8-K/A
PBF Energy Inc. (PBF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 8-K/A
______________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 1, 2020
PBF ENERGY INC.
PBF ENERGY COMPANY LLC
PBF HOLDING COMPANY LLC
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-35764 | 45-3763855 |
|---|---|---|
| Delaware | 333-206728-02 | 61-1622166 |
| Delaware | 333-186007 | 27-2198168 |
| (State or other jurisdiction<br><br>of incorporation or organization) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification Number) |
_____________________________________________
One Sylvan Way, Second Floor
Parsippany, New Jersey 07054
(Address of the Principal Executive Offices) (Zip Code)
(973) 455-7500
(Registrant’s Telephone Number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of The Act: | Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|---|
| Common Stock, par value $.001 | PBF | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12-b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter): ☐
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. ☐
As reported in a Current Report on Form 8-K filed by PBF Energy Inc. (“PBF Energy”), PBF Energy Company LLC ("PBF LLC") and PBF Holding Company LLC (“PBF Holding” collectively with PBF Energy and PBF LLC, the "Company") on February 6, 2020 (the “Original Filing”), PBF Holding, a subsidiary of PBF Energy, completed the acquisition of the Martinez refinery, and related logistics assets (collectively, the "Martinez Acquisition"), on February 1, 2020.
This amendment is being filed to amend Item 9.01 Financial Statements and Exhibits of the Original Filing, to provide certain audited financial statements related to the Martinez Acquisition and related unaudited pro forma financial information of PBF Energy, PBF LLC and PBF Holding.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Audited combined financial statements of the Martinez Refinery and Logistics Assets comprised of the combined balance sheet as of December 31, 2019, the related combined statements of operations, changes in net parent investment and cash flows for the year then ended, and the related notes to the combined financial statements, copies of which are filed as Exhibit 99.1 hereto.
(b) Pro Forma Financial Information
Unaudited pro forma consolidated financial statements of PBF Holding as of and for the year ended December 31, 2019, are filed as Exhibit 99.2 hereto.
Unaudited pro forma consolidated financial statements of PBF LLC as of and for the year ended December 31, 2019, are filed as Exhibit 99.3 hereto.
Unaudited pro forma consolidated financial statements of PBF Energy as of and for the year ended December 31, 2019, are filed as Exhibit 99.4 hereto.
The unaudited pro forma consolidated financial information of the Company as of and for the year ended December 31, 2019 is attached hereto as Exhibit 99.2, Exhibit 99.3 and Exhibit 99.4 and is incorporated in its entirety into this Item 9.01(b) by reference. The unaudited pro forma consolidated financial information is a presentation of historical results with accounting adjustments necessary to reflect the estimated pro forma effect of the Martinez Acquisition on the financial position and results of operations of the Company and is presented for informational purposes only and not necessarily indicative of the financial position or results of operations that would have been reported had the acquisition occurred as of and for the periods presented. The unaudited pro forma consolidated financial information does not reflect the effects of any anticipated changes to be made by the Company to the operations of the combined companies, including synergies and cost savings, and does not include one-time transaction and integration charges attributable to the acquisition. The unaudited pro forma consolidated financial information should not be construed to be indicative of the Company’s future results of operations or financial position.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 23.1 | Consent of RSM US LLP. |
| 99.1 | Historical audited combined financial statements of Martinez Refinery and Logistics Assets as of and for the year ended December 31, 2019 and Independent Auditor's Report. |
| 99.2 | Unaudited pro forma consolidated financial statements of PBF Holding as of and for the year ended December 31, 2019. |
| 99.3 | Unaudited pro forma consolidated financial statements of PBF LLC as of and for the year ended December 31, 2019. |
| 99.4 | Unaudited pro forma consolidated financial statements of PBF Energy as of and for the year ended December 31, 2019. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
| Date: | April 17, 2020 | PBF Energy Inc. | |
|---|---|---|---|
| (Registrant) | |||
| By: | /s/ Erik Young | ||
| Name: | Erik Young | ||
| Title: | Senior Vice President, Chief Financial Officer | ||
| Date: | April 17, 2020 | PBF Energy Company LLC | |
| --- | --- | --- | --- |
| (Registrant) | |||
| By: | /s/ Erik Young | ||
| Name: | Erik Young | ||
| Title: | Senior Vice President, Chief Financial Officer | ||
| Date: | April 17, 2020 | PBF Holding Company LLC | |
| --- | --- | --- | --- |
| (Registrant) | |||
| By: | /s/ Erik Young | ||
| Name: | Erik Young | ||
| Title: | Senior Vice President, Chief Financial Officer |
Exhibit
Consent of Independent Auditor's Report
We consent to the incorporation by reference in the Registration Statements (Nos. 333-225309, 333-218075, 333-187179, and 333-185968) on Form S-8, Registration Statement (No. 333-226728) on Form S-3 and Post-effective Amendment No.1 to Registration Statement (No. 333-190725) on Form S-1 of PBF Energy Inc. of our report dated April 17, 2020, relating to the combined financial statements of Martinez Refinery and Logistics Assets, appearing in this Current Report on Form 8-K/A.
/s/ RSM US LLP
Houston, Texas
April 17, 2020
Exhibit
Martinez Refinery and Logistics Assets
Combined Financial Statements
Year ended December 31, 2019
Table of Contents
| Combined Financial Statements | Page(s) |
|---|---|
| Independent Auditor's Report | 1 |
| Combined Balance Sheet | 2 |
| Combined Statement of Operations | 3 |
| Combined Statement of Changes in Net Parent Investment | 4 |
| Combined Statement of Cash Flows | 5 |
| Notes to Combined Financial Statements | 6-17 |
Independent Auditor’s Report
To the Management of
Shell Oil Company
Report on the Financial Statements
We have audited the accompanying combined financial statements of Martinez Refinery and Logistics Assets (the Company), which comprise the combined balance sheet as of December 31, 2019, the related combined statements of operations, changes in net parent investment and cash flows for the year then ended, and the related notes to the combined financial statements (collectively, the financial statements).
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Martinez Refinery and Logistics Assets as of December 31, 2019, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As disclosed in Note 4 to the combined financial statements, on June 11, 2019, a wholly owned subsidiary of Shell Oil Company entered into an agreement to sell the Martinez Refinery and Logistics Assets to PBF Energy, Inc. The transaction closed on February 1, 2020. Our opinion is not modified with respect to this matter.
/s/ RSM US LLP
Houston, Texas
April 17, 2020
1
Martinez Refinery and Logistics Assets
Combined Balance Sheet
(in millions of dollars)
| Notes | As of December 31, 2019 | ||
|---|---|---|---|
| Assets | |||
| Current assets | |||
| Inventory | 6 | $ | 325.5 |
| Accounts receivable - related parties | — | 120.5 | |
| Accounts receivable - third parties | — | 0.3 | |
| Other current assets | 15 | 41.4 | |
| Prepaid expenses | — | 14.7 | |
| Total current assets | 502.4 | ||
| Property, plant and equipment, net | 5 | 1,298.4 | |
| Other non-current assets | 15 | 27.0 | |
| Total assets | $ | 1,827.8 | |
| Liabilities | |||
| Current liabilities | |||
| Accounts payable - related parties | — | $ | 235.6 |
| Accounts payable - third parties | — | 95.8 | |
| Accrued liabilities - current | 14 | 54.1 | |
| Total current liabilities | 385.5 | ||
| Accrued liabilities - non-current | 14 | 33.3 | |
| Non-current deferred tax liability, net | 11 | 21.6 | |
| Capital lease obligations | 13 | 55.9 | |
| Total liabilities | 496.3 | ||
| Net parent investment | |||
| Net parent investment | — | 1,331.5 | |
| Total net parent investment | 1,331.5 | ||
| Total liabilities and net parent investment | $ | 1,827.8 |
The accompanying notes are an integral part of the combined financial statements.
2
Martinez Refinery and Logistics Assets
Combined Statement of Operations
(in millions of dollars)
| Notes | For the year ended December 31, 2019 | |||
|---|---|---|---|---|
| Revenue | 12 | $ | 3,814.9 | |
| Costs and expenses | ||||
| Cost of sales | 7 | 3,473.6 | ||
| General and administrative expenses - third parties | — | 164.7 | ||
| General and administrative expenses - related parties | 7 | 83.6 | ||
| Operations and maintenance - third parties | — | 142.2 | ||
| Operations and maintenance - related parties | — | 84.2 | ||
| Property and other taxes | — | 18.9 | ||
| Depreciation and amortization | — | 156.1 | ||
| Loss on disposal of fixed assets | — | 10.6 | ||
| Operating loss | (319.0 | ) | ||
| Interest expense | 13 | 3.9 | ||
| Loss before taxes | (322.9 | ) | ||
| Income tax benefit | 11 | (89.8 | ) | |
| Net loss | $ | (233.1 | ) |
The accompanying notes are an integral part of the combined financial statements.
3
Martinez Refinery and Logistics Assets
Combined Statement of Changes in Net Parent Investment
(in millions of dollars)
| For the year ended December 31, 2019 | |||
|---|---|---|---|
| Balance, beginning of the year | $ | 1,169.5 | |
| Net loss | (233.1 | ) | |
| Net contributions from Parent | 395.1 | ||
| Balance, end of the year | $ | 1,331.5 |
The accompanying notes are an integral part of the combined financial statements.
4
Martinez Refinery and Logistics Assets
Combined Statement of Cash Flows
(in millions of dollars)
| For the year ended December 31, 2019 | |||
|---|---|---|---|
| Operating activities | |||
| Net loss | $ | (233.1 | ) |
| Adjustments to reconcile net loss to net cash flows: | |||
| Depreciation and amortization | 156.1 | ||
| Deferred income taxes | (89.8 | ) | |
| Loss on disposal of fixed assets | 10.6 | ||
| Changes in assets and liabilities: | |||
| Inventories | (67.7 | ) | |
| Other current assets | 19.2 | ||
| Accounts receivable - related parties | (7.4 | ) | |
| Accounts receivable - third parties | 0.5 | ||
| Prepaid expenses | (0.7 | ) | |
| Non-current receivables - third parties | 0.2 | ||
| Other non-current assets | (22.3 | ) | |
| Accounts payable - related parties | 54.4 | ||
| Accounts payable - third parties | (9.8 | ) | |
| Accrued liabilities - current | (24.5 | ) | |
| Accrued liabilities - non-current | 10.9 | ||
| Net cash flows used in operating activities | (203.4 | ) | |
| Investing activities | |||
| Capital expenditures | (186.2 | ) | |
| Net cash flows used in investing activities | (186.2 | ) | |
| Financing activities | |||
| Capital lease obligations | (5.5 | ) | |
| Net contributions from Parent | 395.1 | ||
| Net cash flows provided by financing activities | 389.6 | ||
| Net change in cash and cash equivalents | — | ||
| Cash and cash equivalents at beginning of the year | — | ||
| Cash and cash equivalents at end of the year | $ | — |
The accompanying notes are an integral part of the combined financial statements.
5
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
| 1 | Nature of Operations and Basis of Presentation |
|---|
Nature of Operations
Martinez Refinery and Logistics Assets (“carve-out operations,” “Asset Group,” “we,” “us,” or “our”) are a group of downstream assets that operate in Martinez, California. We are owned and operated by subsidiaries of Shell Oil Company. The term “Parent” refers collectively to Royal Dutch Shell plc, Shell Oil Company, and its subsidiaries.
Our carve-out operations consist of the operation of a refinery located in Martinez, California, that processes predominantly heavy and sour crude to produce primarily regular gasoline, premium gasoline, jet fuel, and diesel fuel. In addition, the carve-out operations also consist of the Martinez truck rack, which facilitates vehicle distribution and includes terminal capacity.
