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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-35764
Commission File Number: 333-206728-02

PBF ENERGY INC.
PBF ENERGY COMPANY LLC
(Exact name of registrant as specified in its charter)

Delaware
45-3763855
Delaware
61-1622166
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Sylvan Way, Second Floor
ParsippanyNew Jersey07054
(Address of principal executive offices)(Zip Code)
(973) 455-7500
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act.
Title of each classTrading SymbolName of each exchange on which registered
Common Stockpar value $.001PBFNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

PBF Energy Inc.                 Yes [x] No [ ]
PBF Energy Company LLC         Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

PBF Energy Inc.             Yes [x] No [ ]
PBF Energy Company LLC    Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
PBF Energy Inc. Large accelerated filer
Accelerated filer o
 Non-accelerated filer Smaller reporting companyEmerging growth company
PBF Energy Company LLCLarge accelerated filer
 
Accelerated filer o
 Non-accelerated filer Smaller reporting companyEmerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PBF Energy Inc.             Yes No
PBF Energy Company LLC    Yes No

As of October 26, 2020, PBF Energy Inc. had outstanding 120,127,908 shares of Class A common stock and 16 shares of Class B common stock. PBF Energy Inc. is the sole managing member of, and owner of an equity interest representing approximately 99.2% of the outstanding economic interest in PBF Energy Company LLC as of September 30, 2020. There is no trading in the membership interest of PBF Energy Company LLC and therefore an aggregate market value based on such is not determinable. PBF Energy Company LLC has no common stock outstanding.




PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
ITEM 1.
PBF Energy Inc.
PBF Energy Company LLC
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 6.


2


EXPLANATORY NOTE

This combined Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (this “Form 10-Q”) is filed by PBF Energy Inc. (“PBF Energy”) and PBF Energy Company LLC (“PBF LLC”). Each Registrant hereto is filing on its own behalf all of the information contained in this report that relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes no representation as to any such information. PBF Energy is a holding company whose primary asset is an equity interest in PBF LLC. PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 99.2% of the outstanding economic interests in PBF LLC as of September 30, 2020. PBF Energy operates and controls all of the business and affairs and consolidates the financial results of PBF LLC and its subsidiaries. PBF LLC is a holding company for the companies that directly and indirectly own and operate our business. PBF Holding Company LLC (“PBF Holding”) is a wholly-owned subsidiary of PBF LLC and PBF Finance Corporation (“PBF Finance”) is a wholly-owned subsidiary of PBF Holding. As of September 30, 2020, PBF LLC also holds a 48.0% limited partner interest and a non-economic general partner interest in PBF Logistics LP (“PBFX”), a publicly traded master limited partnership (“MLP”). PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX’s unitholders other than PBF LLC. Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires. Discussions or areas of this report that either apply only to PBF Energy or PBF LLC are clearly noted in such sections. Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to both PBF Energy and PBF LLC and its consolidated subsidiaries.
3


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements”, as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”), of expected future developments that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our strategies, objectives, intentions, resources and expectations regarding future industry trends are forward-looking statements made under the safe harbor provisions of the PSLRA except to the extent such statements relate to the operations of a partnership or limited liability company. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations, which we refer to as “cautionary statements,” are disclosed under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q, the Annual Report on Form 10-K for the year ended December 31, 2019 of PBF Energy and PBF LLC, which we refer to as our 2019 Annual Report on Form 10-K, and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). All forward-looking information in this Quarterly Report on Form 10-Q and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
the effect of the novel coronavirus (“COVID-19”) pandemic and related governmental and consumer responses on our business, financial condition and results of operations;
supply, demand, prices and other market conditions for our products, including volatility in commodity prices;
the effects of competition in our markets;
changes in currency exchange rates, interest rates and capital costs;
adverse developments in our relationship with both our key employees and unionized employees;
our ability to operate our businesses efficiently, manage capital expenditures and costs (including general and administrative expenses) and generate earnings and cash flow;
our indebtedness;
our expectations with respect to our capital improvement and turnaround projects;
our supply and inventory intermediation arrangements expose us to counterparty credit and performance risk;
termination of our Inventory Intermediation Agreements (as defined in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”), which could have a material adverse effect on our liquidity, as we would be required to finance our crude oil, intermediate and refined products inventory covered by the agreements. Additionally, we are obligated to repurchase from J. Aron certain crude, intermediates and finished products (the “J. Aron Products”) located at the Company’s storage tanks at the Delaware City and Paulsboro refineries (the “East Coast Refineries”) and at PBFX’s assets acquired from
4


