10-Q 1 pbfenergy-09302018.htm 10-Q Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark one)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2018
Or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-35764
Commission File Number: 333-206728-02
 
PBF ENERGY INC.
PBF ENERGY COMPANY LLC
(Exact name of registrant as specified in its charter)
 
DELAWARE
 
45-3763855 
DELAWARE
 
61-1622166
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
One Sylvan Way, Second Floor
Parsippany, New Jersey
 
07054
(Address of principal executive offices)
 
(Zip Code)
(973) 455-7500
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PBF Energy Inc.         Yes [ ] No [x]
PBF Energy Company LLC    Yes [ ] No [x]
As of October 29, 2018, PBF Energy Inc. had outstanding 119,889,646 shares of Class A common stock and 20 shares of Class B common stock. PBF Energy Inc. is the sole managing member of, and owner of an equity interest representing approximately 99.0% of the outstanding economic interest in PBF Energy Company LLC as of September 30, 2018. There is no trading in the membership interest of PBF Energy Company LLC and therefore an aggregate market value based on such is not determinable. PBF Energy Company LLC has no common stock outstanding.
 




PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
PBF Energy Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PBF Energy Company LLC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
ITEM 3.
 
 
ITEM 4.
 
 
 
 
 
 
 
 
 
ITEM 1.
 
 
ITEM 2.
 
 
ITEM 6.
This combined Quarterly Report on Form 10-Q is filed by PBF Energy Inc. (“PBF Energy”) and PBF Energy Company LLC (“PBF LLC”). Each Registrant hereto is filing on its own behalf all of the information contained in this report that relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes no representation as to any such information. PBF Energy is a holding company whose primary asset is an equity interest in PBF LLC. PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 99.0% of the outstanding economic interests in PBF LLC as of September 30, 2018. PBF Energy operates and controls all of the business and affairs and consolidates the financial results of PBF LLC and its subsidiaries. PBF LLC is a holding company for the companies that directly and indirectly own and operate our business. PBF Holding Company LLC (“PBF Holding”) is a wholly-owned subsidiary of PBF LLC and PBF Finance Corporation (“PBF Finance”) is a wholly-owned subsidiary of PBF Holding. As of September 30, 2018, PBF LLC also holds a 44.0% limited partner interest, a non-economic general partner interest and all of the incentive distribution rights in PBF Logistics LP (“PBFX” or the “Partnership”), a publicly traded master limited partnership. PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX’s unit holders other than PBF LLC. Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires. Discussions or areas of this report that either apply only to PBF Energy or PBF LLC are clearly noted in such sections. Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to both PBF Energy and PBF LLC and its consolidated subsidiaries.

2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), of expected future developments that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our strategies, objectives, intentions, resources and expectations regarding future industry trends are forward-looking statements made under the safe harbor provisions of the PSLRA except to the extent such statements relate to the operations of a partnership or limited liability company. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations, which we refer to as “cautionary statements,” are disclosed under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q, the Annual Report on Form 10-K for the year ended December 31, 2017 of PBF Energy, which we refer to as our 2017 Annual Report on Form 10-K, the PBF LLC financial statements for the year ended December 31, 2017 filed with PBF Logistics LP’s Registration Statement on Form S-4 filed on March 13, 2018 by PBF Logistics LP, and in our other filings with the SEC. All forward-looking information in this Quarterly Report on Form 10-Q and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
supply, demand, prices and other market conditions for our products, including volatility in commodity prices;
the effects of competition in our markets;
changes in currency exchange rates, interest rates and capital costs;
adverse developments in our relationship with both our key employees and unionized employees;
our ability to operate our businesses efficiently, manage capital expenditures and costs (including general and administrative expenses) and generate earnings and cash flow;
our indebtedness;
our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;
termination of our Inventory Intermediation Agreements with J. Aron, which could have a material adverse effect on our liquidity, as we would be required to finance our intermediate and refined products inventory covered by the agreements. Additionally, we are obligated to repurchase from J. Aron certain intermediates and finished products located at the Paulsboro and Delaware City refineries’ storage tanks upon termination of these agreements;
restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
payments by PBF Energy to the current and former holders of PBF LLC Series A Units and PBF LLC Series B Units under our Tax Receivable Agreement (as defined in “Note 10 - Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements) for certain tax benefits we may claim;
our assumptions regarding payments arising under PBF Energy’s Tax Receivable Agreement and other arrangements relating to our organizational structure are subject to change due to various factors, including,

3



among other factors, the timing of exchanges of PBF LLC Series A Units for shares of our Class A common stock as contemplated by the Tax Receivable Agreement, the price of our Class A common stock at the time of such exchanges, the extent to which such exchanges are taxable, and the amount and timing of our income;
our expectations and timing with respect to our acquisition activity and whether such acquisitions are accretive or dilutive to shareholders;
our expectations with respect to our capital improvement and turnaround projects;
the status of an air permit to transfer crude through the Delaware City refinery’s dock;
the impact of disruptions to crude or feedstock supply to any of our refineries, including disruptions due to problems at PBFX or with third party logistics infrastructure or operations, including pipeline, marine and rail transportation;
the possibility that we might reduce or not make further dividend payments;
the inability of our subsidiaries to freely pay dividends or make distributions to us;
the impact of current and future laws, rulings and governmental regulations, including the implementation of rules and regulations regarding transportation of crude oil by rail;
the impact of the newly enacted federal income tax legislation on our business;
the effectiveness of our crude oil sourcing strategies, including our crude by rail strategy and related commitments;
adverse impacts related to legislation by the federal government lifting the restrictions on exporting U.S. crude oil;
adverse impacts from changes in our regulatory environment, such as the effects of compliance with the California Global Warming Solutions Act (also referred to as “AB32”), or from actions taken by environmental interest groups;
market risks related to the volatility in the price of Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuel Standards and greenhouse gas (“GHG”) emission credits required to comply with various GHG emission programs, such as AB32;
our ability to successfully integrate recently completed acquisitions into our business and realize the benefits from such acquisitions;
liabilities arising from recent acquisitions that are unforeseen or exceed our expectations;
risk associated with the operation of PBFX as a separate, publicly-traded entity;
potential tax consequences related to our investment in PBFX; and
any decisions we continue to make with respect to our energy-related logistical assets that may be transferred to PBFX.
We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements.
Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing.