Basis of Presentation
The accompanying combined financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
The combined financial statements have been prepared on a historical cost basis. The accompanying combined financial statements were derived from the financial statements and accounting records of our Parent. These combined financial statements reflect the historical results of operations, financial position, and cash flows of the carve-out operations. All intercompany transactions and accounts between us and our Parent have been reflected as net parent investment in the accompanying combined balance sheet.
The accompanying combined statement of operations also includes expense allocations for certain functions historically performed by our Parent, including allocations of general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, insurance, and share-based compensation. The portion of expenses specifically identifiable to the carve-out operations is directly expensed to us, with the remainder allocated based on equivalent distillation capacity, which is a reflection of refinery capacity. Our management believes the assumptions underlying the accompanying combined financial statements, including the assumptions regarding allocation of expenses from the Parent, are reasonable. Nevertheless, the accompanying combined financial statements may not include all the expenses that would have been incurred or reflect our results of operations, financial position, and cash flows had we been a stand-alone company during the year presented.
We did not maintain separate bank accounts for the carve-out operations. The cash generated and used by our operations is deposited to our Parent’s centralized account, which is commingled with the cash of other entities controlled by our Parent. Our Parent funds our operating and investing activities, as needed. Accordingly, we did not record any cash and cash equivalents held by our Parent on our behalf for the year presented. We reflected the cash generated by our operations and expenses paid by our Parent on
6
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
behalf of our operations as a component of net parent investment on the accompanying combined balance sheet, combined statement of changes in net parent investment, and net contributions from Parent on the accompanying combined statement of cash flows.
| 2 | Summary of Significant Accounting Policies |
|---|
Revenue Recognition
Our revenues are generated from contracts with customers through the sale of refined petroleum products. The recognition of revenue occurs when we have met our performance obligations, which generally occurs when the product is shipped or delivered to the customer, and for a transaction price that is allocated to the performance obligation. Any revenue derived from sources other than contracts with customers is immaterial.
While our contracts with customers represent the final terms of sale, including the description, quantity, and price for the goods sold, the recognized price may be based on commodity market pricing (i.e., variable consideration). As such, the pricing may not be known until the contract is fulfilled.
Net Parent Investment
In the accompanying combined balance sheet, net parent investment represents our Parent’s historical investment in us, our accumulated net earnings, and the net effect of transactions with and allocations from our Parent.
Property, Plant, and Equipment
Property, plant, and equipment are initially recorded on the combined balance sheet at cost where it is probable that they will generate future economic benefits. Property, plant, and equipment are subsequently recognized at cost, less accumulated depreciation on the combined balance sheet. Cost of repairs from normal maintenance of property are expensed as incurred. Gains and losses on disposal of property, plant, and equipment are determined by comparing disposal proceeds with the carrying amounts of assets sold and recognized in the combined statement of operations as gain or loss on disposal of property, plant, and equipment.
Depreciation
Refining facilities and related equipment are depreciated on a straight-line basis over their useful lives of two to 40 years. Where facilities and equipment, including major components, are significant in relation to the total cost of the assets and have differing useful lives, they are depreciated separately. Major inspection costs and overhaul and turnaround activities are depreciated over the estimated period before the next planned major activity (two to eight years). Capital expenditures are not depreciated until assets are substantially complete and ready for their intended use.
7
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
Impairment of Assets
We evaluate long-lived assets of identifiable business activities for impairment when events or changes in circumstances indicate, in our management’s judgment, the carrying value of such assets may not be recoverable. These events include market declines that are believed to be other than temporary, changes in the way we intend to use a long-lived asset, decisions to sell an asset, and adverse changes in the legal or business environment, such as adverse actions by regulators. If an event occurs, which is a determination that involves judgment, we perform an impairment assessment by comparing our management’s estimate of forecasted undiscounted future cash flows associated with the asset to the asset’s net book value. If the net book value exceeds our estimate of forecasted undiscounted cash flows, an impairment is calculated as the amount the net book value exceeds the estimated discounted future cash flows associated with the asset. We did not recognize any asset impairments during the year ended December 31, 2019.
Cost Classification
Cost of sales includes the purchase of material inputs into our refining process, utilities used in refining process, and the cost of emissions compliance.
Our operation and maintenance expenses include direct labor costs, repairs and maintenance, chemicals and catalysts, plant insurance, outside services, and some operational support services provided by our parent.
Historically, our Parent and its related parties performed certain services, which directly and indirectly supported our operations. Personnel and operating costs incurred by our Parent on our behalf were charged to us and are included in either general and administrative expenses or operations and maintenance expenses, depending on the nature of the employee’s role in our operations in the accompanying combined statement of operations. Our Parent also performs certain general corporate functions for us related to finance, legal, information technology, human resources, communications, ethics and compliance, and other shared services. See Note 7 - Related-Party Transactions for further discussion on our related-party transactions.
Income Taxes
The Asset Group has never filed a state or federal tax return prior to now. We used the separate return method to calculate the estimated tax impact for the purposes of these carve-out financial statements.
Pension and Other Postretirement Benefits
We participate in employee benefit programs sponsored by our Parent, consisting of a defined benefit pension plan and other postretirement benefits, including certain health care and life insurance benefits, for its retired employees and eligible surviving dependents. The estimated future cost of providing defined
8
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
benefit pension and other postretirement benefits to all members of the program is determined by the Parent using its best estimate of demographic and financial assumptions.
For purposes of these combined financial statements, we are considered as participating in multiemployer benefit plans of our Parent. For presentation of these accompanying combined financial statements, our portion of employee benefit plan costs have been allocated to us as a charge to us by Shell Oil Company. Shell Oil Company sponsors various employee pension and postretirement health and life insurance plans. For purposes of these accompanying combined financial statements, we are considered to be participating in multiemployer benefit plans of Shell Oil Company. We participate in the following defined benefit plans: Shell Oil Pension Plan, Alliance Pension Plan, Shell Benefit Restoration Pension Plan, Alliance Restoration Plan, Shell Oil Retiree Health Care Plan, Shell Retiree Medical Plan, and Pennzoil-Quaker State Retiree Medical & Life Insurance. As a participant in multiemployer benefit plans, we recognize as expense an allocation from Shell Oil Company, and we do not recognize any employee benefit plan assets or liabilities. Pension expenses are included in general and administrative in the accompanying combined statement of operations.
Inventories
Inventories of crude oil and refined products are valued at the lower of cost or net realizable value, using the first-in, first-out method. Costs include direct expenditures incurred in bringing an item or product to its existing condition and location. Materials and supplies are valued at the lower of cost or net realizable value.
Net realizable value is the estimate of the selling price in the ordinary course of business, less selling expenses. See Note 6 – Inventory for additional information.
Environmental Compliance Program Costs
We are subject to federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their economic benefit. We expense costs, such as permits, compliance with existing environmental regulations, remedial investigations, soil sampling, testing, and monitoring costs to meet applicable environmental laws and regulations, where prudently incurred or determined to be reasonably possible in the ordinary course of business. We also expense costs relating to an existing condition caused by past operations, which do not contribute to current or future revenue generation. We record environmental liabilities when environmental assessments and/or remedial efforts are probable, and we can reasonably estimate the costs. Generally, our recording of these accruals coincides with our completion of a feasibility study or our commitment to a formal plan of action. We recognize receivables for anticipated associated insurance recoveries when such recoveries are deemed to be probable. We recognized environmental remediation liabilities totaling $8.9 million as of December 31, 2019. Environmental remediation liabilities were included as a part of current and noncurrent accrued liabilities on the combined balance sheet. See Note 14 – Accrued Liabilities Current and Noncurrent for a full breakdown of accrued liabilities.
9
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
We are subject to California State Assembly Bill 32, which institutes a state-wide cap and trade system for carbon dioxide emissions. To meet our emission obligations, we purchase emissions credits when our obligation can be reasonably estimated. See Note 14 – Accrued Liabilities Current and Noncurrent and Note 15 – Other Assets Current and Noncurrent for a breakdown of our liabilities and assets related to emissions. See Note 9 – Environmental Compliance Activities for additional information.
As our refinery resides within the United States, we are subject to biofuel requirements under the Renewable Fuels Standards (“RFS”) that requires us to purchase renewable identification numbers (“RINs”) credits to meet our obligation. See Note 14 – Accrued Liabilities Current and Noncurrent and Note 15 – Other Assets Current and Noncurrent for a breakdown of our liabilities and assets related to RINs compliance. See Note 9 - Environmental Compliance Activities for additional information.
Asset Retirement Obligations
The Asset Group is built and used for an indefinite time and there has been no formal decision taken on the closure and dismantling of these assets. We determined that the Asset Group has an indefinite life, and as such, the fair values of those associated retirement obligations are not reasonably estimable. Although individual assets will be replaced as needed, our carve-out operations will continue to exist for an indefinite useful life. As such, there is uncertainty around the timing of any asset retirement activities. As a result, we determined that there is not sufficient information to make a reasonable estimate of the asset retirement obligations for our assets, and we have not recognized any asset retirement obligations as of December 31, 2019.
Legal
We are subject to litigation and regulatory proceedings as the result of our business operations and transactions. We utilize both internal and external counsel in evaluating our potential exposure to adverse outcomes from orders, judgments, or settlements. In general, we expense legal costs as incurred. When we identify specific litigation that is expected to continue for a significant period, is reasonably possible to occur and may require substantial expenditures, we identify a range of possible costs expected to be required to litigate the matter to a conclusion or reach an acceptable settlement, and we accrue for the best estimate in the range. To the extent actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying combined financial statements and notes. While management believes current estimates are reasonable and appropriate, actual results could differ from those estimates.
10
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
Estimates and judgments are continually evaluated by management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
| 3 | Recent Accounting Pronouncements |
|---|
Topic 842, Leases
In February 2016, the Financial Accounting Standards Board issued an accounting standard update to Topic 842, Leases, which requires lessees to recognize assets and liabilities for leases with lease terms greater than 12 months in the statement of financial position. This update also requires improved disclosures to help users of financial statements better understand the amount, timing, and uncertainty of cash flows arising from leases. This provision was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, for private companies, with early adoption permitted. In November 2019, the Financial Accounting Standards Board issued an update to extend the effective date to fiscal years beginning after December 15, 2020. We do not intend to early adopt this accounting standard for these combined financial statements. We are currently evaluating the effect that adopting this new standard will have on our combined financial statements and related disclosures.
| 4 | Significant Events |
|---|
On June 11, 2019, a wholly owned subsidiary of Shell Oil Company, our Parent company, entered into an agreement to sell the Martinez Refinery and Logistics Assets to PBF Energy, Inc. The transaction closed on February 1, 2020.
| 5 | Property, Plant, and Equipment | ||
|---|---|---|---|
| As of December 31, 2019 | |||
| --- | --- | --- | --- |
| Refinery machinery and equipment | $ | 2,799.0 | |
| Land | 26.7 | ||
| Leased assets | 85.5 | ||
| Assets under construction | 101.7 | ||
| Other | 2.9 | ||
| Property, plant, and equipment at cost | 3,015.8 | ||
| Accumulated depreciation and amortization | (1,717.4 | ) | |
| Property, plant, and equipment, net | $ | 1,298.4 |
11
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
| 6 | Inventory | |
|---|---|---|
| As of December 31, 2019 | ||
| --- | --- | --- |
| Crude oil | $ | 69.2 |
| Refined products | 241.6 | |
| Materials | 14.7 | |
| Inventory | $ | 325.5 |
| 7 | Related-Party Transactions | |
| --- | --- |
Cash Management Program
We participate in the Parent’s centralized cash management and funding system. Our working capital and capital expenditure requirements have historically been part of the corporate-wide cash management program for the Parent. As part of this program, the Parent maintains all cash generated by our operations and cash required to meet our operating and investing needs is provided by the Parent, as necessary. Net cash generated by or used by our operations is reflected as a component of net parent investment on the accompanying combined balance sheet and as net distributions to Parent on the accompanying combined statement of cash flows.