Crown Point International, LLC in October 2018 (together with the Company’s storage tanks at the East Coast Refineries, the “J. Aron Storage Tanks”) upon termination of these agreements;
restrictive covenants in our indebtedness that may adversely affect our operational flexibility;
payments by PBF Energy to the current and former holders of PBF LLC Series A Units and PBF LLC Series B Units under PBF Energy’s tax receivable agreement entered with the PBF LLC Series A and PBF LLC Series B unitholders (the “Tax Receivable Agreement”) for certain tax benefits we may claim;
our assumptions regarding payments arising under PBF Energy’s Tax Receivable Agreement and other arrangements relating to our organizational structure are subject to change due to various factors, including, among other factors, the timing of exchanges of PBF LLC Series A Units for shares of PBF Energy Class A common stock as contemplated by the Tax Receivable Agreement, the price of PBF Energy Class A common stock at the time of such exchanges, the extent to which such exchanges are taxable, and the amount and timing of our income;
our expectations and timing with respect to our acquisition activity and whether such acquisitions are accretive or dilutive to shareholders;
the impact of disruptions to crude or feedstock supply to any of our refineries, including disruptions due to problems at PBFX or with third-party logistics infrastructure or operations, including pipeline, marine and rail transportation;
the possibility that we might not make further dividend payments;
the inability of our subsidiaries to freely pay dividends or make distributions to us;
the impact of current and future laws, rulings and governmental regulations, including the implementation of rules and regulations regarding transportation of crude oil by rail;
the threat of cyber-attacks;
our increased dependence on technology;
the effectiveness of our crude oil sourcing strategies, including our crude by rail strategy and related commitments;
adverse impacts related to legislation by the federal government lifting the restrictions on exporting U.S. crude oil;
adverse impacts from changes in our regulatory environment, such as the effects of compliance with the California Global Warming Solutions Act (also referred to as “AB32”), or from actions taken by environmental interest groups;
market risks related to the volatility in the price of Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuel Standards and greenhouse gas (“GHG”) emission credits required to comply with various GHG emission programs, such as AB32;
our ability to complete the successful integration of the Martinez refinery and any other acquisitions into our business and to realize the benefits from such acquisitions;
unforeseen liabilities associated with the Martinez Acquisition (as defined in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations) and any other acquisitions;
risk associated with the operation of PBFX as a separate, publicly-traded entity;
potential tax consequences related to our investment in PBFX; and
any decisions we continue to make with respect to our energy-related logistics assets that may be transferred to PBFX.
5


We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur. Accordingly, investors should not place undue reliance on those statements.
Our forward-looking statements speak only as of the date of this Form 10-Q. Except as required by applicable law, including the securities laws of the United States, we do not intend to update or revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing.

6


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
PBF ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except share and per share data)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents (PBFX: $27.9 and $35.0, respectively)
$1,282.6 $814.9 
Accounts receivable464.6 835.0 
Inventories1,485.6 2,122.2 
Prepaid and other current assets79.8 51.6 
Total current assets3,312.6 3,823.7 
Property, plant and equipment, net (PBFX: $829.8 and $854.6, respectively)
4,957.7 4,023.2 
Lease right of use assets941.9 330.6 
Deferred charges and other assets, net979.1 954.9 
Total assets$10,191.3 $9,132.4 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$212.7 $601.4 
Accrued expenses1,634.1 1,815.6 
Deferred revenue23.6 20.1 
Current operating lease liabilities85.5 72.1 
Total current liabilities1,955.9 2,509.2 
Long-term debt (PBFX: $733.4 and $802.1, respectively)
4,411.1 2,064.9 
Payable to related parties pursuant to Tax Receivable Agreement132.9 373.5 
Deferred tax liabilities 94.0 96.9 
Long-term operating lease liabilities770.2 233.1 
Long-term financing lease liabilities72.0 18.4 
Other long-term liabilities264.4 250.9 
Total liabilities7,700.5 5,546.9 
Commitments and contingencies (Note 9)
Equity:
PBF Energy Inc. equity
Class A common stock, $0.001 par value, 1,000,000,000 shares authorized, 120,151,595 shares outstanding at September 30, 2020, 119,804,971 shares outstanding at December 31, 2019
0.1 0.1 
Class B common stock, $0.001 par value, 1,000,000 shares authorized, 16 shares outstanding at September 30, 2020, 20 shares outstanding at December 31, 2019
  
Preferred stock, $0.001 par value, 100,000,000 shares authorized, no shares outstanding at September 30, 2020 and December 31, 2019
  
Treasury stock, at cost, 6,499,687 shares outstanding at September 30, 2020 and 6,424,787 shares outstanding at December 31, 2019
(167.0)(165.7)
Additional paid in capital2,841.5 2,812.3 
Retained earnings (Accumulated deficit)(728.7)401.2 
Accumulated other comprehensive loss(10.5)(8.3)
Total PBF Energy Inc. equity1,935.4 3,039.6 
Noncontrolling interest555.4 545.9 
Total equity2,490.8 3,585.5 
Total liabilities and equity$10,191.3 $9,132.4 