4


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

PBF ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share data)
 
September 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (PBFX: $18,022 and $19,664, respectively)
$
1,059,200

 
$
573,021

Accounts receivable
1,067,811

 
952,552

Inventories
2,561,106

 
2,213,797

Prepaid and other current assets
61,489

 
63,589

Total current assets
4,749,606

 
3,802,959

Property, plant and equipment, net (PBFX: $736,876 and $684,488, respectively)
3,597,266

 
3,479,213

Deferred tax assets

 
53,638

Deferred charges and other assets, net
868,538

 
782,183

Total assets
$
9,215,410

 
$
8,117,993

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
483,127

 
$
578,551

Accrued expenses
2,151,131

 
1,814,854

Deferred revenue
13,154

 
8,933

Note payable

 
5,621

Current debt
1,242

 
10,987

Total current liabilities
2,648,654

 
2,418,946

Long-term debt (PBFX: $567,152 and $548,793, respectively)
2,175,889

 
2,175,042

Payable to related parties pursuant to Tax Receivable Agreement
381,260

 
362,142

Deferred tax liabilities
122,406

 
33,155

Other long-term liabilities
241,840

 
225,759

Total liabilities
5,570,049

 
5,215,044

Commitments and contingencies (Note 10)

 

Equity:
 
 
 
PBF Energy Inc. equity
 
 
 
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 119,951,719 shares outstanding at September 30, 2018, 110,565,531 shares outstanding at December 31, 2017
105

 
95

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

 

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

 

Treasury stock, at cost, 6,172,428 shares outstanding at September 30, 2018 and 6,132,884 shares outstanding at December 31, 2017
(153,968
)
 
(152,585
)
Additional paid in capital
2,631,191

 
2,277,739

Retained earnings
615,540

 
236,786

Accumulated other comprehensive loss
(24,934
)
 
(25,381
)
Total PBF Energy Inc. equity
3,067,934

 
2,336,654

Noncontrolling interest
577,427

 
566,295

Total equity
3,645,361

 
2,902,949

Total liabilities and equity
$
9,215,410

 
$
8,117,993


See notes to condensed consolidated financial statements.
5



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except share and per share data)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
7,646,360

 
$
5,478,951

 
$
20,893,219

 
$
15,250,649


 
 
 
 
 
 
 
Cost and expenses:
 
 
 
 
 
 
 
Cost of products and other
6,816,095

 
4,352,061

 
18,400,732

 
13,154,521

Operating expenses (excluding depreciation and amortization expense as reflected below)
424,331

 
402,823

 
1,268,161

 
1,266,879

Depreciation and amortization expense
90,732

 
75,948

 
263,753

 
197,800

Cost of sales
7,331,158

 
4,830,832

 
19,932,646

 
14,619,200

General and administrative expenses (excluding depreciation and amortization expense as reflected below)
69,920

 
58,259

 
191,418

 
143,147

Depreciation and amortization expense
2,594

 
2,572

 
7,871

 
10,355

(Gain) loss on sale of assets
(43,745
)
 
28

 
(43,072
)
 
940

Total cost and expenses
7,359,927

 
4,891,691

 
20,088,863

 
14,773,642

 
 
 
 
 
 
 
 
Income from operations
286,433

 
587,260

 
804,356

 
477,007

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Change in Tax Receivable Agreement liability
7,763

 
565

 
7,763

 
565

Change in fair value of catalyst leases
1,630

 
473

 
5,783

 
(1,011
)
Debt extinguishment costs

 

 

 
(25,451
)
Interest expense, net
(42,289
)
 
(36,990
)
 
(128,935
)
 
(114,871
)
Other non-service components of net periodic benefit cost
278

 
(103
)
 
833

 
(305
)
Income before income taxes
253,815

 
551,205

 
689,800

 
335,934

Income tax expense
61,349

 
203,979

 
167,836

 
112,889

Net income
192,466

 
347,226

 
521,964

 
223,045

Less: net income attributable to noncontrolling interests
12,928

 
32,861

 
39,907

 
49,420

Net income attributable to PBF Energy Inc. stockholders
$
179,538

 
$
314,365

 
$
482,057

 
$
173,625

 
 
 
 
 
 
 
 
Weighted-average shares of Class A common stock outstanding
 
 
 
 
 
 
 
Basic
117,029,486

 
109,724,595

 
113,597,970

 
109,634,921

Diluted
120,405,315

 
113,882,240

 
117,375,170

 
113,791,542

Net income available to Class A common stock per share:
 
 
 
 
 
 
 
Basic
$
1.53

 
$
2.86

 
$
4.24

 
$
1.58

Diluted
$
1.50

 
$
2.85

 
$
4.16

 
$
1.57

 
 
 
 
 
 
 
 
Dividends per common share
$
0.30

 
$
0.30

 
$
0.90

 
$
0.90



See notes to condensed consolidated financial statements.
6



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

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
192,466

 
$
347,226

 
$
521,964

 
$
223,045

Other comprehensive income:
 
 
 
 

 

Unrealized (loss) gain on available for sale securities
(77
)
 
(1
)
 
(312
)
 
69

Net gain on pension and other post-retirement benefits
254

 
288

 
763

 
862

Total other comprehensive income
177

 
287

 
451

 
931

Comprehensive income
192,643

 
347,513

 
522,415

 
223,976

Less: comprehensive income attributable to noncontrolling interests
12,929

 
32,871

 
39,911

 
49,452

Comprehensive income attributable to PBF Energy Inc. stockholders
$
179,714

 
$
314,642

 
$
482,504

 
$
174,524


See notes to condensed consolidated financial statements.
7



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Nine Months Ended 
 September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
521,964

 
$
223,045

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
277,663

 
215,052

Stock-based compensation
18,608

 
18,064

Change in fair value of catalyst leases
(5,783
)
 
1,011

Deferred income taxes
167,013

 
111,325

Change in Tax Receivable Agreement liability
(7,763
)
 
(565
)
Non-cash change in inventory repurchase obligations
10,701

 
(26,659
)
Non-cash lower of cost or market inventory adjustment
(300,456
)
 
(97,943
)
Debt extinguishment costs

 
25,451

Pension and other post-retirement benefit costs
35,536

 
31,682

(Gain) loss on sale of assets
(43,072
)
 
940

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(115,259
)
 
(155,838
)
Inventories
(46,853
)
 
(349,189
)
Prepaid and other current assets
2,100

 
78,838

Accounts payable
(109,847
)
 
(102,471
)
Accrued expenses
318,848

 
415,862

Deferred revenue
4,221

 
(9,005
)
Other assets and liabilities
(7,292
)
 
(57,377
)
Net cash provided by operating activities
720,329

 
322,223

 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(192,152
)
 
(267,151
)
Expenditures for deferred turnaround costs
(201,029
)
 
(341,598
)
Expenditures for other assets
(16,946
)
 
(31,096
)
Acquisition of Toledo Products Terminal by PBFX

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

Purchase of marketable securities

 
(75,036
)
Maturities of marketable securities

 
115,060

Proceeds from sale of assets
48,290

 

Net cash used in investing activities
$
(419,837
)
 
$
(609,918
)


See notes to condensed consolidated financial statements.
8



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)
 
Nine Months Ended 
 September 30,
 
2018
 
2017
Cash flows from financing activities:
 
 
 
Net proceeds from issuance of Class A common stock
$
287,284

 
$

Net proceeds from issuance of PBFX common units
34,820

 

Distributions to PBF Energy Company LLC members other than PBF Energy
(1,724
)
 
(3,448
)
Distributions to PBFX public unitholders
(35,490
)
 
(32,261
)
Dividend payments
(103,015
)
 
(98,723
)
Proceeds from 2025 Senior Notes

 
725,000

Cash paid to extinguish 2020 Senior Secured Notes

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

 

Repayments of PBFX revolver borrowings
(43,700
)
 

Repayments of PBFX Term Loan borrowings

 
(39,664
)
Repayments of PBF Rail Term Loan
(5,092
)
 
(4,959
)
Proceeds from revolver borrowings

 
490,000

Repayments of revolver borrowings

 
(490,000
)
Repayment of note payable
(5,621
)
 

Catalyst lease settlements
(9,466
)
 

Proceeds from insurance premium financing
6,959

 

Proceeds from stock options exercised
14,004

 

Purchase of treasury stock
(1,383
)
 

Deferred financing costs and other
(15,889
)
 