Related-Party Sales and Purchases
The Asset Group enters into transactions with related parties in the normal course of business, which includes purchases of crude oil, distribution of refined products, and sale of refined products and byproducts. A summary of the significant related-party transactions for the year ended December 31, 2019, is as follows:
| For the year ended December 31, 2019 | ||
|---|---|---|
| Sales | $ | 3,812.6 |
| Purchases | 3,297.2 |
Related-Party Services
Historically, our Parent and its related parties performed certain services that directly and indirectly supported our operations. Expenses related to these services for the year ended December 31, 2019, were $167.8 million.
We are covered by the insurance policies of our Parent. As of December 31, 2019, our allocated prepaid insurance balance was $10.6 million. Our insurance expense was $20.1 million for the year ended
12
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
December 31, 2019, which was included within operations and maintenance expenses in the accompanying combined statement of operations.
Employees who directly or indirectly support our operations participate in the pension, postretirement, health and life insurance, and defined contribution benefit plans sponsored by our Parent, which includes other Parent subsidiaries. Our share of pension and postretirement health and life insurance costs for the year ended December 31, 2019, was $27.9 million. Our share of defined contribution plan costs for the year ended December 31, 2019, was $6.2 million. Pension and defined contribution benefit plan expenses are included in either general and administrative expenses or operations and maintenance expenses in the accompanying combined statement of operations, depending on the nature of the employee’s role in our operations.
| 8 | Transaction with Major Customers and Concentration of Credit Risk |
|---|
Our Parent and our Parent’s affiliates accounted for substantially all of our total revenues for the year ended December 31, 2019. As such, no third-party customer generated revenue greater than 10.0% in 2019.
No third-party customer accounted for accounts receivable greater than 10.0% in 2019.
| 9 | Environmental Compliance Activities |
|---|
Emissions
We are required to comply with state emissions requirements. To meet this obligation, we purchase emissions credits when our obligation can be reasonably estimated. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at fair value. We treat the purchased credits as an asset on the combined balance sheet. Our expenses related to emissions compliance for the year ended December 31, 2019, were $15.4 million.
RINs Credits
We are required to comply with federal ethanol standards and we recognize the related costs as part of our cost of sales. Our expenses related to RFS standards compliance using RINs for the year ended December 31, 2019, were $36.8 million.
| 10 | Commitments and Contingencies |
|---|
Legal Proceedings
Our Parent and certain affiliates are named defendants in lawsuits and governmental proceedings that arise in the ordinary course of our business. For each of our outstanding legal matters, we evaluate the
13
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
merits of the case, our exposure to the matter, possible legal or settlement strategies, and the likelihood of an unfavorable outcome. Actual liability with respect to these lawsuits is not determinable. Our management believes, based on Legal counsels’ opinion, that any potential liability will not materially impact our financial position, operating results or cash flows.
| 11 | Income Taxes |
|---|
Components of income tax benefit related to our operations were as follows:
| As of December 31, 2019 | ||
|---|---|---|
| Federal | $ | 61.5 |
| State | 28.3 | |
| Income tax benefit | $ | 89.8 |
Our reconciliation of our effective tax rate is as follows:
| For the year ended December 31, 2019 | |||
|---|---|---|---|
| Loss before tax | $ | 322.9 | |
| Federal tax rate | 21.0 | % | |
| Expected income tax benefit | 67.8 | ||
| Effect on income tax of: | |||
| State tax benefit | 22.4 | ||
| Nondeductible portion of meals and entertainment | (0.2 | ) | |
| Interest and penalties on taxes | (0.2 | ) | |
| Income tax benefit | $ | 89.8 |
The tax effects of significant temporary differences representing deferred tax assets and liabilities were as follows:
| For the year ended December 31, 2019 | ||
|---|---|---|
| Deferred income tax assets | ||
| Net operating losses | $ | 199.6 |
| Environmental provision | 3.8 | |
| Other | 11.1 | |
| Total deferred income tax assets | 214.5 | |
| Deferred income tax liabilities | ||
| Property, plant, and equipment, net | 236.1 | |
| Total deferred income tax liabilities | $ | 236.1 |
| Noncurrent deferred tax liability, net | $ | 21.6 |
14
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
| 12 | Revenue |
|---|
Segmented Revenue
| For the year ended December 31, 2019 | ||
|---|---|---|
| Related party - refining | $ | 3,809.4 |
| Third Party - refining | 2.3 | |
| Related party - terminaling | 3.2 | |
| Total revenue | $ | 3,814.9 |
Remaining Performance Obligations
The majority of our contracts with customers relate to the transfer of refined products and have no remaining performance obligations beyond the transfer of goods. The remaining contracts with customers relate to terminalling services, which are completed over the storage term with no remaining performance obligations once the term ends, and product is transferred back to the customer.
| 13 | Leases |
|---|
Capital Lease Obligation
We have a capital lease obligation that matures in 2028 for a hydrogen facility that supports our refining operations. As of December 31, 2019, we recognized capital lease obligation of $61.4 million and capital lease assets of $53.5 million. All interest expense recognized in 2019 was related to capital lease obligation.
Future minimum annual lease payments, including interest for capital leases:
| 2020 | $ | 9.0 |
|---|---|---|
| 2021 | 9.0 | |
| 2022 | 9.0 | |
| 2023 | 9.0 | |
| 2024 | 9.0 | |
| Thereafter | 34.1 | |
| Total minimum lease payments | 79.1 | |
| Less interest | 17.7 | |
| Total | $ | 61.4 |
Operating Lease Obligations
We have operating lease obligations related to government-owned land as part of our dock operations, a nitrogen facility, catalysts, and rail cars. During the year ended December 31, 2019, we recognized operating lease expenses of $1.8 million.
15
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
Future minimum annual lease payments for operating leases:
| 2020 | $ | 1.7 | ||||
|---|---|---|---|---|---|---|
| 2021 | 1.4 | |||||
| 2022 | 1.2 | |||||
| 2023 | 0.7 | |||||
| 2024 | 0.5 | |||||
| Thereafter | 0.4 | |||||
| Total minimum lease payments | $ | 5.9 | ||||
| 14 | Accrued Liabilities Current and Noncurrent | |||||
| --- | --- | |||||
| Accrued liabilities - current | ||||||
| --- | --- | --- | ||||
| As of December 31, 2019 | ||||||
| Renewable volume obligation | $ | 36.8 | ||||
| Staff liabilities | 6.6 | |||||
| Emission trading liability | 4.6 | |||||
| Capital lease obligation | 5.5 | |||||
| Environmental remediation | 0.3 | |||||
| Other liabilities | 0.3 | |||||
| Accrued liabilities - current total | $ | 54.1 | Accrued liabilities - noncurrent | |||
| --- | --- | --- | ||||
| As of December 31, 2019 | ||||||
| Emissions trading liability | $ | 24.7 | ||||
| Environmental remediation | 8.6 | |||||
| Accrued liabilities - noncurrent total | $ | 33.3 | ||||
| 15 | Other Assets Current and Noncurrent | |||||
| --- | --- | |||||
| Other current assets | ||||||
| --- | --- | --- | ||||
| As of December 31, 2019 | ||||||
| Renewable volume asset | $ | 36.8 | ||||
| Emission trading asset | 4.6 | |||||
| Other current assets - total | $ | 41.4 |
16
Martinez Refinery and Logistics Assets
Notes to Combined Financial Statements
(in millions of dollars)
| Other noncurrent assets | ||
|---|---|---|
| As of December 31, 2019 | ||
| Emissions trading asset | $ | 27.0 |
| Other noncurrent assets - total | $ | 27.0 |
| 16 | Subsequent Events | |
| --- | --- |
We have performed an evaluation of subsequent events through April 17, 2020, which is the date the combined financial statements were issued.
17
Exhibit
Exhibit 99.2
UNAUDITED PBF HOLDING COMPANY LLC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements are presented to show how PBF Holding Company LLC (“PBF Holding”) might have looked if PBF Holding’s acquisition of the Martinez refinery and related logistics assets (collectively, the “Martinez Acquisition”), borrowings incurred under our asset-backed revolving credit facility (“Revolving Loan”) and the consummation of the offering of PBF Holding’s 6.00% senior notes due 2028 (the “2028 Senior Notes”) to fund the Martinez acquisition as described below, had occurred on the dates and for the periods indicated below. The pro forma consolidated financial statements also include an adjustment to give effect to a portion of the proceeds from the 2028 Senior Notes Offering that were used to redeem in full the outstanding 7.00% senior secured notes due 2023 (the "2023 Senior Notes"). We derived the following unaudited pro forma consolidated financial statements by applying pro forma adjustments to our historical consolidated financial statements and the historical financial statements of Martinez refinery and related logistics assets (collectively “Martinez Refining”). The pro forma effects of the Martinez Acquisition are based on the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.
The unaudited pro forma consolidated balance sheet is based on the individual historical consolidated balance sheets of PBF Holding and Martinez Refining as of December 31, 2019, and has been prepared to reflect the Martinez Acquisition and related financial transactions, including the redemption of the 2023 Senior Notes, as if they occurred on December 31, 2019. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 combines the historical results of operations of PBF Holding and Martinez Refining as if the acquisition occurred on January 1, 2019, and gives effect to the borrowings incurred under our Revolving Loan and the consummation of the 2028 Senior Notes to fund the Martinez Acquisition and the corresponding redemption of the 2023 Senior Notes as if they occurred on January 1, 2019.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 does not reflect future events that may occur after the completion of the Martinez Acquisition on February 1, 2020, including but not limited to the anticipated realization of cost savings from operating synergies and certain charges expected to be incurred in connection with the transaction, including, but not limited to, costs that may be incurred in connection with integrating the operations of Martinez Refining.
The unaudited pro forma consolidated financial information is presented for informational purposes only. The unaudited pro forma consolidated financial information does not purport to represent what our results of operations or financial condition would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated, and they do not purport to project our results of operations or financial condition for any future period or as of any future date. In addition, they do not purport to indicate the results that would actually have been obtained had the Martinez Acquisition been completed on the assumed date or for the periods presented, or which may be realized in the future.
In order to prepare the pro forma consolidated financial information, we adjusted Martinez Refining’s historical assets and liabilities to their estimated fair values in accordance with ASC 805 as a result of our closing of the Martinez Acquisition on February 1, 2020. As of the date of this Current Report on Form 8-K/A, we have not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Martinez Refining’s assets acquired and the liabilities assumed and the related allocation of the purchase price, nor have we identified all adjustments necessary to conform Martinez Refining’s accounting policies to our accounting policies. The determination of the fair value of Martinez Refining’s assets and liabilities is ongoing and is expected to be finalized for our December 31, 2020 fiscal year-end. As a result, the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary unaudited pro forma purchase price allocation has been made solely for the purpose of preparing the accompanying unaudited pro forma consolidated financial statements. There can be no assurance that such finalization of the purchase price will not result in material changes from the preliminary purchase price allocation included in the accompanying unaudited pro forma consolidated financial statements.
