inc.’s Current Report on September 18, 2017)Form 8-K dated February 14, 2019 (File No. 001-35764)). |
| | |
| | Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Holding Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Erik Young, Chief Financial Officer of PBF Holding Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Holding Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Erik Young, Chief Financial Officer of PBF Holding Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
101.INS | | XBRL Instance Document. |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
|
| |
* | Filed herewith. |
† | Confidential treatment has been granted byPortions of the SEC as to certain portions, which portionsexhibit have been omitted because such information is both (i) not material and filed separately with the Securities and Exchange Commission.(ii) would be competitively harmful if publicly disclosed. |
(1) | This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants haveeach registrant has duly caused this report to be signed on theirits behalf by the undersigned, thereunto duly authorized.
|
| | | | |
| | PBF Holding Company LLC |
| | | | |
DateDate: | NovemberMay 7, 20172019 | | By: | /s/ Erik Young |
| | | | Erik Young Senior Vice President, Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
| | | | |
| | PBF Finance Corporation |
| | | | |
DateDate: | NovemberMay 7, 20172019 | | By: | /s/ Erik Young |
| | | | Erik Young Senior Vice President, Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
EXHIBIT INDEX
|
| | |
Exhibit
Number
| | Description |
| | |
| | Amendment to the Inventory Intermediation Agreement dated as of September 8, 2017, among J. Aron & Company, PBF Holding Company LLC and Paulsboro Refining Company LLC (incorporated by reference to Exhibit 10.1 of PBF Energy Inc.’s Current Report on Form 8-K/A (File No. 001-35764) filed on September 18, 2017). |
| | |
| | Amendment to the Inventory Intermediation Agreement dated as of September 8, 2017, among J. Aron & Company, PBF Holding Company LLC and Delaware City Refining Company LLC (incorporated by reference to Exhibit 10.2 of PBF Energy Inc.’s Current Report on Form 8-K/A (File No. 001-35764) filed on September 18, 2017). |
| | |
| | Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Holding Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Erik Young, Chief Financial Officer of PBF Holding Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Holding Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of Erik Young, Chief Financial Officer of PBF Holding Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
101.INS | | XBRL Instance Document. |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
——————————
|
| |
* | Filed herewith. |
† | Confidential treatment has been granted by the SEC as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission. |
(1) | This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act. |