(13,424
)
Net cash provided by (used in) financing activities
185,687

 
(157,688
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
486,179

 
(445,383
)
Cash and cash equivalents, beginning of period
573,021

 
746,274

Cash and cash equivalents, end of period
$
1,059,200

 
$
300,891

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
Accrued and unpaid capital expenditures
$
48,545

 
$
36,172

Note payable issued for purchase of property, plant and equipment

 
6,831



See notes to condensed consolidated financial statements.
9



PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except unit and per unit data)
 
September 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (PBFX: $18,022 and $19,664, respectively)
$
1,057,339

 
$
562,036

Accounts receivable
1,067,811

 
952,552

Inventories
2,561,106

 
2,213,797

Prepaid and other current assets
61,489

 
51,799

Total current assets
4,747,745

 
3,780,184

 
 
 
 
Property, plant and equipment, net (PBFX: $736,876 and $684,488, respectively)
3,597,266

 
3,479,213

Deferred charges and other assets, net
863,834

 
779,588

Total assets
$
9,208,845

 
$
8,038,985

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
482,933

 
$
578,551

Accrued expenses
2,167,794

 
1,824,394

Deferred revenue
13,154

 
8,933

Note payable

 
5,621

Current debt
1,242

 
10,987

Total current liabilities
2,665,123

 
2,428,486

 
 
 
 
Long-term debt (PBFX: $567,152 and $548,793, respectively)
2,175,889

 
2,175,042

Affiliate note payable
326,115

 
292,844

Deferred tax liabilities
27,778

 
33,155

Other long-term liabilities
241,867

 
225,845

Total liabilities
5,436,772

 
5,155,372

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

 
5,110

PBF Energy Company LLC equity:
 
 
 
Series A Units, 1,206,325 and 3,767,464 issued and outstanding at September 30, 2018 and December 31, 2017, no par or stated value
18,996

 
40,058

Series C Units, 119,972,950 and 110,586,762 issued and outstanding at September 30, 2018 and December 31, 2017, no par or stated value
2,003,991

 
1,654,999

Treasury stock, at cost
(153,968
)
 
(152,585
)
Retained earnings
1,464,930

 
906,875

Accumulated other comprehensive loss
(26,485
)
 
(26,936
)
Total PBF Energy Company LLC equity
3,307,464

 
2,422,411

Noncontrolling interest
459,499

 
456,092

Total equity
3,766,963

 
2,878,503

Total liabilities, Series B units and equity
$
9,208,845

 
$
8,038,985


See notes to condensed consolidated financial statements.
10



PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
$
7,646,360

 
$
5,478,951

 
$
20,893,219

 
$
15,250,649

 
 
 
 
 
 
 
 
Cost and expenses:
 
 
 
 
 
 
 
Cost of products and other
6,816,095

 
4,352,061

 
18,400,732

 
13,154,521

Operating expenses (excluding depreciation and amortization expense as reflected below)
424,331

 
402,823

 
1,268,161

 
1,266,879

Depreciation and amortization expense
90,732

 
75,948

 
263,753

 
197,800

Cost of sales
7,331,158

 
4,830,832

 
19,932,646

 
14,619,200

General and administrative expenses (excluding depreciation and amortization expense as reflected below)
69,594

 
58,211

 
190,399

 
142,991

Depreciation and amortization expense
2,594

 
2,572

 
7,871

 
10,355

(Gain) loss on sale of assets
(43,745
)
 
28

 
(43,072
)
 
940

Total cost and expenses
7,359,601

 
4,891,643

 
20,087,844

 
14,773,486

 
 
 
 
 
 
 
 
Income from operations
286,759

 
587,308

 
805,375

 
477,163

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Change in fair value of catalyst leases
1,630

 
473

 
5,783

 
(1,011
)
Debt extinguishment costs

 

 

 
(25,451
)
Interest expense, net
(44,473
)
 
(38,893
)
 
(135,116
)
 
(120,910
)
Other non-service components of net periodic benefit cost
278

 
(103
)
 
833

 
(305
)
Income before income taxes
244,194

 
548,785

 
676,875

 
329,486

Income tax (benefit) expense
(719
)
 
(4,292
)
 
(5,403
)
 
2,040

Net income
244,913

 
553,077

 
682,278

 
327,446

Less: net income attributable to noncontrolling interests
10,534

 
14,732

 
30,117

 
39,751

Net income attributable to PBF Energy Company LLC
$
234,379

 
$
538,345

 
$
652,161

 
$
287,695


See notes to condensed consolidated financial statements.
11



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

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
244,913

 
$
553,077

 
$
682,278

 
$
327,446

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized (loss) gain on available for sale securities
(77
)
 
(1
)
 
(312
)
 
69

Net gain on pension and other post-retirement benefits
254

 
288

 
763

 
862

Total other comprehensive income
177

 
287

 
451

 
931

Comprehensive income
245,090

 
553,364

 
682,729

 
328,377

Less: comprehensive income attributable to noncontrolling interests
10,534

 
14,732

 
30,117

 
39,751

Comprehensive income attributable to PBF Energy Company LLC
$
234,556

 
$
538,632

 
$
652,612

 
$
288,626


See notes to condensed consolidated financial statements.
12



PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
Nine Months Ended 
 September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
682,278

 
$
327,446

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
277,663

 
215,052

Stock-based compensation
18,608

 
18,064

Change in fair value of catalyst leases
(5,783
)
 
1,011

Deferred income taxes
(5,377
)
 
641

Non-cash change in inventory repurchase obligations
10,701

 
(26,659
)
Non-cash lower of cost or market inventory adjustment
(300,456
)
 
(97,943
)
Debt extinguishment costs

 
25,451

Pension and other post-retirement benefit costs
35,536

 
31,682

(Gain) loss on sale of assets
(43,072
)
 
940

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(115,259
)
 
(155,838
)
Inventories
(46,853
)
 
(349,189
)
Prepaid and other current assets
(9,690
)
 
(4,732
)
Accounts payable
(110,041
)
 
(102,441
)
Accrued expenses
317,159

 
412,542

Deferred revenue
4,221

 
(9,005
)
Other assets and liabilities
(10,534
)
 
(57,377
)
Net cash provided by operating activities
699,101

 
229,645

 
 
 
 
Cash flows from investing activities:
 
 
 
Expenditures for property, plant and equipment
(192,152
)
 
(267,151
)
Expenditures for deferred turnaround costs
(201,029
)
 
(341,598
)
Expenditures for other assets
(16,946
)
 
(31,096
)
Acquisition of Toledo Products Terminal by PBFX

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

Purchase of marketable securities

 
(75,036
)
Maturities of marketable securities

 
115,060

Proceeds from sale of assets
48,290

 

Net cash used in investing activities
$
(419,837
)
 
$
(609,918
)

See notes to condensed consolidated financial statements.
13



PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited, in thousands)
 
Nine Months Ended 
 September 30,
 
2018
 
2017
Cash flows from financing activities:
 
 
 
Proceeds from issuance of PBF LLC Series C units
$
287,284

 
$

Net proceeds from issuance of PBFX common units
34,820

 

Distributions to PBF Energy Company LLC members
(104,739
)
 
(102,171
)
Distributions to PBFX public unitholders
(35,490
)
 
(32,261
)
Proceeds from 2025 Senior Notes

 
725,000

Cash paid to extinguish 2020 Senior Secured Notes

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

 

Repayments of PBFX revolver borrowings
(43,700
)
 