Exhibit 99.2
The pro forma adjustments as of and for the year ended December 31, 2019 principally give effect to:
| • | the closing of the Martinez Acquisition and their associated impact on our balance sheet and statement of operations including the borrowings incurred under our Revolving Loan to fund the Martinez Acquisition; and | | --- | --- || • | the consummation of the 2028 Senior Notes offering, the proceeds of which were used to partially fund the Martinez Acquisition and to fully redeem the 2023 Senior Notes. | | --- | --- |
Exhibit 99.2
| Unaudited Pro Forma Consolidated Balance Sheet<br><br>As of December 31, 2019<br><br>(in millions | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||
| PBF Holding | Martinez Refining (1) | ||||||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | $ | 763.1 | $ | — | $ | — | $ | — | $ | (498.4 | ) | (3) | $ | 264.7 | |||
| Accounts receivable | 826.6 | 0.3 | — | 0.3 | (0.3 | ) | (3) | 826.6 | |||||||||
| Accounts receivable-affiliate | 6.5 | 120.5 | — | 120.5 | (120.5 | ) | (3) | 6.5 | |||||||||
| Inventories | 2,122.2 | 325.5 | — | 325.5 | (101.4 | ) | (3) | 2,346.3 | |||||||||
| Prepaid expense and other current assets | 48.0 | 56.1 | — | 56.1 | (50.7 | ) | (3) | 53.4 | |||||||||
| Total current assets | 3,766.4 | 502.4 | — | 502.4 | (771.3 | ) | 3,497.5 | ||||||||||
| Property, plant and equipment, net | 3,168.6 | 1,298.4 | (53.5 | ) | (2 | ) | 1,244.9 | (282.1 | ) | (3) | 4,131.4 | ||||||
| Operating lease right of use assets - third party | 306.1 | — | 7.8 | (2 | ) | 7.8 | — | 313.9 | |||||||||
| Operating lease right of use assets - affiliate | 650.3 | — | — | — | — | 650.3 | |||||||||||
| Deferred charges and other assets, net | 954.2 | 27.0 | 63.6 | (2 | ) | 90.6 | 36.7 | (3) | 1,081.5 | ||||||||
| Total assets | $ | 8,845.6 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,674.6 | ||||
| LIABILITIES AND EQUITY | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable | $ | 591.2 | $ | 95.8 | $ | — | $ | 95.8 | $ | (95.8 | ) | (3) | $ | 591.2 | |||
| Accounts payable-affiliate | 48.1 | 235.6 | — | 235.6 | (235.6 | ) | (3) | 48.1 | |||||||||
| Accrued expenses | 1,791.4 | 54.1 | 0.5 | (2 | ) | 54.6 | (51.6 | ) | (3) | 1,794.4 | |||||||
| Current operating lease liabilities - third party | 72.0 | — | 1.9 | (2 | ) | 1.9 | — | 73.9 | |||||||||
| Current operating lease liabilities - affiliate | 79.2 | — | — | — | — | 79.2 | |||||||||||
| Current debt | — | — | — | — | — | — | |||||||||||
| Deferred revenue | 17.0 | — | — | — | — | 17.0 | |||||||||||
| Total current liabilities | 2,598.9 | 385.5 | 2.4 | 387.9 | (383.0 | ) | 2,603.8 | ||||||||||
| Accrued liabilities - noncurrent | — | 33.3 | — | 33.3 | (33.3 | ) | (3) | — | |||||||||
| Long-term debt | 1,262.8 | — | — | — | 704.5 | (5) | 1,967.3 | ||||||||||
| Deferred tax liabilities | 31.4 | 21.6 | — | 21.6 | (21.6 | ) | (3) | 31.4 | |||||||||
| Long-term operating lease liabilities - third party | 232.9 | — | 5.9 | (2 | ) | 5.9 | — | 238.8 | |||||||||
| Long-term operating lease liabilities - affiliate | 571.1 | — | — | — | — | 571.1 | |||||||||||
| Other long-term liabilities | 251.3 | 55.9 | 1.7 | (2) | 57.6 | 78.5 | (3) | 387.4 | |||||||||
| Total liabilities | 4,948.4 | 496.3 | 10.0 | 506.3 | 345.1 | 5,799.8 | |||||||||||
| Commitments and contingencies |
Exhibit 99.2
| Unaudited Pro Forma Consolidated Balance Sheet (cont'd)<br><br>As of December 31, 2019<br><br>(in millions) | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||
| PBF Holding | Martinez Refining (1) | ||||||||||||||||
| Equity: | |||||||||||||||||
| Net parent investment | $ | — | $ | 1,331.5 | $ | 7.9 | (2) | $ | 1,339.4 | $ | (1,339.4 | ) | (4) | $ | — | ||
| Member's equity/Members' Capital | 2,739.1 | — | — | — | — | 2,739.1 | |||||||||||
| Retained earnings | 1,156.9 | — | — | — | (22.4 | ) | (6) | 1,134.5 | |||||||||
| Accumulated other comprehensive loss | (9.7 | ) | — | — | — | — | (9.7 | ) | |||||||||
| Total equity | 3,886.3 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,863.9 | ||||||||||
| Noncontrolling interest | 10.9 | — | — | — | — | 10.9 | |||||||||||
| Total equity | 3,897.2 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,874.8 | ||||||||||
| Total liabilities and equity | $ | 8,845.6 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,674.6 |
Exhibit 99.2
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
| 1. | We performed certain procedures for the purpose of identifying any material differences in significant accounting policies between PBF Holding and Martinez Refining and any accounting adjustments that would be required in connection with adopting uniform policies. Procedures performed by PBF Holding included a review of the summary of significant accounting policies disclosed in the Martinez Refining audited financial statements and discussions with Martinez Refining management regarding their significant accounting policies in order to identify material adjustments. While we are continuing to engage in additional discussions with Martinez Refining management and are in the process of evaluating the impact of Martinez Refining’s accounting policies on its historical results following the close of the acquisition on February 1, 2020, our best estimates of the differences we have identified to date are included in Notes 2 and 7 below relating to lease and inventory accounting. Additionally, certain financial statement captions within the historical Martinez Refining presentation, have been reclassed to conform to PBF Holding's presentation. | ||
|---|---|---|---|
| 2. | Reflects leases assumed by PBF Holding in connection with the Martinez Acquisition and accounted for by PBF Holding under ASC 842, Leases ("ASC 842"). Martinez Refining was considered a private company and was not required to adopt ASC 842 until January 1, 2020. PBF Holding assumed approximately $7.8 million in operating leases right-of-use assets and operating leases obligations, of which $1.9 million is current and $5.9 million of long-term, and $63.6 million in financing leases right-of-use assets and financing leases obligation, of which $6.0 million is current and $57.6 million is long term, which was attributable to a hydrogen facility which supports the Martinez refining operations. Martinez Refining historical balance sheet includes capital lease obligations, primarily related to a hydrogen facility, of $61.4 million, of which $5.5 million is current and $55.9 is long term, and long term capital lease assets of $53.5 million, which was included in its Property, plant and equipment, net line item. We reclassed Martinez Refining’s capital lease assets in Property, plant, and equipment, net to deferred charges and other non-current assets, net to be consistent with PBF Holding's presentation. Pro forma adjustments were made to incorporate the net amounts of the assumed lease assets and obligations and the amounts recorded in the historical Martinez Refining balance sheet. | ||
| --- | --- | ||
| 3. | Represents preliminary cash consideration transferred at closing consisting of $960.0 million for the Martinez Acquisition and a preliminary working capital settlement of $216.1 million, which we funded through a combination of cash on hand including proceeds from the 2028 Senior Notes offering and borrowings under our Revolving Loan. The estimated preliminary fair value of the net assets acquired is as follows: | ||
| --- | --- | ||
| (in millions) | |||
| --- | --- | --- | --- |
| Inventories | $ | 224.1 | |
| Prepaid and other current assets | 5.4 | ||
| Property, plant and equipment | 962.8 | ||
| Deferred charges and other assets, net | 63.7 | ||
| Accrued expenses | (1.4 | ) | |
| Other long-term liabilities - Contingent consideration | (52.2 | ) | |
| Other long-term liabilities - Environmental obligation | (26.3 | ) | |
| Estimated fair value of net assets acquired | $ | 1,176.1 |
Exhibit 99.2
PBF Holding agreed to make potential additional payments (“Contingent Consideration”) for the Martinez Acquisition based upon the achievement of certain future results and other criteria and conditions set forth in the Sale and Purchase Agreement with respect to each of the four consecutive twelve month measurement periods following the Closing Date.
These pro forma acquisition adjustments reflect the reversal of Martinez Refining’s historical assets and liabilities as of December 31, 2019 and the recording of the estimated preliminary purchase price allocation for the fair value of the net assets acquired, inclusive of the estimated Contingent Consideration obligation. This preliminary purchase price allocation estimate is based on PBF Holding’s initial fair value estimates at closing and final allocations which are subject to the terms of the Sale and Purchase Agreement. The fair value of inventory is based on the quantities acquired at closing using negotiated pricing methodology based on market prices. The fair value of property, plant and equipment is largely based on the acquisition purchase price of the assets. These amounts may change and may change materially at the time the Martinez Acquisition purchase price allocation is finalized. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after the close of the acquisition. PBF Holding anticipates that the valuations of the acquired assets and liabilities will include, but not be limited to, inventory, property, plant and equipment and other potential intangible assets. The valuation will also include an estimate of the Contingent Consideration obligation and estimated assumed environmental liability at closing. The valuations are being performed by a third-party valuation specialist based on valuation techniques that PBF Holding deems appropriate for measuring the fair value of the assets acquired and liabilities assumed.
The final acquisition consideration, and amounts allocated to assets acquired and liabilities assumed, could differ materially from the amounts presented in these unaudited pro forma consolidated financial statements.
The pro forma adjustment for Property, plant and equipment includes the reversal of the historical book value of such assets and the recording of the fair value determined by the preliminary purchase price allocation. In addition, adjustments for future capital expenditures which are contractually obligated to be reimbursed by the seller subsequent to the closing were included in the pro forma amounts.
The pro forma net cash adjustment includes the impacts of the following:
| Cash paid for Martinez Acquisition | (1,176.1 | ) |
| Proceeds from the 2028 Senior Notes offering | ||
| Deferred financing costs associated with the 2028 Senior Notes offering | ) | |
| Revolving Loan borrowings in connection with the Martinez Acquisition | ||
| Redemption of 2023 Senior Notes, inclusive of accrued interest (1) | ) | |
| Total pro forma cash adjustment | (498.4 | ) |
| (1) Includes accrued interest on 2023 Senior Notes through December 31, 2019 of 4.4 million. |
All values are in US Dollars.