See notes to condensed consolidated financial statements.
7


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except share and per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$3,667.5 $6,430.5 $11,460.8 $18,206.7 
Cost and expenses:
Cost of products and other3,378.6 5,700.2 11,095.0 15,865.2 
Operating expenses (excluding depreciation and amortization expense as reflected below)471.9 436.5 1,445.7 1,348.7 
Depreciation and amortization expense130.3 107.7 369.3 314.9 
Cost of sales3,980.8 6,244.4 12,910.0 17,528.8 
General and administrative expenses (excluding depreciation and amortization expense as reflected below)46.6 64.7 187.0 175.9 
Depreciation and amortization expense2.7 2.1 8.4 7.8 
Change in fair value of contingent consideration(28.6) (93.5) 
Impairment expense7.0  7.0  
Loss (gain) on sale of assets 1.7 (32.6)(469.4)(31.8)
Total cost and expenses4,010.2 6,278.6 12,549.5 17,680.7 
Income (loss) from operations(342.7)151.9 (1,088.7)526.0 
Other income (expense):
Interest expense, net (70.4)(39.7)(185.1)(121.3)
Change in Tax Receivable Agreement liability252.2  240.6  
Change in fair value of catalyst obligations(2.4)(3.8)4.2 (6.4)
Debt extinguishment costs  (22.2) 
Other non-service components of net periodic benefit (cost)1.1 (0.1)3.2 (0.2)
Income (loss) before income taxes (162.2)108.3 (1,048.0)398.1 
Income tax expense (benefit)235.6 22.0 (0.7)92.0 
Net income (loss)(397.8)86.3 (1,047.3)306.1 
Less: net income attributable to noncontrolling interests19.4 16.8 46.7 39.7 
Net income (loss) attributable to PBF Energy Inc. stockholders$(417.2)$69.5 $(1,094.0)$266.4 
Weighted-average shares of Class A common stock outstanding
Basic119,684,030 119,921,346 119,561,388 119,897,504 
Diluted119,684,030 121,589,179 120,628,237 121,871,864 
Net income (loss) available to Class A common stock per share:
Basic$(3.49)$0.58 $(9.15)$2.22 
Diluted $(3.49)$0.57 $(9.15)$2.20 

See notes to condensed consolidated financial statements.
8


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

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income (loss)$(397.8)$86.3 $(1,047.3)$306.1 
Other comprehensive income (loss):
Unrealized gain on available for sale securities0.1 0.2 0.8 0.5 
Net gain (loss) on pension and other post-retirement benefits0.2 0.2 (3.0)0.6 
Total other comprehensive income (loss)0.3 0.4 (2.2)1.1 
Comprehensive income (loss)(397.5)86.7 (1,049.5)307.2 
Less: comprehensive income attributable to noncontrolling interests19.4 16.8 46.7 39.7 
Comprehensive income (loss) attributable to PBF Energy Inc. stockholders$(416.9)$69.9 $(1,096.2)$267.5 

See notes to condensed consolidated financial statements.
9


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in millions, except share and per share data)
 Class A
Common Stock
Class B
Common Stock
Additional
Paid-in
Capital
Retained
Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockNoncontrolling
Interest
Total
Equity
 SharesAmountSharesAmountSharesAmount
Balance, June 30, 2020120,032,858 $0.1 17 $ $2,832.7 $(311.5)$(10.8)6,455,930 $(165.7)$544.9 $2,889.7 
Comprehensive income (loss)— — — — — (417.2)0.3 — — 19.4 (397.5)
Distributions to PBF Logistics LP public unitholders— — — — — — — — — (9.9)(9.9)
Stock-based compensation157,516 — — — 7.9 — — — — 1.0 8.9 
Exchange of PBF Energy Company LLC Series A Units for PBF Energy Class A common stock4,978 — (1)— — — — — — —  
Treasury stock purchases(43,757)— — — 1.3 — — 43,757 (1.3)—  
Other— — — — (0.4)— — — — — (0.4)
Balance, September 30, 2020120,151,595 $0.1 16 $ $2,841.5 $(728.7)$(10.5)6,499,687 $(167.0)$555.4 $2,490.8 
Balance, June 30, 2019119,894,441 $0.1 20 $ $2,800.4 $350.8 $(21.7)6,315,761 $(162.2)$545.7 $3,513.1 
Comprehensive income— — — — — 69.5 0.4 — — 16.8 86.7 
Distributions to PBF Energy Company LLC members— — — — — — — — — (0.4)(0.4)
Distributions to PBF Logistics LP public unitholders— — — — — — — — — (17.0)(17.0)
Stock-based compensation10,250 — — — 6.4 — — — — 1.2 7.6 
Dividends ($0.30 per common share)
— — — — — (36.0)— — — — (36.0)
Treasury stock purchases(1,867)— — — — — — 1,867 — —  
Other— — — — — — — — — 0.3 0.3 
Balance, September 30, 2019119,902,824 $0.1 20 $ $2,806.8 $384.3 $(21.3)6,317,628 $(162.2)$546.6 $3,554.3 