Repayments of PBFX Term Loan borrowings

 
(39,664
)
Repayments of PBF Rail Term Loan
(5,092
)
 
(4,959
)
Proceeds from revolver borrowings

 
490,000

Repayments of revolver borrowings

 
(490,000
)
Repayment of note payable
(5,621
)
 

Catalyst lease settlements
(9,466
)
 

Proceeds from insurance premium financing
6,959

 

Proceeds from affiliate loan with PBF Energy Inc.
44,192

 
99,655

Proceeds from stock options exercised
164

 

Purchase of treasury stock
(1,383
)
 

Deferred financing costs and other
(15,889
)
 
(13,424
)
Net cash provided by (used in) financing activities
216,039

 
(58,033
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
495,303

 
(438,306
)
Cash and cash equivalents, beginning of period
562,036

 
734,962

Cash and cash equivalents, end of period
$
1,057,339

 
$
296,656

 
 
 
 
Supplemental cash flow disclosures
 
 
 
Non-cash activities:
 
 
 
Accrued and unpaid capital expenditures
$
48,545

 
$
36,172

Note payable issued for purchase of property, plant and equipment

 
6,831


See notes to condensed consolidated financial statements.
14

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

 
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
PBF Energy Inc. (“PBF Energy”) was formed as a Delaware corporation on November 7, 2011 and is the sole managing member of PBF Energy Company LLC (“PBF LLC”), a Delaware limited liability company, with a controlling interest in PBF LLC and its subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBF LLC’s members other than PBF Energy.
PBF LLC, together with its consolidated subsidiaries, owns and operates oil refineries and related facilities in North America. PBF Holding Company LLC (“PBF Holding”) is a wholly-owned subsidiary of PBF LLC. PBF Investments LLC (“PBF Investments”), Toledo Refining Company LLC (“Toledo Refining” or “TRC”), Paulsboro Refining Company LLC (“Paulsboro Refining” or “PRC”), Delaware City Refining Company LLC (“Delaware City Refining” or “DCR”), Chalmette Refining, L.L.C. (“Chalmette Refining”), PBF Western Region LLC (“PBF Western Region”), Torrance Refining Company LLC (“Torrance Refining”) and Torrance Logistics Company LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned subsidiaries of PBF Holding. Discussions or areas of the Notes to Condensed Consolidated Financial Statements that either apply only to PBF Energy or PBF LLC are clearly noted in such footnotes.
As of September 30, 2018, PBF LLC also holds a 44.0% limited partner interest and all of the incentive distribution rights in PBF Logistics LP (“PBFX”), a publicly traded master limited partnership (refer to “Note 3 - PBF Logistics LP”). PBF Logistics GP LLC (“PBF GP”) owns the noneconomic general partner interest and serves as the general partner of PBFX and is wholly-owned by PBF LLC. PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX’s unitholders other than PBF LLC. Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, PBF GP and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires.
As of September 30, 2018, the Company owns 119,972,950 PBF LLC Series C Units and the Company’s current and former executive officers and directors and certain employees and others beneficially own 1,206,325 PBF LLC Series A Units. As of September 30, 2018, the holders of the Company’s issued and outstanding shares of Class A common stock have 99.0% of the voting power in the Company and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock have the remaining 1.0% of the voting power in the Company.
Substantially all of the Company’s operations are in the United States. The Company operates in two reportable business segments: Refining and Logistics. The Company’s oil refineries are all engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX is a publicly traded master limited partnership that was formed to operate logistical assets such as crude oil and refined petroleum products terminals, pipelines, and storage facilities. PBFX’s operations are aggregated into the Logistics segment. To generate earnings and cash flows from operations, the Company is primarily dependent upon processing crude oil and selling refined petroleum products at margins sufficient to cover fixed and variable costs and other expenses. Crude oil and refined petroleum products are commodities; and factors largely out of the Company’s control can cause prices to vary over time. The potential margin volatility can have a material effect on the Company’s financial position, earnings and cash flow.

15

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

Basis of Presentation
The unaudited condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the financial position and the results of operations and cash flows of the Company for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the PBF Energy financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017 and the PBF LLC financial statements for the year ended December 31, 2017 included in the Registration Statement on Form S-4 filed on March 13, 2018 by PBFX. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year.
Torrance Land Sale
During the three months ended September 30, 2018, the Company closed on a third party sale of a parcel of real property acquired as part of the Torrance Refinery, but not part of the refinery itself. The sale resulted in a gain of approximately $43,761 included within Gain on sale of assets within the Condensed Consolidated Statements of Operations.
Recently Adopted Accounting Guidance
In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers.” (“ASC 606”). ASC 606 supersedes the revenue recognition requirements in Accounting Standards Codification 605 “Revenue Recognition” (“ASC 605”), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method. See “Note 2 - Revenues” for further details.
In March 2017, the FASB issued ASU No. 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which provides guidance to improve the reporting of net periodic benefit cost in the income statement and on the components eligible for capitalization in assets. Under the new guidance, employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Additionally, under this guidance, employers will present the other non-service components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. Employers will apply the guidance on the presentation of the components of net periodic benefit cost in the income statement retrospectively. The guidance limiting the capitalization of net periodic benefit cost in assets to the service cost component will be applied prospectively. The guidance includes a practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in their pension and other postretirement benefit plan note to the financial statements. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company adopted ASU 2017-07 effective January 1, 2018 and applied the new guidance retrospectively in the Condensed Consolidated Statements of Operations. Income and expense amounts related to non-service components of net periodic benefit cost, historically recorded within Operating expenses and General and administrative expenses, have been recorded within Other income (expense). For the three and nine months ended September 30, 2018, the Company recorded income of $278 and $833, respectively, related to non-service components of net periodic benefit cost. For the three and nine months ended September 30, 2017, the Company recorded expense of $103 and $305, respectively, related to non-service components of net periodic benefit cost.

16

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

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’s adoption of this guidance did not materially impact its condensed consolidated financial statements.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), to increase the transparency and comparability about leases among entities. Additional ASUs have been issued subsequent to ASU 2016-02 to provide supplementary clarification and implementation guidance for leases related to, among other things, the application of certain practical expedients, the rate implicit in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments (collectively, the Company refers to ASU 2016-02 and these additional ASUs as the “Updated Lease Guidance”). The Updated Lease Guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Updated Lease Guidance is effective for interim and annual periods beginning after December 15, 2018, and allows a modified retrospective approach to adoption. While early adoption is permitted, the Company will not early adopt the Updated Lease Guidance. The Company has established a working group to study the implementation of the Updated Lease Guidance and has instituted a task plan designed to meet the requirements and implementation deadline. The Company has also evaluated and purchased a lease software system, completed software design and configuration of the system, and substantially completed testing the implementation of the selected system. The working group continues to evaluate the impact of the Updated Lease Guidance on the Company’s consolidated financial statements and related disclosures and has designed and begun implementing business processes and controls to address the new guidance. While the assessment of this standard is ongoing, the Company has identified that the most significant impacts of the Updated Lease Guidance will be to bring nearly all leases, with the exception of certain short-term leases, on its balance sheet reflected as right of use assets and lease obligation liabilities as well as accelerating recognition of the interest expense component of financing leases. The new standard will also require additional disclosures for financing and operating leases. The Updated Lease Guidance allows for certain practical expedients, certain of which the Company has elected to adopt including, among others, the expedient to carry forward the classification of leases under current lease guidance once the Updated Lease Guidance becomes effective, the expedient to not include short-term leases on its balance sheet and to avail itself of the additional transition method whereby it will apply the Updated Lease Guidance on the effective date and recognize a cumulative-effect adjustment to opening retained earnings.