| 4. | Reflects the elimination of Martinez Refining's Net Parent Investment in connection with our acquisition of Martinez Refining. |
|---|
Exhibit 99.2
| 5. | Represents proceeds received in connection with the 2028 Senior Notes offering net of estimated deferred financing costs, borrowings on the Revolving Loan used to fund the acquisition and redemption of the 2023 Senior Notes as shown below. | ||
|---|---|---|---|
| (in millions) | |||
| --- | --- | --- | --- |
| Issuance of the 2028 Senior Notes | $ | 1,000.0 | |
| Deferred financing fees on the 2028 Senior Notes | (12.5 | ) | |
| Borrowings on the Revolving Loan | 212.1 | ||
| Redemption of the 2023 Senior Notes | (500.0 | ) | |
| Write off of deferred financing costs on the 2023 Senior Notes | 4.9 | ||
| Total pro forma long-term debt adjustment | $ | 704.5 | |
| 6. | Represents impact on Retained earnings from debt extinguishment costs and incremental interest expense associated with the redemption of the 2023 Senior Notes. Includes a redemption premium of $17.5 million and a write off of the 2023 Senior Notes unamortized deferred financing costs of $4.9 million. | ||
| --- | --- |
Exhibit 99.2
| Unaudited Pro Forma Consolidated Statement of Operations | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, 2019 | ||||||||||||||||||||||||
| (in millions) | Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| PBF Holding | Martinez Refining (1) | |||||||||||||||||||||||
| Revenues | $ | 24,468.9 | $ | 3,814.9 | $ | — | $ | 3,814.9 | $ | — | $ | 28,283.8 | ||||||||||||
| Cost and expenses: | ||||||||||||||||||||||||
| Cost of products and other | 21,667.7 | 3,473.6 | 23.5 | (7 | ) | 3,497.1 | — | 25,164.8 | ||||||||||||||||
| Operating expenses, excluding depreciation | 1,684.3 | 245.3 | — | 245.3 | — | 1,929.6 | ||||||||||||||||||
| Depreciation and amortization expense | 386.7 | 156.1 | 156.1 | (120.4 | ) | (9) | 422.4 | |||||||||||||||||
| Cost of sales | 23,738.7 | 3,875.0 | 23.5 | 3,898.5 | (120.4 | ) | 27,516.8 | |||||||||||||||||
| General and administrative expenses, excluding depreciation | 258.7 | 248.3 | (11) | — | 248.3 | — | 507.0 | |||||||||||||||||
| Depreciation and amortization expense | 10.8 | — | — | — | — | 10.8 | ||||||||||||||||||
| Equity income in investee | (7.9 | ) | — | — | — | — | (7.9 | ) | ||||||||||||||||
| (Gain) loss on sale of assets | (29.9 | ) | 10.6 | — | 10.6 | — | (19.3 | ) | ||||||||||||||||
| 23,970.4 | 4,133.9 | 23.5 | 4,157.4 | (120.4 | ) | 28,007.4 | ||||||||||||||||||
| Income (loss) from operations | 498.5 | (319.0 | ) | (23.5 | ) | (342.5 | ) | 120.4 | 276.4 | |||||||||||||||
| Other expense | ||||||||||||||||||||||||
| Change in fair value of catalyst obligation | (9.7 | ) | — | — | — | — | (9.7 | ) | ||||||||||||||||
| Interest expense, net | (108.7 | ) | (3.9 | ) | — | (3.9 | ) | (36.3 | ) | (10) | (148.9 | ) | ||||||||||||
| Other non-service components of net periodic benefit costs | (0.2 | ) | — | — | — | — | (0.2 | ) | ||||||||||||||||
| Income (loss) before income taxes | 379.9 | (322.9 | ) | (23.5 | ) | (346.4 | ) | 84.1 | 117.6 | |||||||||||||||
| Income tax (benefit) expense | (8.3 | ) | (89.8 | ) | 89.8 | (8 | ) | — | — | (8.3 | ) | |||||||||||||
| Net income (loss) | 388.2 | (233.1 | ) | (113.3 | ) | (346.4 | ) | $ | 84.1 | 125.9 | ||||||||||||||
| Less: net income attributable to noncontrolling interests | — | — | — | — | — | — | ||||||||||||||||||
| Net income (loss) attributable to PBF Holding Company LLC | $ | 388.2 | $ | (233.1 | ) | $ | (113.3 | ) | $ | (346.4 | ) | $ | 84.1 | $ | 125.9 |
Exhibit 99.2
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
| 7. | Reflects the change in accounting for inventory for Martinez Refining from a FIFO (first-in, first-out) basis to a LIFO (last-in, last-out) basis in order to conform to PBF Holding’s accounting policy. The period presented has been adjusted to reflect the period specific effects of applying the new accounting principle on Martinez Refining's Cost of product and other. |
|---|---|
| 8. | Represents the reversal of income taxes for Martinez Refining. As PBF Holding is a limited liability company treated as a “flow-through” entity for income tax purposes, there is no benefit or expense for federal or state income taxes. |
| --- | --- |
| 9. | Represents an adjustment to depreciation expense resulting from the assumed fair value of property, plant and equipment acquired through the Martinez Acquisition calculated on a straight-line basis and based on a weighted average useful life of 25 years. |
| --- | --- |
| 10. | Represents assumed interest expense associated with borrowings under the Revolving Loan to fund the Martinez acquisition and the 2028 Senior Notes offering, adjusted for a reduction in interest expense associated with the redemption of the 2023 Senior Notes. In addition such adjustments include the assumed amortization of estimated deferred financing costs incurred in connection with the issuance of the 2028 Senior Notes, reduced by lower amortization associated with the 2023 Senior Notes. |
| --- | --- |
| 11. | The historical combined statement of operations of Martinez Refining include significant allocations of corporate overhead and shared service costs associated with the previous owner. Such allocated and shared service costs are not representative of what we expect to incur under our ownership of the Martinez refinery and related logistics assets. For the year ended December 31, 2019, the amount of corporate overhead and shared service costs allocated to Martinez Refining was approximately $82.8 million of total general and administrative expenses. Conversely, a significant portion of our general and administrative expenses are relatively fixed and not directly dependent on the number of assets we own. As such, we expect to incur less than $20 million annually in incremental general and administrative costs related to the Martinez Acquisition under normal operating conditions. No adjustments related to these allocated and shared service costs have been included in the pro forma consolidated statement of operations. |
| --- | --- |
Exhibit
Exhibit 99.3
UNAUDITED PBF ENERGY COMPANY LLC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements are presented to show how PBF Energy Company LLC (“PBF LLC”) might have looked if PBF LLC’s acquisition of the Martinez refinery and related logistics assets (collectively, the “Martinez Acquisition”), borrowings incurred under under PBF Holding Company LLC’s (“PBF Holding”), a subsidiary of PBF LLC, asset-backed revolving credit facility (“Revolving Loan”) and the consummation of the offering of PBF Holding’s 6.00% senior notes due 2028 (the “2028 Senior Notes”) to fund the Martinez acquisition as described below, had occurred on the dates and for the periods indicated below. The pro forma consolidated financial statements also include an adjustment to give effect to a portion of the proceeds from the 2028 Senior Notes Offering that were used to redeem in full the outstanding 7.00% senior secured notes due 2023 (the "2023 Senior Notes"). We derived the following unaudited pro forma consolidated financial statements by applying pro forma adjustments to our historical consolidated financial statements and the historical financial statements of Martinez refinery and related logistics assets (collectively “Martinez Refining”). The pro forma effects of the Martinez Acquisition are based on the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.
The unaudited pro forma consolidated balance sheet is based on the individual historical consolidated balance sheets of PBF LLC and Martinez Refining as of December 31, 2019, and has been prepared to reflect the Martinez Acquisition and related financial transactions, including the redemption of the 2023 Senior Notes, as if they occurred on December 31, 2019. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 combines the historical results of operations of PBF LLC and Martinez Refining as if the acquisition occurred on January 1, 2019, and gives effect to the borrowings incurred under our Revolving Loan and the consummation of the 2028 Senior Notes to fund the Martinez Acquisition and the corresponding redemption of the 2023 Senior Notes as if they occurred on January 1, 2019.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 does not reflect future events that may occur after the completion of the Martinez Acquisition on February 1, 2020, including but not limited to the anticipated realization of cost savings from operating synergies and certain charges expected to be incurred in connection with the transaction, including, but not limited to, costs that may be incurred in connection with integrating the operations of Martinez Refining.
The unaudited pro forma consolidated financial information is presented for informational purposes only. The unaudited pro forma consolidated financial information does not purport to represent what our results of operations or financial condition would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated, and they do not purport to project our results of operations or financial condition for any future period or as of any future date. In addition, they do not purport to indicate the results that would actually have been obtained had the Martinez Acquisition been completed on the assumed date or for the periods presented, or which may be realized in the future.
In order to prepare the pro forma consolidated financial information, we adjusted Martinez Refining’s historical assets and liabilities to their estimated fair values in accordance with ASC 805 as a result of our closing of the Martinez Acquisition on February 1, 2020. As of the date of this Current Report on Form 8-K/A, we have not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Martinez Refining’s assets acquired and the liabilities assumed and the related allocation of the purchase price, nor have we identified all adjustments necessary to conform Martinez Refining’s accounting policies to our accounting policies. The determination of the fair value of Martinez Refining’s assets and liabilities is ongoing and is expected to be finalized for our December 31, 2020 fiscal year-end. As a result, the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary unaudited pro forma purchase price allocation has been made solely for the purpose of preparing the accompanying unaudited pro forma consolidated financial statements. There can be no assurance that such finalization of the purchase price will not result in material changes from the preliminary purchase price allocation included in the accompanying unaudited pro forma consolidated financial statements.
Exhibit 99.3
The pro forma adjustments as of and for the year ended December 31, 2019 principally give effect to:
| • | the closing of the Martinez Acquisition and their associated impact on our balance sheet and statement of operations including the borrowings incurred under our Revolving Loan to fund the Martinez Acquisition; and | | --- | --- || • | the consummation of the 2028 Senior Notes offering, the proceeds of which were used to partially fund the Martinez Acquisition and to fully redeem the 2023 Senior Notes. | | --- | --- |
Exhibit 99.3
| Unaudited Pro Forma Consolidated Balance Sheet<br><br>As of December 31, 2019<br><br>(in millions) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | ||||||||||||
| PBF LLC | Martinez Refining (1) | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 813.7 | $ | — | $ | — | $ | — | $ | (498.4 | ) | (3) | $ | 315.3 | ||
| Accounts receivable | 834.0 | 0.3 | — | 0.3 | (0.3 | ) | (3) | 834.0 | ||||||||
| Accounts receivable-affiliate | — | 120.5 | — | 120.5 | (120.5 | ) | (3) | — | ||||||||
| Inventories | 2,122.2 | 325.5 | — | 325.5 | (101.4 | ) | (3) | 2,346.3 | ||||||||
| Prepaid expense and other current assets | 51.6 | 56.1 | — | 56.1 | (50.7 | ) | (3) | 57.0 | ||||||||
| Total current assets | 3,821.5 | 502.4 | — | 502.4 | (771.3 | ) | 3,552.6 | |||||||||
| Property, plant and equipment, net | 4,023.2 | 1,298.4 | (53.5 | ) | (2) | 1,244.9 | (282.1 | ) | (3) | 4,986 | ||||||
| Operating lease right of use assets | 306.4 | — | 7.8 | (2) | 7.8 | — | 314.2 | |||||||||
| Deferred charges and other assets, net | 978.0 | 27.0 | 63.6 | (2) | 90.6 | 36.7 | (3) | 1,105.3 | ||||||||
| Total assets | $ | 9,129.1 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,958.1 | |||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 601.4 | $ | 95.8 | — | $ | 95.8 | $ | (95.8 | ) | (3) | $ | 601.4 | |||
| Accounts payable-affiliate | — | 235.6 | — | 235.6 | (235.6 | ) | (3) | — | ||||||||
| Accrued expenses | 1,846.2 | 54.1 | 0.5 | (2) | 54.6 | (51.6 | ) | (3) | 1,849.2 | |||||||
| Current operating lease liabilities | 72.1 | — | 1.9 | (2) | 1.9 | — | 74.0 | |||||||||
| Current debt | — | — | — | — | — | |||||||||||
| Deferred revenue | 20.1 | — | — | — | — | 20.1 | ||||||||||
| Total current liabilities | 2,539.8 | 385.5 | 2.4 | 387.9 | (383.0 | ) | 2,544.7 | |||||||||
| Accrued liabilities - noncurrent | — | 33.3 | — | 33.3 | (33.3 | ) | (3) | — | ||||||||
| Long-term debt | 2,064.9 | — | — | — | 704.5 | (5) | 2,769.4 | |||||||||
| Affiliate note payable | 376.4 | — | — | — | — | 376.4 | ||||||||||
| Deferred tax liabilities | 31.4 | 21.6 | — | 21.6 | (21.6 | ) | (3) | 31.4 | ||||||||
| Long-term operating lease liabilities | 233.1 | — | 5.9 | (2) | 5.9 | — | 239.0 | |||||||||
| Other long-term liabilities | 269.3 | 55.9 | 1.7 | (2) | 57.6 | 78.5 | (3) | 405.4 | ||||||||
| Total liabilities | 5,514.9 | 496.3 | 10.0 | 506.3 | 345.1 | 6,366.3 | ||||||||||
| Commitments and contingencies | ||||||||||||||||
| Series B Units, 1,000,000 issued and outstanding, no par or stated value | 5.1 | — | — | — | — | 5.1 |
Exhibit 99.3
| Unaudited Pro Forma Consolidated Balance Sheet (cont'd)<br><br>As of December 31, 2019<br><br>(in millions) | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||
| PBF LLC | Martinez Refining (1) | ||||||||||||||||
| Equity: | |||||||||||||||||
| Net parent investment | $ | — | $ | 1,331.5 | $ | 7.9 | (2) | $ | 1,339.4 | $ | (1,339.4 | ) | (4) | $ | — | ||
| Series A Units, 1,215,317 and 1,206,325 issued and outstanding at December 31, 2019 and 2018, no par or stated value | 20.0 | — | — | — | — | 20.0 | |||||||||||
| Series C Units, 119,826,202 and 119,895,422 issued and outstanding at December 31, 2019 and 2018, no par or stated value | 2,189.4 | — | — | — | — | 2,189.4 | |||||||||||
| Treasury stock, at cost | (165.7 | ) | — | — | — | — | (165.7 | ) | |||||||||
| Retained earnings | 1,142.4 | — | — | — | (22.4 | ) | (6) | 1,120.0 | |||||||||