See notes to condensed consolidated financial statements.
10



PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in millions, except share and per share data)
Class A
Common Stock
Class B
Common Stock
Additional
Paid-in
Capital
Retained
Earnings (Accumulated Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockNoncontrolling
Interest
Total
Equity
SharesAmountSharesAmountSharesAmount
Balance, December 31, 2019119,804,971 $0.1 20 $ $2,812.3 $401.2 $(8.3)6,424,787 $(165.7)$545.9 $3,585.5 
Comprehensive income (loss)— — — — — (1,094.0)(2.2)— — 46.7 (1,049.5)
Exercise of warrants and options7,500 — — — 0.2 — — — — — 0.2 
Taxes paid for net settlement of equity-based compensation — — — — (0.9)— — — — — (0.9)
Distributions to PBF Energy Company LLC members — — — — — — — — — (0.4)(0.4)
Distributions to PBF Logistics LP public unitholders— — — — — — — — — (36.9)(36.9)
Stock-based compensation159,377 — — — 21.4 — — — — 3.2 24.6 
Dividends ($0.30 per common share)
— — — — — (35.9)— — — — (35.9)
Exchange of PBF Energy Company LLC Series A Units for PBF Energy Class A common stock254,647 — (4)— 2.3 — — — — (2.3) 
Treasury stock purchases(74,900)— — — 1.3 — — 74,900 (1.3)—  
Other— — — — 4.9 — — — — (0.8)4.1 
Balance, September 30, 2020120,151,595 $0.1 16 $ $2,841.5 $(728.7)$(10.5)6,499,687 $(167.0)$555.4 $2,490.8 
Balance, December 31, 2018119,874,191 $0.1 20 $ $2,633.8 $225.8 $(22.4)6,274,261 $(160.8)$572.0 $3,248.5 
Comprehensive income— — — — — 266.4 1.1 — — 39.7 307.2 
Exercise of warrants and options7,525 — — — 0.2 — — — — — 0.2 
Taxes paid for net settlement of equity-based compensation — — — — (1.0)— — — — — (1.0)
Distributions to PBF Energy Company LLC members — — — — — — — — — (2.7)(2.7)
Distributions to PBF Logistics LP public unitholders— — — — — — — — — (47.0)(47.0)
Stock-based compensation54,475 — — — 20.3 — — — — 5.6 25.9 
Dividends ($0.90 per common share)
— — — — — (107.9)— — — — (107.9)
Issuance of additional PBFX common units— — — — 152.0 — — — — (19.5)132.5 
Exchange of PBF Energy Company LLC Series A Units for PBF Energy Class A common stock10,000 — — — 0.1 — — — — — 0.1 
Treasury stock purchases(43,367)— — — 1.4 — — 43,367 (1.4)—  
Other— — — — — — — — — (1.5)(1.5)
Balance, September 30, 2019119,902,824 $0.1 20 $ $2,806.8 $384.3 $(21.3)6,317,628 $(162.2)$546.6 $3,554.3 

See notes to condensed consolidated financial statements.
11


PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income (loss) $(1,047.3)$306.1 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization391.9 331.3 
Impairment expense7.0  
Stock-based compensation29.1 28.4 
Change in fair value of catalyst obligations(4.2)6.4 
Deferred income taxes(1.1)89.6 
Change in Tax Receivable Agreement liability(240.6) 
Non-cash change in inventory repurchase obligations(19.1)11.4 
Non-cash lower of cost or market inventory adjustment691.5 (277.0)
Change in fair value of contingent consideration (93.5) 
Debt extinguishment costs22.2  
Pension and other post-retirement benefit costs41.5 33.6 
Gain on sale of assets(469.4)(31.8)
Changes in operating assets and liabilities:
Accounts receivable370.4 (161.6)
Inventories169.3 12.4 
Prepaid and other current assets(22.8)(2.0)
Accounts payable(398.5)56.8 
Accrued expenses(162.1)85.0 
Deferred revenue3.4 (7.0)
Other assets and liabilities(60.3)(49.4)
Net cash (used in) provided by operating activities $(792.6)$432.2 
Cash flows from investing activities:
Expenditures for property, plant and equipment(158.0)(309.0)
Expenditures for deferred turnaround costs(175.8)(282.6)
Expenditures for other assets(9.7)(38.2)
Acquisition of Martinez refinery (1,176.2) 
Proceeds from sale of assets529.4 36.3 
Net cash used in investing activities$(990.3)$(593.5)