17

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

In 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 in the consolidated financial statements. The amendments expand the ability to hedge nonfinancial and financial risk components, reduce complexity in fair value hedges of interest rate risk, eliminate the requirement to separately measure and report hedge ineffectiveness, and eases certain hedge effectiveness assessment requirements. The guidance in ASU 2017-12 should be applied using a modified retrospective approach. The guidance in ASU 2017-12 also provides transition relief to make it easier for entities to apply certain amendments to existing hedges (including fair value hedges) where the hedge documentation needs to be modified. The presentation and disclosure requirements of ASU 2017-12 should be applied prospectively. The amendments in this ASU are effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. While the Company is still evaluating the timing of adoption, it currently does not expect this guidance to have a material impact on its consolidated financial statements and related disclosures.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Targeted Improvements to Non-employee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee 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 evaluated under ASC 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. The Company does not expect this guidance to have a material impact on its consolidated financial statements and related disclosures.
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 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 fiscal years ending after December 15, 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. REVENUES
Adoption of Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”
Prior to January 1, 2018, the Company recognized revenue from customers when all of the following criteria were met:  (i) persuasive evidence of an exchange arrangement existed, (ii) delivery had occurred or services had been rendered, (iii) the buyer’s price was fixed or determinable and (iv) collectability was reasonably assured. Amounts billed in advance of the period in which the service was rendered or product delivered were recorded as deferred revenue. 
Effective January 1, 2018, the Company adopted ASC 606. As a result, the Company has changed its accounting policy for the recognition of revenue from contracts with customers as detailed below.
The Company adopted ASC 606 using the modified retrospective method, which has been applied for the three and nine months ended September 30, 2018. The Company has applied ASC 606 only to those contracts that were not complete as of January 1, 2018. As such, the financial information for prior periods has not been adjusted and continues to be reported under ASC 605. The Company did not record a cumulative effect adjustment upon initially

18

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

applying ASC 606 as there was not a significant impact upon adoption; however, the details of significant qualitative and quantitative disclosure changes upon implementing ASC 606 are detailed below.
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
As described in “Note 15 - Segment Information”, the Company’s business consists of the Refining Segment and Logistics Segment. The following table provides information relating to the Company’s revenues for each product or group of similar products or services by segment for the periods presented.
 
Three Months Ended September 30,
 
2018
 
2017
Refining Segment:

 
 
 
Gasoline and distillates
$
6,227,509

 
$
4,657,279

Feedstocks and other
552,156

 
192,817

Asphalt and blackoils
544,943

 
361,401

Chemicals
243,174

 
189,812

Lubricants
74,162

 
73,805

Total
7,641,944

 
5,475,114

Logistics Segment:
 
 
 
Logistics
70,556

 
66,195

Total revenue prior to eliminations
7,712,500

 
5,541,309

Elimination of intercompany revenue
(66,140
)
 
(62,358
)
Total Revenues
$
7,646,360

 
$
5,478,951

 
 
 
 
 
Nine Months Ended September 30,
 
2018
 
2017
Refining Segment:
 
 
 
Gasoline and distillates
$
17,563,586

 
$
12,900,465

Asphalt and blackoils
1,251,007

 
834,260

Feedstocks and other
1,193,660

 
726,804

Chemicals
621,834

 
553,311

Lubricants
250,526

 
222,349

Total
20,880,613

 
15,237,189

Logistics Segment:
 
 
 
Logistics
203,395

 
190,375

Total revenue prior to eliminations
21,084,008

 
15,427,564

Elimination of intercompany revenue
(190,789
)
 
(176,915
)
Total Revenues
$
20,893,219

 
$
15,250,649



19

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

The majority of the Company’s revenues are generated from the sale of refined petroleum products reported in the Refining segment. These revenues are largely based on the current spot (market) prices of the products sold, which represent consideration specifically allocable to the products being sold on a given day, and the Company recognizes those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and 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 Refining segment also has contracts which contain fixed pricing, tiered pricing, minimum volume features with makeup periods, or other factors that have not materially been affected by ASC 606.
Logistics segment revenue is generated by charging fees for crude oil and refined products terminaling, storing and pipeline services based on the greater of contractual minimum volume commitments, as applicable, or the delivery of actual volumes based on contractual rates applied to throughput or storage volumes. A majority of the Company’s logistics revenues are generated between intercompany transactions and are eliminated in consolidation.
Deferred Revenues
The Company records deferred revenues when cash payments are received or are due in advance of performance, including amounts which are refundable. Deferred revenue was $13,154 and $8,933 as of September 30, 2018 and December 31, 2017, 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.
Significant Judgment and Practical Expedients
For performance obligations related to sales of products, the Company has determined that customers are able to direct the use of, and obtain substantially all of the benefits from, the products at the point in time that the products are delivered. The Company has determined that the transfer of control upon delivery to the customer’s requested destination accurately depicts the transfer of goods. Upon the delivery of the products and transfer of control, the Company generally has the present right to payment and the customers bear the risks and rewards of ownership of the products. The Company has elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

3. PBF LOGISTICS LP
PBFX is a fee-based, growth-oriented, publicly traded Delaware master limited partnership formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries, as well as for third party customers. As of September 30, 2018, a substantial majority of PBFX’s revenue is derived from long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments for receiving, handling, storing and transferring crude oil, refined products and natural gas. PBF Energy also has agreements with PBFX that establish fees for certain general and administrative services and operational and maintenance services provided by PBF Holding to PBFX. These transactions, other than those with third parties, are eliminated by PBF Energy and PBF LLC in consolidation.
PBFX, a variable interest entity, is consolidated by PBF Energy through its ownership of PBF LLC. PBF LLC, through its ownership of PBF GP, has the sole ability to direct the activities of PBFX that most significantly impact its economic performance. PBF LLC is considered to be the primary beneficiary of PBFX for accounting purposes.

20

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

As of September 30, 2018, PBF LLC holds a 44.0% limited partner interest in PBFX consisting of 19,953,631 common units, with the remaining 56.0% limited partner interest held by public unitholders. PBF LLC also owns all of the incentive distribution rights (“IDRs”) and indirectly owns a non-economic general partner interest in PBFX through its wholly-owned subsidiary, PBF GP, the general partner of PBFX. The IDRs entitle PBF LLC to receive increasing percentages, up to a maximum of 50.0%, of the cash PBFX distributes from operating surplus in excess of $0.345 per unit per quarter.
Knoxville Terminals Purchase
On April 16, 2018, PBFX completed the purchase of two refined product terminals located in Knoxville, Tennessee, which include product tanks, pipeline connections to the Colonial and Plantation pipeline systems and truck loading facilities (the “Knoxville Terminals”) from Cummins Terminals, Inc. (“Cummins”) for total cash consideration of $58,000, excluding working capital adjustments (the “Knoxville Terminals Purchase”). The transaction was financed through a combination of cash on hand and borrowings under the PBFX Revolving Credit Facility.
Registered Direct Offering
On July 16, 2018, PBFX entered into a common unit purchase agreement with certain funds managed by Tortoise Capital Advisors, L.L.C. providing for the issuance and sale in a registered direct offering (the “Registered Direct Offering”) of an aggregate of 1,775,750 common units for gross proceeds of approximately $35,000. The Registered Direct Offering closed on July 30, 2018.
4. EQUITY
Noncontrolling Interest in PBF LLC
PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its subsidiaries. As of September 30, 2018 and December 31, 2017, PBF Energy’s equity interest in PBF LLC represented approximately 99.0% and 96.7%, respectively, of the outstanding interests.
PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, and records a noncontrolling interest for the economic interest in PBF Energy held by the members of PBF LLC other than PBF Energy. Noncontrolling interest on the condensed consolidated statements of operations includes the portion of net income or loss attributable to the economic interest in PBF Energy held by the members of PBF LLC other than PBF Energy. Noncontrolling interest on the condensed consolidated balance sheets represents the portion of net assets of PBF Energy attributable to the members of PBF LLC other than PBF Energy.
The noncontrolling interest ownership percentages in PBF LLC as of September 30, 2018 and December 31, 2017 are calculated as follows:
 