| Accumulated other comprehensive loss | (9.7 | ) | — | — | — | — | (9.7 | ) | |||||||||
| Total PBF Energy Company LLC equity | 3,176.4 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,154.0 | ||||||||||
| Noncontrolling interest | 432.7 | — | — | — | — | 432.7 | |||||||||||
| Total equity | 3,609.1 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,586.7 | ||||||||||
| Total liabilities, Series B units and equity | $ | 9,129.1 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,958.1 |
Exhibit 99.3
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
| 1. | We performed certain procedures for the purpose of identifying any material differences in significant accounting policies between PBF LLC and Martinez Refining and any accounting adjustments that would be required in connection with adopting uniform policies. Procedures performed by PBF LLC included a review of the summary of significant accounting policies disclosed in the Martinez Refining audited financial statements and discussions with Martinez Refining management regarding their significant accounting policies in order to identify material adjustments. While we are continuing to engage in additional discussions with Martinez Refining management and are in the process of evaluating the impact of Martinez Refining’s accounting policies on its historical results following the close of the acquisition on February 1, 2020, our best estimates of the differences we have identified to date are included in Notes 2 and 7 below relating to lease and inventory accounting. Additionally, certain financial statement captions within the historical Martinez Refining presentation, have been reclassed to conform to PBF LLC's presentation. | ||
|---|---|---|---|
| 2. | Reflects leases assumed by PBF LLC in connection with the Martinez Acquisition and accounted for by PBF LLC under ASC 842, Leases ("ASC 842"). Martinez Refining was considered a private company and was not required to adopt ASC 842 until January 1, 2020. PBF LLC assumed approximately $7.8 million in operating leases right-of-use assets and operating leases obligations, of which $1.9 million is current and $5.9 million of long-term, and $63.6 million in financing leases right-of-use assets and financing leases obligation, of which $6.0 million is current and $57.6 million is long term, which was attributable to a hydrogen facility which supports the Martinez refining operations. Martinez Refining historical balance sheet includes capital lease obligations, primarily related to a hydrogen facility, of $61.4 million, of which $5.5 million is of current and $55.9 is long term, and long term capital lease assets of $53.5 million, which was included in their its Property, plant and equipment, net line item. We reclassed Martinez Refining’s capital lease assets in Property, plant, and equipment, net to deferred charges and other non-current assets, net to be consistent with PBF LLC's presentation. Pro forma adjustments were made to incorporate the net amounts of the assumed lease assets and obligations and the amounts recorded in the historical Martinez Refining balance sheet. | ||
| --- | --- | ||
| 3. | Represents preliminary cash consideration transferred at closing consisting of $960.0 million for the Martinez Acquisition and a preliminary working capital settlement of $216.1 million, which we funded through a combination of cash on hand including proceeds from the 2028 Senior Notes offering and borrowings under our Revolving Loan. The estimated preliminary fair value of the net assets acquired is as follows: | ||
| --- | --- | ||
| (in millions) | |||
| --- | --- | --- | --- |
| Inventories | $ | 224.1 | |
| Prepaid and other current assets | 5.4 | ||
| Property, plant and equipment | 962.8 | ||
| Deferred charges and other assets, net | 63.7 | ||
| Accrued expenses | (1.4 | ) | |
| Other long-term liabilities - Contingent consideration | (52.2 | ) | |
| Other long-term liabilities - Environmental obligation | (26.3 | ) | |
| Estimated fair value of net assets acquired | $ | 1,176.1 |
Exhibit 99.3
PBF LLC agreed to make potential additional payments (“Contingent Consideration”) for the Martinez Acquisition based upon the achievement of certain future results and other criteria and conditions set forth in the Sale and Purchase Agreement with respect to each of the four consecutive twelve month measurement periods following the Closing Date.
These pro forma acquisition adjustments reflect the reversal of Martinez Refining’s historical assets and liabilities as of December 31, 2019 and the recording of the estimated preliminary purchase price allocation for the fair value of the net assets acquired, inclusive of the estimated Contingent Consideration obligation. This preliminary purchase price allocation estimate is based on PBF LLC’s initial fair value estimates at closing and final allocations which are subject to the terms of the Sale and Purchase Agreement. The fair value of inventory is based on the quantities acquired at closing using negotiated pricing methodology based on market prices. The fair value of property, plant and equipment is largely based on the acquisition purchase price of the assets. These amounts may change and may change materially at the time the Martinez Acquisition purchase price allocation is finalized. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after the close of the acquisition. PBF LLC anticipates that the valuations of the acquired assets and liabilities will include, but not be limited to, inventory, property, plant and equipment and other potential intangible assets. The valuation will also include an estimate of the Contingent Consideration obligation and estimated assumed environmental liability at closing. The valuations are being performed by a third-party valuation specialist based on valuation techniques that PBF LLC deems appropriate for measuring the fair value of the assets acquired and liabilities assumed.
The final acquisition consideration, and amounts allocated to assets acquired and liabilities assumed, could differ materially from the amounts presented in these unaudited pro forma consolidated financial statements.
The pro forma adjustment for Property, plant and equipment includes the reversal of the historical book value of such assets and the recording of the fair value determined by the preliminary purchase price allocation. In addition, adjustments for future capital expenditures which are contractually obligated to be reimbursed by the seller subsequent to the closing were included in the pro forma amounts.
The pro forma net cash adjustment includes the impacts of the following:
| Cash paid for Martinez Acquisition | (1,176.1 | ) |
| Proceeds from the 2028 Senior Notes offering | ||
| Deferred financing costs associated with the 2028 Senior Notes offering | ) | |
| Revolving Loan borrowings in connection with the Martinez Acquisition | ||
| Redemption of 2023 Senior Notes, inclusive of accrued interest (1) | ) | |
| Total pro forma cash adjustment | (498.4 | ) |
| (1) Includes accrued interest on 2023 Senior Notes through December 31, 2019 of 4.4 million. |
All values are in US Dollars.
| 4. | Reflects the elimination of Martinez Refining's Net Parent Investment in connection with our acquisition of Martinez Refining. |
|---|
Exhibit 99.3
| 5. | Represents proceeds received in connection with the 2028 Senior Notes offering net of estimated deferred financing costs, borrowings on the Revolving Loan used to fund the acquisition and redemption of the 2023 Senior Notes as shown below. | ||
|---|---|---|---|
| (in millions) | |||
| --- | --- | --- | --- |
| Issuance of the 2028 Senior Notes | $ | 1,000.0 | |
| Deferred financing fees on the 2028 Senior Notes | (12.5 | ) | |
| Borrowings on the Revolving Loan | 212.1 | ||
| Redemption of the 2023 Senior Notes | (500.0 | ) | |
| Write off of deferred financing costs on the 2023 Senior Notes | 4.9 | ||
| Total pro forma long-term debt adjustment | $ | 704.5 | |
| 6. | Represents impact on Retained earnings from debt extinguishment costs and incremental interest expense associated with the redemption of the 2023 Senior Notes. Includes a redemption premium of $17.5 million and a write off of the 2023 Senior Notes unamortized deferred financing costs of $4.9 million. | ||
| --- | --- |
Exhibit 99.3
| Unaudited Pro Forma Consolidated Statement of Operations | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, 2019 | ||||||||||||||||||||||||||
| (in millions) | Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| PBF LLC | Martinez Refining | |||||||||||||||||||||||||
| Revenues | $ | 24,508.2 | $ | 3,814.9 | $ | — | $ | 3,814.9 | $ | — | $ | 28,323.1 | ||||||||||||||
| Cost and expenses: | ||||||||||||||||||||||||||
| Cost of products and other | 21,387.5 | 3,473.6 | 23.5 | (7 | ) | 3,497.1 | — | 24,884.6 | ||||||||||||||||||
| Operating expenses, excluding depreciation | 1,782.3 | 245.3 | — | 245.3 | — | 2,027.6 | ||||||||||||||||||||
| Depreciation and amortization expense | 425.3 | 156.1 | 156.1 | (120.4 | ) | (9 | ) | 461.0 | ||||||||||||||||||
| Cost of sales | 23,595.1 | 3,875 | 23.5 | 3,898.5 | (120.4 | ) | 27,373.2 | |||||||||||||||||||
| General and administrative expenses, excluding depreciation | 282.3 | 248.3 | (11 | ) | — | 248.3 | — | 530.6 | ||||||||||||||||||
| Depreciation and amortization expense | 10.8 | — | — | — | — | 10.8 | ||||||||||||||||||||
| Change in contingent consideration | (0.8 | ) | — | — | — | — | (0.8 | ) | ||||||||||||||||||
| (Gain) loss on sale of assets | (29.9 | ) | 10.6 | — | 10.6 | — | (19.3 | ) | ||||||||||||||||||
| 23,857.5 | 4,133.9 | 23.5 | 4,157.4 | (120.4 | ) | 27,894.5 | ||||||||||||||||||||
| Income (loss) from operations | 650.7 | (319.0 | ) | (23.5 | ) | (342.5 | ) | 120.4 | 428.6 | |||||||||||||||||
| Other expense | ||||||||||||||||||||||||||
| Interest expense, net | (169.1 | ) | (3.9 | ) | — | (3.9 | ) | (36.3 | ) | (10 | ) | (209.3 | ) | |||||||||||||
| Change in fair value of catalyst obligation | (9.7 | ) | — | — | — | — | (9.7 | ) | ||||||||||||||||||
| Other non-service components of net periodic benefit costs | (0.2 | ) | — | — | — | — | (0.2 | ) | ||||||||||||||||||
| Income (loss) before income taxes | 471.7 | (322.9 | ) | (23.5 | ) | (346.4 | ) | 84.1 | 209.4 | |||||||||||||||||
| Income tax (benefit) expense | (8.3 | ) | (89.8 | ) | 89.8 | (8 | ) | — | — | (8.3 | ) | |||||||||||||||
| Net income (loss) | 480.0 | (233.1 | ) | (113.3 | ) | (346.4 | ) | 84.1 | 217.7 | |||||||||||||||||
| Less: net income attributable to noncontrolling interests | 51.5 | — | — | — | — | 51.5 | ||||||||||||||||||||
| Net income (loss) attributable to PBF LLC Inc. stockholders | $ | 428.5 | $ | (233.1 | ) | $ | (113.3 | ) | $ | (346.4 | ) | $ | 84.1 | $ | 166.2 |
Exhibit 99.3
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
| 7. | Reflects the change in accounting for inventory for Martinez Refining from a FIFO (first-in, first-out) basis to a LIFO (last-in, last-out) basis in order to conform to PBF LLC’s accounting policy. The period presented has been adjusted to reflect the period specific effects of applying the new accounting principle on Martinez Refining's Cost of product and other. |
|---|---|
| 8. | Represents the reversal of income taxes for Martinez Refining. As PBF LLC is a limited liability company treated as a “flow-through” entity for income tax purposes, there is no benefit or expense for federal or state income taxes. |
| --- | --- |
| 9. | Represents an adjustment to depreciation expense resulting from the assumed fair value of property, plant and equipment acquired through the Martinez Acquisition calculated on a straight-line basis and based on a weighted average useful life of 25 years. |
| --- | --- |
| 10. | Represents assumed interest expense associated with borrowings under the Revolving Loan to fund the Martinez acquisition and the 2028 Senior Notes offering, adjusted for a reduction in interest expense associated with the redemption of the 2023 Senior Notes. In addition such adjustments include the assumed amortization of estimated deferred financing costs incurred in connection with the issuance of the 2028 Senior Notes, reduced by lower amortization associated with the 2023 Senior Notes. |
| --- | --- |
| 11. | The historical combined statement of operations of Martinez Refining include significant allocations of corporate overhead and shared service costs associated with the previous owner. Such allocated and shared service costs are not representative of what we expect to incur under our ownership of the Martinez refinery and related logistics assets. For the year ended December 31, 2019, the amount of corporate overhead and shared service costs allocated to Martinez Refining was approximately $82.8 million of total general and administrative expenses. Conversely, a significant portion of our general and administrative expenses are relatively fixed and not directly dependent on the number of assets we own. As such, we expect to incur less than $20 million annually in incremental general and administrative costs related to the Martinez Acquisition under normal operating conditions. No adjustments related to these allocated and shared service costs have been included in the pro forma consolidated statement of operations. |
| --- | --- |
Exhibit
Exhibit 99.4
UNAUDITED PBF ENERGY INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements are presented to show how PBF Energy Inc. (“PBF Energy”) might have looked if PBF Energy’s acquisition of the Martinez refinery and related logistics assets (collectively, the “Martinez Acquisition”), borrowings incurred under under PBF Holding Company LLC’s (“PBF Holding”), an indirect subsidiary of PBF Energy, asset-backed revolving credit facility (“Revolving Loan”) and the consummation of the offering of PBF Holding’s 6.00% senior notes due 2028 (the “2028 Senior Notes”) to fund the Martinez acquisition as described below, had occurred on the dates and for the periods indicated below. The pro forma consolidated financial statements also include an adjustment to give effect to a portion of the proceeds from the 2028 Senior Notes Offering that were used to redeem in full the outstanding 7.00% senior secured notes due 2023 (the "2023 Senior Notes"). We derived the following unaudited pro forma consolidated financial statements by applying pro forma adjustments to our historical consolidated financial statements and the historical financial statements of Martinez refinery and related logistics assets (collectively “Martinez Refining”). The pro forma effects of the Martinez Acquisition are based on the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.