See notes to condensed consolidated financial statements.
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PBF ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited, in millions)
Nine Months Ended September 30,
20202019
Cash flows from financing activities:
Net proceeds from issuance of PBFX common units$ $132.5 
Distributions to PBF Energy Company LLC members other than PBF Energy(0.4)(2.7)
Distributions to PBFX public unitholders(36.2)(45.8)
Dividend payments(35.9)(107.6)
Proceeds from 2025 9.25% Senior Secured Notes1,000.0  
Proceeds from 2028 6.00% Senior Notes1,000.0  
Redemption of 2023 7.00% Senior Notes(517.5) 
Proceeds from revolver borrowings1,450.0 1,350.0 
Repayments of revolver borrowings(550.0)(1,350.0)
Proceeds from PBFX revolver borrowings100.0 228.0 
Repayments of PBFX revolver borrowings(170.0)(101.0)
Repayments of PBF Rail Term Loan(5.4)(5.2)
Settlement of catalyst obligations(8.8)(3.5)
Proceeds from catalyst financing arrangements 51.9  
Payments on financing leases(8.9) 
Proceeds from insurance premium financing12.7 7.5 
Deferred financing costs and other(30.9)(1.9)
Net cash provided by financing activities$2,250.6 $100.3 
Net increase (decrease) in cash and cash equivalents 467.7 (61.0)
Cash and cash equivalents, beginning of period814.9 597.3 
Cash and cash equivalents, end of period $1,282.6 $536.3 
Supplemental cash flow disclosures
Non-cash activities:
Accrued and unpaid capital expenditures$23.5 $34.9 
Assets acquired under operating and financing leases690.7 422.1 
Fair value of the Martinez Contingent Consideration at acquisition77.3  
Cash paid during the period for:
Interest (net of capitalized interest of $10.0 and $13.8 in 2020 and 2019, respectively)
$113.8 $81.9 
Income taxes1.5 1.9 

See notes to condensed consolidated financial statements.
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PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except unit and per unit data)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents (PBFX: $27.9 and $35.0, respectively)
$1,280.9 $813.7 
Accounts receivable464.6 834.0 
Inventories1,485.6 2,122.2 
Prepaid and other current assets79.8 51.6 
Total current assets3,310.9 3,821.5 
Property, plant and equipment, net (PBFX: $829.8 and $854.6, respectively)
4,957.7 4,023.2 
Lease right of use assets941.9 330.6 
Deferred charges and other assets, net979.2 953.8 
Total assets$10,189.7 $9,129.1 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$212.7 $601.4 
Accrued expenses1,673.4 1,846.2 
Deferred revenue23.6 20.1 
Current operating lease liabilities85.5 72.1 
Total current liabilities1,995.2 2,539.8 
Long-term debt (PBFX: $733.4 and $802.1, respectively)
4,411.1 2,064.9 
Affiliate note payable 375.9 376.4 
Deferred tax liabilities 40.0 31.4 
Long-term operating lease liabilities770.2 233.1 
Long-term financing lease liabilities72.0 18.4 
Other long-term liabilities264.4 250.9 
Total liabilities7,928.8 5,514.9 
Commitments and contingencies (Note 9)
Series B Units, 1,000,000 issued and outstanding, no par or stated value
5.1 5.1 
PBF Energy Company LLC equity:
Series A Units, 970,647 and 1,215,317 issued and outstanding at September 30, 2020 and December 31, 2019, no par or stated value
17.6 20.0 
Series C Units, 120,172,826 and 119,826,202 issued and outstanding at September 30, 2020 and December 31, 2019, no par or stated value
2,213.6 2,189.4 
Treasury stock, at cost(167.0)(165.7)
Retained earnings(258.6)1,142.4 
Accumulated other comprehensive loss(8.3)(9.7)
Total PBF Energy Company LLC equity1,797.3 3,176.4 
Noncontrolling interest458.5 432.7 
Total equity2,255.8 3,609.1 
Total liabilities, Series B units and equity$10,189.7 $9,129.1 

See notes to condensed consolidated financial statements.
14


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$3,667.5 $6,430.5 $11,460.8 $18,206.7 
Cost and expenses:
Cost of products and other3,378.6 5,700.2 11,095.0 15,865.2 
Operating expenses (excluding depreciation and amortization expense as reflected below)471.9 436.5 1,445.7 1,348.7 
Depreciation and amortization expense130.3 107.7 369.3 314.9 
Cost of sales3,980.8 6,244.4 12,910.0 17,528.8 
General and administrative expenses (excluding depreciation and amortization expense as reflected below)46.4 64.3 186.5 174.8 
Depreciation and amortization expense2.7 2.1 8.4 7.8 
Change in fair value of contingent consideration(28.6) (93.5) 
Impairment expense 7.0  7.0  
Loss (gain) on sale of assets 1.7 (32.6)(469.4)(31.8)
Total cost and expenses4,010.0 6,278.2 12,549.0 17,679.6 
Income (loss) from operations(342.5)152.3 (1,088.2)527.1 
Other income (expense):
Interest expense, net (73.0)(42.3)(192.8)(128.3)
Change in fair value of catalyst obligations(2.4)(3.8)4.2 (6.4)
Debt extinguishment costs   (22.2) 
Other non-service components of net periodic benefit (cost)1.1 (0.1)3.2 (0.2)
Income (loss) before income taxes (416.8)106.1 (1,295.8)392.2 
Income tax (benefit) expense(1.2)(2.0)8.6 (7.4)
Net income (loss) (415.6)108.1 (1,304.4)399.6 
Less: net income attributable to noncontrolling interests22.8 16.0 60.3 36.1 
Net income (loss) attributable to PBF Energy Company LLC$(438.4)$92.1 $(1,364.7)$363.5 