Holders of PBF LLC Series A Units
 
Outstanding Shares of PBF Energy Class A Common Stock
 
Total *
December 31, 2017
3,767,464

 
110,565,531

 
114,332,995

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

 
119,951,719

 
121,158,044

 
1.0
%
 
99.0
%
 
100.0
%
——————————
*
Assumes all of the holders of PBF LLC Series A Units exchange their PBF LLC Series A Units for shares of PBF Energy’s Class A common stock on a one-for-one basis.

21

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

Noncontrolling Interest in PBFX
PBF LLC holds a 44.0% limited partner interest in PBFX and owns all of PBFX’s IDRs, with the remaining 56.0% limited partner interest owned by public common unitholders as of September 30, 2018. PBF LLC is also the sole member of PBF GP, the general partner of PBFX.
PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX, and records a noncontrolling interest for the economic interest in PBFX held by the public common unitholders. Noncontrolling interest on the condensed consolidated statements of operations includes the portion of net income or loss attributable to the economic interest in PBFX held by the public common unitholders of PBFX other than PBF Energy (through its ownership in PBF LLC). Noncontrolling interest on the condensed consolidated balance sheets includes the portion of net assets of PBFX attributable to the public common unitholders of PBFX.
The noncontrolling interest ownership percentages in PBFX as of September 30, 2018 and December 31, 2017, are calculated as follows:

Units of PBFX Held by the Public

Units of PBFX Held by PBF LLC

Total
December 31, 2017
23,441,211

 
18,459,497

 
41,900,708


55.9
%
 
44.1
%
 
100.0
%
September 30, 2018
25,393,565

 
19,953,631

 
45,347,196

 
56.0
%
 
44.0
%
 
100.0
%
Noncontrolling Interest in PBF Holding
In connection with the Chalmette Acquisition, PBF Holding recorded noncontrolling interests in two subsidiaries of Chalmette Refining. PBF Holding, through Chalmette Refining, owns an 80% ownership interest in both Collins Pipeline Company and T&M Terminal Company. For the three months ended September 30, 2018 and 2017 the Company recorded a noncontrolling interest in the earnings (loss) of these subsidiaries of $35 and $(6), respectively. For the nine months ended September 30, 2018 and 2017 the Company recorded a noncontrolling interest in the earnings of these subsidiaries of $43 and $374, respectively.

22

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

Changes in Equity and Noncontrolling Interests
On August 14, 2018, the Company completed a public offering of an aggregate of 6,000,000 shares of Class A common stock (the “August 2018 Equity Offering”) for net proceeds of $287,284, after deducting underwriting discounts and commissions and other offering expenses. The following tables summarize the changes in equity for the controlling and noncontrolling interests of PBF Energy for the nine months ended September 30, 2018 and 2017, respectively: 
 
PBF Energy Inc. Equity
 
Noncontrolling
Interest in PBF LLC

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

 
$
110,203

 
$
10,808

 
$
445,284

 
$
2,902,949

Comprehensive income
482,504

 
9,794

 
43

 
30,074

 
522,415

Dividends and distributions
(103,303
)
 
(1,724
)
 

 
(36,466
)
 
(141,493
)
Effects of exchanges of PBF LLC Series A Units on deferred tax assets and liabilities and Tax Receivable Agreement obligation
(2,756
)
 

 

 

 
(2,756
)
Issuance of additional PBFX common units
28,564

 

 

 
6,256

 
34,820

Equity-based compensation awards
14,059

 

 

 
4,549

 
18,608

August 2018 Equity Offering
287,284

 

 

 

 
287,284

Exercise of PBF LLC and PBF Energy options and warrants, net
14,004

 
(345
)
 

 

 
13,659

Other
10,924

 

 

 
(1,049
)
 
9,875

Balance at September 30, 2018
$
3,067,934

 
$
117,928

 
$
10,851

 
$
448,648

 
$
3,645,361


 
PBF Energy Inc. Equity
 
Noncontrolling
Interest in PBF LLC
 
Noncontrolling
Interest in PBF Holding
 
Noncontrolling
Interest in PBFX
 
Total Equity
Balance at January 1, 2017
$
2,025,044

 
$
98,671

 
$
12,513

 
$
434,456

 
$
2,570,684

Comprehensive income
174,524

 
9,701

 
374

 
39,377

 
223,976

Dividends and distributions
(98,723
)
 
(3,448
)
 

 
(33,090
)
 
(135,261
)
Equity-based compensation awards
13,549

 

 

 
4,515

 
18,064

Other
(2,096
)
 

 

 
(5
)
 
(2,101
)
Balance at September 30, 2017
$
2,112,298

 
$
104,924

 
$
12,887

 
$
445,253

 
$
2,675,362


23

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

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

 
$
10,808

 
$
445,284

 
$
2,878,503

Comprehensive income
652,612

 
43

 
30,074

 
682,729

Dividends and distributions
(105,027
)
 

 
(36,466
)
 
(141,493
)
Issuance of additional PBFX common units
28,564

 

 
6,256

 
34,820

Equity-based compensation awards
14,059

 

 
4,549

 
18,608

Exercise of PBF LLC options and warrants, net
(3,760
)
 

 

 
(3,760
)
Issuance of Series C units in connection with the August 2018 Equity Offering
287,284

 

 

 
287,284

Other
11,321

 

 
(1,049
)
 
10,272

Balance at September 30, 2018
$
3,307,464

 
$
10,851

 
$
448,648

 
$
3,766,963

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

 
$
12,513

 
$
434,456

 
$
2,487,820

Comprehensive income
288,626

 
374

 
39,377

 
328,377

Dividends and distributions
(102,171
)
 

 
(33,090
)
 
(135,261
)
Equity-based compensation awards
13,549

 

 
4,515

 
18,064

Other
(2,096
)
 

 
(5
)
 
(2,101
)
Balance at September 30, 2017
$
2,238,759

 
$
12,887

 
$
445,253

 
$
2,696,899

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

 
6,132,884

 
109,204,047

 
6,087,963

Treasury stock purchases (1)
(39,544
)
 
39,544

 

 
44,921

Stock based compensation
35,811

 

 
702,404

 

Exercise of options and warrants
691,286

 

 
462,500

 

Exchange of PBF LLC Series A units for shares of Class A common stock
2,698,635

 

 
196,580

 

August 2018 Equity Offering
6,000,000

 

 

 

Balance at end of period
119,951,719

 
6,172,428

 
110,565,531

 
6,132,884

_____
(1) Includes shares repurchased from participants in connection with the vesting of equity awards granted under the Company’s stock compensation plans to cover employee income tax liabilities.