The unaudited pro forma consolidated balance sheet is based on the individual historical consolidated balance sheets of PBF Energy and Martinez Refining as of December 31, 2019, and has been prepared to reflect the Martinez Acquisition and related financial transactions, including the redemption of the 2023 Senior Notes, as if they occurred on December 31, 2019. The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 combines the historical results of operations of PBF Energy and Martinez Refining as if the acquisition occurred on January 1, 2019, and gives effect to the borrowings incurred under our Revolving Loan and the consummation of the 2028 Senior Notes to fund the Martinez Acquisition and the corresponding redemption of the 2023 Senior Notes as if they occurred on January 1, 2019.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 does not reflect future events that may occur after the completion of the Martinez Acquisition on February 1, 2020, including but not limited to the anticipated realization of cost savings from operating synergies and certain charges expected to be incurred in connection with the transaction, including, but not limited to, costs that may be incurred in connection with integrating the operations of Martinez Refining.
The unaudited pro forma consolidated financial information is presented for informational purposes only. The unaudited pro forma consolidated financial information does not purport to represent what our results of operations or financial condition would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated, and they do not purport to project our results of operations or financial condition for any future period or as of any future date. In addition, they do not purport to indicate the results that would actually have been obtained had the Martinez Acquisition been completed on the assumed date or for the periods presented, or which may be realized in the future.
In order to prepare the pro forma consolidated financial information, we adjusted Martinez Refining’s historical assets and liabilities to their estimated fair values in accordance with ASC 805 as a result of our closing of the Martinez Acquisition on February 1, 2020. As of the date of this Current Report on Form 8-K/A, we have not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Martinez Refining’s assets acquired and the liabilities assumed and the related allocation of the purchase price, nor have we identified all adjustments necessary to conform Martinez Refining’s accounting policies to our accounting policies. The determination of the fair value of Martinez Refining’s assets and liabilities is ongoing and is expected to be finalized for our December 31, 2020 fiscal year-end. As a result, the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary unaudited pro forma purchase price allocation has been made solely for the purpose of preparing the accompanying unaudited pro forma consolidated financial statements. There can be no assurance that such finalization of the purchase price will not result in material changes from the preliminary purchase price allocation included in the accompanying unaudited pro forma consolidated financial statements.
Exhibit 99.4
The pro forma adjustments as of and for the year ended December 31, 2019 principally give effect to:
| • | the closing of the Martinez Acquisition and their associated impact on our balance sheet and statement of operations including the borrowings incurred under our Revolving Loan to fund the Martinez Acquisition; and | | --- | --- || • | the consummation of the 2028 Senior Notes offering, the proceeds of which were used to partially fund the Martinez Acquisition and to fully redeem the 2023 Senior Notes. | | --- | --- |
Exhibit 99.4
| Unaudited Pro Forma Consolidated Balance Sheet<br><br>As of December 31, 2019<br><br>(in millions) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | ||||||||||||
| PBF Energy | Martinez Refining(1) | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 814.9 | $ | — | $ | — | $ | — | $ | (498.4 | ) | (3) | $ | 316.5 | ||
| Accounts receivable | 835 | 0.3 | — | 0.3 | (0.3 | ) | (3) | 835.0 | ||||||||
| Accounts receivable-affiliate | — | 120.5 | — | 120.5 | (120.5 | ) | (3) | — | ||||||||
| Inventories | 2,122.2 | 325.5 | — | 325.5 | (101.4 | ) | (3) | 2,346.3 | ||||||||
| Prepaid expense and other current assets | 51.6 | 56.1 | — | 56.1 | (50.7 | ) | (3) | 57.0 | ||||||||
| Total current assets | 3,823.7 | 502.4 | — | 502.4 | (771.3 | ) | 3,554.8 | |||||||||
| Property, plant and equipment, net | 4,023.2 | 1,298.4 | (53.5 | ) | (2) | 1,244.9 | (282.1 | ) | (3) | 4,986 | ||||||
| Operating lease right of use assets | 306.4 | — | 7.8 | (2) | 7.8 | — | 314.2 | |||||||||
| Deferred charges and other assets, net | 979.1 | 27.0 | 63.6 | (2) | 90.6 | 36.7 | (3) | 1,106.4 | ||||||||
| Total assets | $ | 9,132.4 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,961.4 | |||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 601.4 | $ | 95.8 | — | $ | 95.8 | $ | (95.8 | ) | (3) | $ | 601.4 | |||
| Accounts payable-affiliate | — | 235.6 | — | 235.6 | (235.6 | ) | (3) | — | ||||||||
| Accrued expenses | 1,815.6 | 54.1 | 0.5 | (2) | 54.6 | (51.6 | ) | (3) | 1,818.6 | |||||||
| Current operating lease liabilities | 72.1 | — | 1.9 | (2) | 1.9 | — | 74 | |||||||||
| Current debt | — | — | — | — | — | — | ||||||||||
| Deferred revenue | 20.1 | — | — | — | — | 20.1 | ||||||||||
| Total current liabilities | 2,509.2 | 385.5 | 2.4 | 387.9 | (383.0 | ) | 2,514.1 | |||||||||
| Accrued liabilities - noncurrent | — | 33.3 | — | 33.3 | (33.3 | ) | (3) | — | ||||||||
| Long-term debt | 2,064.9 | — | — | — | 704.5 | (5) | 2,769.4 | |||||||||
| Payable to related parties pursuant to Tax Receivable Agreement | 373.5 | — | — | — | — | 373.5 | ||||||||||
| Deferred tax liabilities | 96.9 | 21.6 | — | 21.6 | (21.6 | ) | (3) | 96.9 | ||||||||
| Long-term operating lease liabilities | 233.1 | — | 5.9 | (2) | 5.9 | — | 239 | |||||||||
| Other long-term liabilities | 269.3 | 55.9 | 1.7 | (2) | 57.6 | 78.5 | (3) | 405.4 | ||||||||
| Total liabilities | 5,546.9 | 496.3 | 10.0 | 506.3 | 345.1 | 6,398.3 | ||||||||||
| Commitments and contingencies |
Exhibit 99.4
| Unaudited Pro Forma Consolidated Balance Sheet (cont'd)<br><br>As of December 31, 2019<br><br>(in millions) | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | |||||||||||||
| PBF Energy | Martinez Refining(1) | ||||||||||||||||
| Equity: | |||||||||||||||||
| Net parent investment | $ | — | $ | 1,331.5 | $ | 7.9 | (2) | $ | 1,339.4 | $ | (1,339.4 | ) | (4) | $ | — | ||
| Class A common stock, $0.001 par value, 1,000,000,000 shares authorized,119,804,971 shares outstanding at December 31, 2019, 119,874,191 shares outstanding at December 31, 2018 | 0.1 | — | — | — | — | 0.1 | |||||||||||
| Class B common stock, $0.001 par value, 1,000,000 shares authorized, 20 shares outstanding at December 31, 2019, 20 shares outstanding at December 31, 2018 | — | — | — | — | — | — | |||||||||||
| Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding at December 31, 2019 and 2018 | — | — | — | — | — | — | |||||||||||
| Treasury stock, at cost, 6,424,787 shares outstanding at December 31, 2019 and 6,274,261 shares outstanding at December 31, 2018 | (165.7 | ) | — | — | — | — | (165.7 | ) | |||||||||
| Additional paid in capital | 2,812.3 | — | — | — | — | 2,812.3 | |||||||||||
| Retained earnings | 401.2 | — | — | — | (22.4 | ) | (6) | 378.8 | |||||||||
| Accumulated other comprehensive income/(loss) | (8.3 | ) | — | — | — | — | (8.3 | ) | |||||||||
| Total equity | 3,039.6 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,017.2 | ||||||||||
| Noncontrolling interest | 545.9 | — | — | — | — | 545.9 | |||||||||||
| Total equity | 3,585.5 | 1,331.5 | 7.9 | 1,339.4 | (1,361.8 | ) | 3,563.1 | ||||||||||
| Total liabilities and equity | $ | 9,132.4 | $ | 1,827.8 | $ | 17.9 | $ | 1,845.7 | $ | (1,016.7 | ) | $ | 9,961.4 |
Exhibit 99.4
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
| 1. | We performed certain procedures for the purpose of identifying any material differences in significant accounting policies between PBF Energy and Martinez Refining and any accounting adjustments that would be required in connection with adopting uniform policies. Procedures performed by PBF Energy included a review of the summary of significant accounting policies disclosed in the Martinez Refining audited financial statements and discussions with Martinez Refining management regarding their significant accounting policies in order to identify material adjustments. While we are continuing to engage in additional discussions with Martinez Refining management and are in the process of evaluating the impact of Martinez Refining’s accounting policies on its historical results following the close of the acquisition on February 1, 2020, our best estimates of the differences we have identified to date are included in Notes 2 and 7 below relating to lease and inventory accounting. Additionally, certain financial statement captions within the historical Martinez Refining presentation, have been reclassed to conform to PBF Energy's presentation. | ||
|---|---|---|---|
| 2. | Reflects leases assumed by PBF Energy in connection with the Martinez Acquisition and accounted for by PBF Energy under ASC 842, Leases ("ASC 842"). Martinez Refining was considered a private company and was not required to adopt ASC 842 until January 1, 2020. PBF Energy assumed approximately $7.8 million in operating leases right-of-use assets and operating leases obligations, of which $1.9 million is current and $5.9 million of long-term, and $63.6 million in financing leases right-of-use assets and financing leases obligation, of which $6.0 million is current and $57.6 million is long term, which was attributable to a hydrogen facility which supports the Martinez refining operations. Martinez Refining historical balance sheet includes capital lease obligations, primarily related to a hydrogen facility, of $61.4 million, of which $5.5 million is current and $55.9 is long term, and long term capital lease assets of $53.5 million, which was included in its Property, plant and equipment, net line item. We reclassed Martinez Refining’s capital lease assets in Property, plant, and equipment, net to deferred charges and other non-current assets, net to be consistent with PBF Energy's presentation. Pro forma adjustments were made to incorporate the net amounts of the assumed lease assets and obligations and the amounts recorded in the historical Martinez Refining balance sheet. | ||
| --- | --- | ||
| 3. | Represents preliminary cash consideration transferred at closing consisting of $960.0 million for the Martinez Acquisition and a preliminary working capital settlement of $216.1 million, which we funded through a combination of cash on hand including proceeds from the 2028 Senior Notes offering and borrowings under our Revolving Loan. The estimated preliminary fair value of the net assets acquired is as follows: | ||
| --- | --- | ||
| (in millions) | |||
| --- | --- | --- | --- |
| Inventories | $ | 224.1 | |
| Prepaid and other current assets | 5.4 | ||
| Property, plant and equipment | 962.8 | ||
| Deferred charges and other assets, net | 63.7 | ||
| Accrued expenses | (1.4 | ) | |
| Other long-term liabilities - Contingent consideration | (52.2 | ) | |
| Other long-term liabilities - Environmental obligation | (26.3 | ) | |
| Estimated fair value of net assets acquired | $ | 1,176.1 |
Exhibit 99.4
PBF Energy agreed to make potential additional payments (“Contingent Consideration”) for the Martinez Acquisition based upon the achievement of certain future results and other criteria and conditions set forth in the Sale and Purchase Agreement with respect to each of the four consecutive twelve month measurement periods following the Closing Date.