See notes to condensed consolidated financial statements.
15


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

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income (loss)$(415.6)$108.1 $(1,304.4)$399.6 
Other comprehensive income:
Unrealized gain on available for sale securities0.1 0.2 0.8 0.5 
Net gain on pension and other post-retirement benefits0.2 0.2 0.6 0.6 
Total other comprehensive income0.3 0.4 1.4 1.1 
Comprehensive income (loss) (415.3)108.5 (1,303.0)400.7 
Less: comprehensive income attributable to noncontrolling interests22.8 16.0 60.3 36.1 
Comprehensive income (loss) attributable to PBF Energy Company LLC$(438.1)$92.5 $(1,363.3)$364.6 

See notes to condensed consolidated financial statements.
16


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in millions, except unit data)
 
Series ASeries CAccumulated
Other
Comprehensive Income (Loss)
Retained
Earnings (Accumulated Deficit)
Noncontrolling
Interest
Treasury StockTotal Member’s
Equity
UnitsAmountUnitsAmount
Balance, June 30, 2020975,625 $17.6 120,054,089 $2,204.4 $(8.6)$179.8 $444.6 $(165.7)$2,672.1 
Comprehensive income (loss)— — — — 0.3 (438.4)22.8 — (415.3)
Exercise of Series A warrants and options, net— — — — — — — —  
Exchange of Series A units for PBF Energy Class A common stock(4,978)— 4,978 — — — — —  
Distribution to members— — — — — — (9.9)— (9.9)
Stock-based compensation— — 157,516 7.9 — — 1.0 — 8.9 
Treasury stock purchases— — (43,757)1.3 — — — (1.3) 
Other — — — — — — — —  
Balance, September 30, 2020970,647 $17.6 120,172,826 $2,213.6 $(8.3)$(258.6)$458.5 $(167.0)$2,255.8 
Balance, June 30, 20191,206,325 $20.2 119,915,672 $2,176.4 $(23.2)$1,058.2 $433.0 $(162.2)$3,502.4 
Comprehensive income— — — — 0.4 92.1 16.0 — 108.5 
Exercise of Series A warrants and options, net— — — (0.1)— — — — (0.1)
Distribution to members— — — — — (36.3)(17.0)— (53.3)
Stock-based compensation— — 10,250 6.4 — — 1.2 — 7.6 
Treasury stock purchases— — (1,867)— — — — —  
Other— — — — — — 0.3 — 0.3 
Balance, September 30, 20191,206,325 $20.2 119,924,055 $2,182.7 $(22.8)$1,114.0 $433.5 $(162.2)$3,565.4 

See notes to condensed consolidated financial statements.
17


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited, in millions, except unit data)
Series ASeries CAccumulated
Other
Comprehensive Income (Loss)
Retained
Earnings (Accumulated Deficit)
Noncontrolling
Interest
Treasury StockTotal Member’s
Equity
UnitsAmountUnitsAmount
Balance, December 31, 20191,215,317 $20.0 119,826,202 $2,189.4 $(9.7)$1,142.4 $432.7 $(165.7)$3,609.1 
Comprehensive income (loss)— — — — 1.4 (1,364.7)60.3 — (1,303.0)
Exercise of Series A warrants and options, net9,977 (0.1)7,500 (0.8)— — — — (0.9)
Exchange of Series A units for PBF Energy Class A common stock(254,647)(2.3)254,647 2.3 — — — —  
Distribution to members— — — — — (36.3)(36.9)— (73.2)
Stock-based compensation— — 159,377 21.4 — — 3.2 — 24.6 
Treasury stock purchases— — (74,900)1.3 — — — (1.3) 
Other — — — — — — (0.8)— (0.8)
Balance, September 30 , 2020970,647 $17.6 120,172,826 $2,213.6 $(8.3)$(258.6)$458.5 $(167.0)$2,255.8 
Balance, December 31, 20181,206,325 $20.2 119,895,422 $2,009.8 $(23.9)$914.3 $459.8 $(160.8)$3,219.4 
Comprehensive income— — — — 1.1 363.5 36.1 — 400.7 
Exercise of Series A warrants and options, net10,000 0.1 7,525 (0.9)— — — — (0.8)
Exchange of Series A units for PBF Energy Class A common stock(10,000)(0.1)10,000 0.1 — — — —  
Distribution to members— — — — — (163.8)(47.0)— (210.8)
Issuance of additional PBFX common units— — — 152.0 — — (19.5)— 132.5 
Stock-based compensation— — 54,475 20.3 — — 5.6 — 25.9 
Treasury stock purchases— — (43,367)1.4 — — — (1.4) 
Other — — — — — — (1.5)— (1.5)
Balance, September 30, 20191,206,325 $20.2 119,924,055 $2,182.7 $(22.8)$1,114.0 $433.5 $(162.2)$3,565.4 