24

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

The following table presents the changes in PBF LLC Series A Units and Series C Units outstanding:
 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
 
Series A Units
 
Series C Units
 
Series A Units
 
Series C Units
Balance at beginning of period
3,767,464

 
110,586,762

 
3,920,902

 
109,204,047

Exercise of Series A warrants and options
137,496

 
691,286

 
64,373

 
462,500

Exchange of Series A units for PBF Energy Class A common stock
(2,698,635
)
 
2,698,635

 
(196,580
)
 
217,811

Grant of restricted shares

 
35,811

 

 
702,404

Surrender of units for tax withholding

 
(39,544
)
 

 

Redemption of Series A units by PBF Energy

 

 
(21,231
)
 

August 2018 Equity Offering

 
6,000,000

 

 

Balance at end of period
1,206,325

 
119,972,950

 
3,767,464

 
110,586,762


5. INVENTORIES
Inventories consisted of the following:
September 30, 2018
 
Titled Inventory
 
Inventory Intermediation Agreements
 
Total
Crude oil and feedstocks
$
1,055,654

 
$

 
$
1,055,654

Refined products and blendstocks
1,060,841

 
339,134

 
1,399,975

Warehouse stock and other
105,477

 

 
105,477

 
$
2,221,972

 
$
339,134

 
$
2,561,106

Lower of cost or market adjustment

 

 

Total inventories
$
2,221,972

 
$
339,134

 
$
2,561,106

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

 
$

 
$
1,073,093

Refined products and blendstocks
1,030,817

 
311,477

 
1,342,294

Warehouse stock and other
98,866

 

 
98,866

 
$
2,202,776

 
$
311,477

 
$
2,514,253

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

 
$
243,673

 
$
2,213,797

Inventory under inventory intermediation agreements includes certain light finished products sold to counterparties and stored in the Paulsboro and Delaware City refineries’ storage facilities in connection with the amended and restated inventory intermediation agreements (as amended, the “Inventory Intermediation Agreements”) with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”).

25

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

At September 30, 2018 the replacement value of inventories exceeded the LIFO carrying value by approximately $12,037. During the three months ended September 30, 2018, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $54,801 and $40,328, respectively, reflecting no lower of cost or market (“LCM”) reserve as of September 30, 2018 in comparison to an LCM reserve of $54,801 at June 30, 2018. During the nine months ended September 30, 2018, the Company recorded an LCM inventory adjustment which increased operating income and net income by $300,456 and $221,106, respectively, reflecting no LCM reserve as of September 30, 2018 in comparison to an LCM reserve of $300,456 at December 31, 2017.
During the three months ended September 30, 2017, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income and net income by $265,077 and $160,743, respectively, reflecting the net change in the LCM reserve from $763,122 at June 30, 2017 to $498,045 at September 30, 2017. During the nine months ended September 30, 2017, the Company recorded an LCM inventory adjustment which increased operating income and net income by $97,943 and $59,393, respectively, reflecting the net change in the LCM reserve from $595,988 at December 31, 2016 to $498,045 at September 30, 2017.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:


PBF Energy
September 30,
2018
 
December 31,
2017
Inventory-related accruals
$
1,451,142

 
$
1,151,810

Inventory intermediation agreements
254,022

 
244,287

Excise and sales tax payable
123,174

 
118,515

Accrued transportation costs
56,167

 
64,400

Accrued salaries and benefits
55,366

 
58,589

Accrued interest
43,395

 
14,080

Renewable energy credit and emissions obligations
32,753

 
26,231

Accrued utilities
32,371

 
42,189

Accrued capital expenditures
26,082

 
18,765

Accrued refinery maintenance and support costs
23,147

 
35,674

Customer deposits
20,583

 
16,133

Environmental liabilities
7,173

 
8,289

Other
25,756

 
15,892

Total accrued expenses
$
2,151,131

 
$
1,814,854

 

26

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



PBF LLC
September 30,
2018
 
December 31,
2017
Inventory-related accruals
$
1,451,142

 
$
1,151,810

Inventory intermediation agreements
254,022

 
244,287

Excise and sales tax payable
123,174

 
118,515

Accrued interest
58,885

 
23,419

Accrued transportation costs
56,167

 
64,400

Accrued salaries and benefits
55,366

 
58,589

Renewable energy credit and emissions obligations
32,753

 
26,231

Accrued utilities
32,371

 
42,189

Accrued capital expenditures
26,082

 
18,765

Accrued refinery maintenance and support costs
23,147

 
35,674

Customer deposits
20,583

 
16,133

Environmental liabilities
7,173

 
8,289

Other
26,929

 
16,093

Total accrued expenses
$
2,167,794

 
$
1,824,394

The Company has the obligation to repurchase certain intermediates and finished products that are held in the Company’s refinery storage tanks at the Delaware City and Paulsboro refineries in accordance with the Inventory Intermediation Agreements with J. Aron. As of September 30, 2018 and December 31, 2017, a liability is recognized for the Inventory Intermediation Agreements and is recorded at market price for the J. Aron owned inventory held in the Company’s storage tanks under the Inventory Intermediation Agreements, with any change in the market price being recorded in Cost of products and other.
The Company is subject to obligations to purchase Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuels Standard. The Company’s overall RINs obligation is based on a percentage of domestic shipments of on-road fuels as established by Environmental Protection Agency (“EPA”). To the degree the Company is unable to blend the required amount of biofuels to satisfy its RINs obligation, RINs must be purchased on the open market to avoid penalties and fines. The Company records its RINs obligation on a net basis in Accrued expenses when its RINs liability is greater than the amount of RINs earned and purchased in a given period and in Prepaid and other current assets when the amount of RINs earned and purchased is greater than the RINs liability. In addition, the Company is subject to obligations to comply with federal and state legislative and regulatory measures, including regulations in the state of California pursuant to Assembly Bill 32 (“AB32”), to address environmental compliance and greenhouse gas and other emissions. These requirements include incremental costs to operate and maintain our facilities as well as to implement and manage new emission controls and programs. Renewable energy credit and emissions obligations fluctuate with the volume of applicable product sales and timing of credit purchases.