These pro forma acquisition adjustments reflect the reversal of Martinez Refining’s historical assets and liabilities as of December 31, 2019 and the recording of the estimated preliminary purchase price allocation for the fair value of the net assets acquired, inclusive of the estimated Contingent Consideration obligation. This preliminary purchase price allocation estimate is based on PBF Energy’s initial fair value estimates at closing and final allocations which are subject to the terms of the Sale and Purchase Agreement. The fair value of inventory is based on the quantities acquired at closing using negotiated pricing methodology based on market prices. The fair value of property, plant and equipment is largely based on the acquisition purchase price of the assets. These amounts may change and may change materially at the time the Martinez Acquisition purchase price allocation is finalized. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after the close of the acquisition. PBF Energy anticipates that the valuations of the acquired assets and liabilities will include, but not be limited to, inventory, property, plant and equipment and other potential intangible assets. The valuation will also include an estimate of the Contingent Consideration obligation and estimated assumed environmental liability at closing. The valuations are being performed by a third-party valuation specialist based on valuation techniques that PBF Energy deems appropriate for measuring the fair value of the assets acquired and liabilities assumed.
The final acquisition consideration, and amounts allocated to assets acquired and liabilities assumed, could differ materially from the amounts presented in these unaudited pro forma consolidated financial statements.
The pro forma adjustment for Property, plant and equipment includes the reversal of the historical book value of such assets and the recording of the fair value determined by the preliminary purchase price allocation. In addition, adjustments for future capital expenditures which are contractually obligated to be reimbursed by the seller subsequent to the closing were included in the pro forma amounts.
The pro forma net cash adjustment includes the impacts of the following:
| Cash paid for Martinez Acquisition | (1,176.1 | ) |
| Proceeds from the 2028 Senior Notes offering | ||
| Deferred financing costs associated with the 2028 Senior Notes offering | ) | |
| Revolving Loan borrowings in connection with the Martinez Acquisition | ||
| Redemption of 2023 Senior Notes, inclusive of accrued interest (1) | ) | |
| Total pro forma cash adjustment | (498.4 | ) |
| (1) Includes accrued interest on 2023 Senior Notes through December 31, 2019 of 4.4 million. |
All values are in US Dollars.
| 4. | Reflects the elimination of Martinez Refining's Net Parent Investment in connection with our acquisition of Martinez Refining. |
|---|
Exhibit 99.4
| 5. | Represents proceeds received in connection with the 2028 Senior Notes offering net of estimated deferred financing costs, borrowings on the Revolving Loan used to fund the acquisition and redemption of the 2023 Senior Notes as shown below. | ||
|---|---|---|---|
| (in millions) | |||
| --- | --- | --- | --- |
| Issuance of the 2028 Senior Notes | $ | 1,000.0 | |
| Deferred financing fees on the 2028 Senior Notes | (12.5 | ) | |
| Borrowings on the Revolving Loan | 212.1 | ||
| Redemption of the 2023 Senior Notes | (500.0 | ) | |
| Write off of deferred financing costs on the 2023 Senior Notes | 4.9 | ||
| Total pro forma long-term debt adjustment | $ | 704.5 | |
| 6. | Represents impact on Retained earnings from debt extinguishment costs and incremental interest expense associated with the redemption of the 2023 Senior Notes. Includes a redemption premium of $17.5 million and a write off of the 2023 Senior Notes unamortized deferred financing costs of $4.9 million. | ||
| --- | --- |
Exhibit 99.4
| Unaudited Pro Forma Consolidated Statement of Operations | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, 2019 | |||||||||||||||||||||||||
| (in millions) | Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| PBF Energy | Martinez Refining (1) | ||||||||||||||||||||||||
| Revenues | $ | 24,508.2 | $ | 3,814.9 | $ | — | $ | 3,814.9 | $ | — | $ | 28,323.1 | |||||||||||||
| Cost and expenses: | |||||||||||||||||||||||||
| Cost of products and other | 21,387.5 | 3,473.6 | 23.5 | (7 | ) | 3,497.1 | — | 24,884.6 | |||||||||||||||||
| Operating expenses, excluding depreciation | 1,782.3 | 245.3 | — | 245.3 | — | 2,027.6 | |||||||||||||||||||
| Depreciation and amortization expense | 425.3 | 156.1 | 156.1 | (120.4 | ) | (8) | 461.0 | ||||||||||||||||||
| Cost of sales | 23,595.1 | 3,875 | 23.5 | 3,898.5 | (120.4 | ) | 27,373.2 | ||||||||||||||||||
| General and administrative expenses, excluding depreciation | 284.0 | 248.3 | (11 | ) | — | 248.3 | — | 532.3 | |||||||||||||||||
| Depreciation and amortization expense | 10.8 | — | — | — | — | 10.8 | |||||||||||||||||||
| Change in contingent consideration | (0.8 | ) | — | — | — | — | (0.8 | ) | |||||||||||||||||
| Gain on sale of assets | (29.9 | ) | 10.6 | — | 10.6 | — | (19.3 | ) | |||||||||||||||||
| 23,859.2 | 4,133.9 | 23.5 | 4,157.4 | (120.4 | ) | 27,896.2 | |||||||||||||||||||
| Income (loss) from operations | 649.0 | (319.0 | ) | (23.5 | ) | (342.5 | ) | 120.4 | 426.9 | ||||||||||||||||
| Other expense | |||||||||||||||||||||||||
| Interest expense, net | (159.6 | ) | (3.9 | ) | — | (3.9 | ) | (36.3 | ) | (9) | (199.8 | ) | |||||||||||||
| Change in fair value of catalyst obligation | (9.7 | ) | — | — | — | — | (9.7 | ) | |||||||||||||||||
| Other non-service components of net periodic benefit costs | (0.2 | ) | — | — | — | — | (0.2 | ) | |||||||||||||||||
| Income (loss) before income taxes | 479.5 | (322.9 | ) | (23.5 | ) | (346.4 | ) | 84.1 | 217.2 | ||||||||||||||||
| Income tax (benefit) expense | 104.3 | (89.8 | ) | (89.8 | ) | 25.3 | (10) | 39.8 | |||||||||||||||||
| Net income (loss) | 375.2 | (233.1 | ) | (23.5 | ) | (256.6 | ) | 58.8 | 177.4 |
Exhibit 99.4
| Unaudited Pro Forma Consolidated Statement of Operations (cont'd) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year Ended December 31, 2019 | |||||||||||||||||||
| (in millions) | Historical | Pro Forma Effect of Accounting Changes (Note 1) | Adjusted Pro Forma Martinez Refining | Pro Forma Acquisition and Offering Adjustments | Pro Forma Consolidated | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| PBF Energy | Martinez Refining (1) | ||||||||||||||||||
| Less: net income attributable to noncontrolling interests | 55.8 | — | — | — | (2.0 | ) | (10) | 53.8 | |||||||||||
| Net income (loss) attributable to PBF Energy Inc. stockholders | $ | 319.4 | $ | (233.1 | ) | $ | (23.5 | ) | $ | (256.6 | ) | $ | 60.8 | $ | 123.6 | ||||
| Weighted-average shares of Class A common stock outstanding | |||||||||||||||||||
| Basic | 119,887,646 | 119,887,646 | |||||||||||||||||
| Diluted | 121,853,299 | 121,853,299 | |||||||||||||||||
| Net income available to Class A common stock per share: | |||||||||||||||||||
| Basic | $ | 2.66 | $ | 1.03 | |||||||||||||||
| Dilutes | $ | 2.64 | $ | 1.02 |
Exhibit 99.4
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
| 7. | Reflects the change in accounting for inventory for Martinez Refining from a FIFO (first-in, first-out) basis to a LIFO (last-in, last-out) basis in order to conform to PBF Energy’s accounting policy. The period presented has been adjusted to reflect the period specific effects of applying the new accounting principle on Martinez Refining's Cost of product and other. |
|---|---|
| 8. | Represents an adjustment to depreciation expense resulting from the assumed fair value of property, plant and equipment acquired through the Martinez Acquisition calculated on a straight-line basis and based on a weighted average useful life of 25 years. |
| --- | --- |
| 9. | Represents assumed interest expense associated with borrowings under the Revolving Loan to fund the Martinez acquisition and the 2028 Senior Notes offering, adjusted for a reduction in interest expense associated with the redemption of the 2023 Senior Notes. In addition such adjustments include the assumed amortization of estimated deferred financing costs incurred in connection with the issuance of the 2028 Senior Notes, reduced by lower amortization associated with the 2023 Senior Notes. |
| --- | --- |
| 10. | Reflects an adjustment to income tax expense and non-controlling interest related to the impact of the pro forma acquisition adjustments noted above, assuming a non-controlling interest of 1.0% and an effective tax rate of 24.6% for the year ended December 31, 2019. |
| --- | --- |
| 11. | The historical combined statement of operations of Martinez Refining include significant allocations of corporate overhead and shared service costs associated with the previous owner. Such allocated and shared service costs are not representative of what we expect to incur under our ownership of the Martinez refinery and related logistics assets. For the year ended December 31, 2019, the amount of corporate overhead and shared service costs allocated to Martinez Refining was approximately $82.8 million of total general and administrative expenses. Conversely, a significant portion of our general and administrative expenses are relatively fixed and not directly dependent on the number of assets we own. As such, we expect to incur less than $20 million annually in incremental general and administrative costs related to the Martinez Acquisition. No adjustments related to these allocated and shared service costs have been included in the pro forma consolidated statement of operations. |
| --- | --- |