See notes to condensed consolidated financial statements.
18


PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income (loss) $(1,304.4)$399.6 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization391.9 331.3 
Impairment expense7.0  
Stock-based compensation29.1 28.4 
Change in fair value of catalyst obligations(4.2)6.4 
Deferred income taxes8.6 (7.5)
Non-cash change in inventory repurchase obligations(19.1)11.4 
Non-cash lower of cost or market inventory adjustment691.5 (277.0)
Change in fair value of contingent consideration(93.5) 
Debt extinguishment costs 22.2  
Pension and other post-retirement benefit costs41.5 33.6 
Gain on sale of assets(469.4)(31.8)
Changes in operating assets and liabilities:
Accounts receivable369.4 (160.5)
Inventories169.3 12.4 
Prepaid and other current assets(22.8)(2.6)
Accounts payable(398.5)56.8 
Accrued expenses(153.4)91.3 
Deferred revenue3.4 (7.0)
Other assets and liabilities(61.0)(50.5)
Net cash (used in) provided by in operating activities$(792.4)$434.3 
Cash flows from investing activities:
Expenditures for property, plant and equipment(158.0)(309.0)
Expenditures for deferred turnaround costs(175.8)(282.6)
Expenditures for other assets(9.7)(38.2)
Acquisition of Martinez refinery(1,176.2) 
Proceeds from sale of assets529.4 36.3 
Net cash used in investing activities$(990.3)$(593.5)









See notes to condensed consolidated financial statements.
19





PBF ENERGY COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited, in millions)
Nine Months Ended September 30,
20202019
Cash flows from financing activities:
Net proceeds from issuance of PBFX common units$ $132.5 
Distributions to PBF Energy Company LLC members(36.3)(110.3)
Distributions to PBFX public unitholders(36.2)(45.8)
Proceeds from 2025 9.25% Senior Secured Notes1,000.0  
Proceeds from 2028 6.00% Senior Notes1,000.0  
Redemption of 2023 7.00% Senior Notes(517.5) 
Proceeds from revolver borrowings1,450.0 1,350.0 
Repayments of revolver borrowings(550.0)(1,350.0)
Proceeds from PBFX revolver borrowings100.0 228.0 
Repayments of PBFX revolver borrowings(170.0)(101.0)
Repayments of PBF Rail Term Loan(5.4)(5.2)
Settlement of catalyst obligations(8.8)(3.5)
Proceeds from catalyst financing arrangements51.9  
Payments on financing leases(8.9) 
Proceeds from insurance premium financing 12.7 7.5 
Affiliate note payable with PBF Energy Inc.(0.5)(0.8)
Deferred financing costs and other(31.1)(1.9)
Net cash provided by financing activities2,249.9 99.5 
Net increase (decrease) in cash and cash equivalents 467.2 (59.7)
Cash and cash equivalents, beginning of period813.7 596.0 
Cash and cash equivalents, end of period $1,280.9 $536.3 
Supplemental cash flow disclosures
Non-cash activities:
Accrued and unpaid capital expenditures$23.5 $34.9 
Assets acquired under operating and financing leases690.7 422.1 
Affiliate note payable related to PBF LLC member distributions 53.2 
Fair value of the Martinez Contingent Consideration at acquisition77.3  
Cash paid during the period for:
Interest (net of capitalized interest of $10.0 and $13.8 in 2020 and 2019, respectively)
$113.8 $81.9 
Income taxes0.6 1.0 