27

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

Early Return of Railcars
On September 30, 2018, the Company agreed to voluntarily return a portion of railcars under an operating lease in order to rationalize certain components of its railcar fleet based on prevailing market conditions in the crude oil by rail market. Under the terms of the lease amendment, the Company will pay agreed amounts in lieu of satisfaction of return conditions (the “early termination penalty”) and will pay a reduced rental fee over the remaining term of the lease. Certain of these railcars are idle and the remaining railcars will be taken out of service during the fourth quarter of 2018 and subsequently fully returned to the lessor. As a result, the Company recognized an expense of $44,571 for the three months ended September 30, 2018 included within Cost of sales consisting of (i) a $40,313 charge for the early termination penalty and (ii) a $4,258 charge related to the remaining lease payments associated with the portion of railcars within the amended lease, that were idled and out of service as of September 30, 2018. The Company has recorded a liability within Inventory-related accruals (included within Accrued expenses) for $25,843 representing the amount of the early lease termination obligation expected to be paid within the next twelve months and a liability within Other long-term liabilities for $18,728 representing the remaining amount of the obligation.
7. DEBT
2018 Revolving Credit Agreement
On May 2, 2018, PBF Holding and certain of its wholly-owned subsidiaries, as borrowers or subsidiary guarantors, replaced its existing asset-based revolving credit agreement dated as of August 15, 2014 (the “August 2014 Revolving Credit Agreement”) with a new asset-based revolving credit agreement (the “2018 Revolving Credit Agreement"). The 2018 Revolving Credit Agreement has a maximum commitment of $3,400,000, a maturity date of May 2023 and redefines certain components of the Borrowing Base (as defined in the credit agreement) to make more funding available for working capital and other general corporate purposes. Borrowings under the 2018 Revolving Credit Agreement bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR Rate plus the Applicable Margin (all as defined in the credit agreement). The Applicable Margin ranges from 0.25% to 1.00% for Alternative Base Rate Loans and from 1.25% to 2.00% for Adjusted LIBOR Rate Loans, in each case depending on the Company’s corporate credit rating. In addition, an accordion feature allows for commitments of up to $3,500,000. The LC Participation Fee ranges from 1.00% to 1.75% depending on the Company’s corporate credit rating and the Fronting Fee is capped at 0.25%.
The 2018 Revolving Credit Agreement contains customary covenants and restrictions on the activities of PBF Holding and its subsidiaries, including, but not limited to, limitations on incurring additional indebtedness, liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions and prepayment of other debt, distributions, dividends and the repurchase of capital stock, transactions with affiliates and the ability of PBF Holding to change the nature of its business or its fiscal year; all as defined in the credit agreement.
In addition, the 2018 Revolving Credit Agreement has a financial covenant which requires that if at any time Excess Availability, as defined in the credit agreement, is less than the greater of (i) 10% of the lesser of the then existing Borrowing Base and the then aggregate Revolving Commitments of the Lenders (the “Financial Covenant Testing Amount”), and (ii) $100,000, and until such time as Excess Availability is greater than the Financial Covenant Testing Amount and $100,000 for a period of 12 or more consecutive days, PBF Holding will not permit the Consolidated Fixed Charge Coverage Ratio, as defined in the credit agreement and determined as of the last day of the most recently completed quarter, to be less than 1.0 to 1.0.
At both September 30, 2018 and December 31, 2017, there was $350,000 outstanding under the revolving credit agreements.

28

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

PBFX Revolving Credit Facility
On July 30, 2018, PBFX entered into an amended and restated credit facility (as amended, the “PBFX Revolving Credit Facility”). The PBFX Revolving Credit Facility has a maximum commitment available to PBFX of $500,000 and a maturity date of July 2023 that may be extended for one year on up to two occasions, subject to certain customary terms and conditions. PBFX has the ability to increase the maximum amount of the PBFX Revolving Credit Facility by an aggregate amount of up to $250,000, or a total facility size of $750,000, subject to receiving increased commitments from lenders or other financial institutions and satisfaction of certain conditions. The PBFX Revolving Credit Facility includes a $75,000 sublimit for standby letters of credit, a $25,000 sublimit for swingline loans and is guaranteed by a guaranty of collection from PBF LLC. Obligations under the PBFX Revolving Credit Facility are guaranteed by its restricted subsidiaries, and are secured by a first priority lien on PBFX’s assets and those of its restricted subsidiaries. Borrowings under the PBFX Revolving Credit Facility bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR Rate plus an Applicable Margin (all as defined in the PBFX Revolving Credit Facility). The Applicable Margin ranges from 0.75% to 1.75% for Alternative Base Rate Loans and from 1.75% to 2.75% for Adjusted LIBOR Rate Loans, in each case depending on PBFX’s Consolidated Total Leverage Ratio, as defined in the PBFX Revolving Credit Facility.
At September 30, 2018 and December 31, 2017, there was $50,000 and $29,700, respectively, outstanding under the PBFX revolving credit facilities.

8. AFFILIATE NOTE PAYABLE - PBF LLC
As of September 30, 2018 and December 31, 2017, PBF LLC had an outstanding note payable with PBF Energy for an aggregate principal amount of $326,115 and $292,844, respectively. The note has an interest rate of 2.5% and a 5-year term but may be prepaid in whole or in part at any time, at the option of PBF LLC without penalty or premium.

9. INCOME TAXES
PBF Energy files federal and applicable state corporate income tax returns and recognizes income taxes on its pre-tax income, which to-date has consisted primarily of its share of PBF LLC’s pre-tax income (approximately 99.0% as of September 30, 2018 and approximately 96.7% as of December 31, 2017). PBF LLC is organized as a limited liability company and PBFX is a master limited partnership, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income taxes apart from the income tax attributable to the two subsidiaries acquired in connection with the acquisition of Chalmette Refining and PBF Holding’s wholly-owned Canadian subsidiary, PBF Ltd, that are treated as C-Corporations for income tax purposes.
The reported income tax expense in the PBF Energy condensed consolidated financial statements of operations consists of the following: 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Current income tax expense
$
71

 
$
190

 
$
823

 
$
1,564

Deferred income tax expense
61,278

 
203,789

 
167,013

 
111,325

Total income tax expense
$
61,349

 
$
203,979

 
$
167,836

 
$
112,889


29

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


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

State income taxes (net of federal income tax)
5.6
 %
 
4.5
 %
 
5.9
 %
 
4.3
 %
Nondeductible/nontaxable items
(0.5
)%
 
(0.2
)%
 
(0.1
)%
 
0.2
 %
Rate differential from foreign jurisdictions
(0.2
)%
 
0.3
 %
 
(0.2
)%
 
(0.1
)%
Provision to return adjustment
 %
 
(0.1
)%
 
 %
 
(0.2
)%
Foreign tax rate change
 %
 
 %
 
 %
 
0.3
 %
Other
(0.4
)%
 
(0.1
)%
 
(0.8
)%
 
(0.1
)%
Effective tax rate
25.5
 %
 
39.4
 %
 
25.8
 %
 
39.4
 %
PBF Energy’s effective income tax rate for the three and nine months ended September 30, 2018, including the impact of income attributable to noncontrolling interests of $12,928 and $39,907, respectively, was 24.2% and 24.3%, respectively. PBF Energy’s effective income tax rate for the three and nine months ended September 30, 2017, including the impact of income attributable to noncontrolling interests of $32,861 and $49,420, respectively, was 37.0% and 33.6% respectively.
The decrease in effective tax rate when comparing the three and nine month periods ended September 30, 2018 to the three and nine month periods ended September 30, 2017 is primarily driven by the Tax Cuts and Jobs Act (“TCJA”), which was effective as of January 1, 2018. The TCJA significantly revised the U.S. tax code by, among other things, lowering the corporate income tax rate from 35.0% to 21.0%. In connection with the enactment of the TCJA, PBF Energy recorded a net tax expense of $20,153 in the year ending December 31, 2017. It is the Company’s expectation that the other legislative areas within TCJA, such as the Transition Tax and the Global Low-Taxed Intangible Income, will not have a material impact on the provision for income taxes.
The reported income tax (benefit) expense in the PBF LLC condensed consolidated financial statements of operations consists of the following: 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Current income tax expense (benefit)
$
5

 
$
190

 
$
(26
)
 
$
1,399

Deferred income tax (benefit) expense
(724
)
 
(4,482
)
 
(5,377
)
 
641

Total income tax (benefit) expense
$
(719
)