See notes to condensed consolidated financial statements.
20

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Description of the Business
PBF Energy Inc. (“PBF Energy”) was formed as a Delaware corporation on November 7, 2011 and is the sole managing member of PBF Energy Company LLC (“PBF LLC”), a Delaware limited liability company, with a controlling interest in PBF LLC and its subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries and records a noncontrolling interest in its Condensed Consolidated Financial Statements representing the economic interests of PBF LLC’s members other than PBF Energy (refer to “Note 11 - Equity”).
PBF Energy holds a 99.2% economic interest in PBF LLC as of September 30, 2020 through its ownership of PBF LLC Series C Units, which are held solely by PBF Energy. Holders of PBF LLC Series A Units, which are held by parties other than PBF Energy (“the members of PBF LLC other than PBF Energy”), hold the remaining 0.8% economic interest in PBF LLC. The PBF LLC Series C Units rank on parity with the PBF LLC Series A Units as to distribution rights, voting rights and rights upon liquidation, winding up or dissolution. In addition, the amended and restated limited liability company agreement of PBF LLC provides that any PBF LLC Series A Units acquired by PBF Energy will automatically be reclassified as PBF LLC Series C Units in connection with such acquisition. As of September 30, 2020, PBF Energy held 120,172,826 PBF LLC Series C Units and the members of PBF LLC other than PBF Energy held 970,647 PBF LLC Series A Units.
PBF LLC, together with its consolidated subsidiaries, owns and operates oil refineries and related facilities in North America. PBF Holding Company LLC (“PBF Holding”) is a wholly-owned subsidiary of PBF LLC. PBF Investments LLC, Toledo Refining Company LLC, Paulsboro Refining Company LLC, Delaware City Refining Company LLC, Chalmette Refining, L.L.C. (“Chalmette Refining”), PBF Energy Western Region LLC, Torrance Refining Company LLC, Torrance Logistics Company LLC and Martinez Refining Company LLC are PBF LLC’s principal operating subsidiaries and are all wholly-owned subsidiaries of PBF Holding. Discussions or areas of the Notes to Condensed Consolidated Financial Statements that either apply only to PBF Energy or PBF LLC are clearly noted in such footnotes.
As of September 30, 2020, PBF LLC also held a 48.0% limited partner interest in PBF Logistics LP (“PBFX”), a publicly-traded master limited partnership (“MLP”) (refer to “Note 2 - PBF Logistics LP”). PBF Logistics GP LLC (“PBF GP”) owns the noneconomic general partner interest and serves as the general partner of PBFX and is wholly-owned by PBF LLC. PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX and its subsidiaries and records a noncontrolling interest in its consolidated financial statements representing the economic interests of PBFX’s unitholders other than PBF LLC (refer to “Note 11 - Equity”). Collectively, PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding, PBF GP and PBFX are referred to hereinafter as the “Company” unless the context otherwise requires.
Substantially all of the Company’s operations are in the United States. The Company operates in two reportable business segments: Refining and Logistics. The Company’s oil refineries are all engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX is a publicly traded MLP that was formed to operate logistics assets such as crude oil and refined petroleum products terminals, pipelines and storage facilities. The Logistics segment consists solely of PBFX’s operations. To generate earnings and cash flows from operations, the Company is primarily dependent upon processing crude oil and selling refined petroleum products at margins sufficient to cover fixed and variable costs and other expenses. Crude oil and refined petroleum products are commodities; and factors that are largely out of the Company’s control can cause prices to vary over time. The resulting potential margin volatility can have a material effect on the Company’s financial position, earnings and cash flows.
21

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation
The unaudited condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the financial position and the results of operations and cash flows of the Company for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. These unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim Condensed Consolidated Financial Statements should be read in conjunction with the PBF Energy and PBF LLC financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.
Reclassification
As of September 30, 2020, Financing lease right of use assets, previously included in Deferred charges and other assets, net, in the Condensed Consolidated Balance Sheets, are reflected within Lease right of use assets, which is inclusive of both operating and financing lease right of use assets. Financing lease liabilities, previously included in Other long-term liabilities, in the Condensed Consolidated Balance Sheets, are presented as separate line items in the Condensed Consolidated Financial Statements. The amounts related to such balance sheet accounts have also been reclassified in their respective footnotes for prior periods to conform to the 2020 presentation.
Interim Impairment Assessment
The global crisis resulting from the spread of the novel coronavirus (“COVID-19”) pandemic continues to have a substantial impact on the economy and overall consumer demand for energy and hydrocarbon products. As a result of the sustained decrease in PBF Energy’s stock price as of the end of the third quarter, enduring throughput reductions across the Company’s refineries and continued decrease in demand for the Company’s products during the quarter, the Company determined an impairment triggering event had occurred. As such, the Company performed an interim impairment assessment on certain long-lived assets as of September 30, 2020. As a result of the interim impairment test, the Company concluded that the carrying values of its long-lived assets were not impaired when comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets over their remaining estimated useful life.

As discussed further in “Note 2 - PBF Logistics LP” and “Note 9 - Commitments and Contingencies”, PBFX recognized an impairment charge of $7.0 million during the quarter as a result of a third party contract termination which led to the write-down of certain processing unit assets and a customer contract intangible asset that were directly tied to the contract.

If adverse market conditions persist or there is further deterioration in the general economic environment due to the COVID-19 pandemic, there could be additional indicators that the Company’s assets are impaired requiring evaluation that may result in future impairment charges to earnings.






22

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This guidance amends the guidance on measuring credit losses on financial assets held at amortized cost. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this ASU effective January 1, 2020. The adoption of this ASU does not currently impact the Company’s Condensed Consolidated Financial Statements. Refer to “Note 4 - Current Expected Credit Losses” for further disclosure related to our adoption of this pronouncement.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the effects of reference rate reform on financial reporting”. The amendments in this ASU provide optional guidance to alleviate the burden in accounting for reference rate reform, by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationship and other transactions affected by the expected market transition from London Interbank Offered Rate (“LIBOR”) and other interbank rates. The amendments in this ASU are effective for all entities at any time beginning on March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of the ASU. The Company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740)”: Simplifying the Accounting for Income Taxes, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, for public business entities. Early adoption is permitted for all entities. The Company does not expect that the adoption of this guidance will have a material impact on its Condensed Consolidated Financial Statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)”, to improve the effectiveness of benefit plan disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Additionally, the amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years ending after December 15, 2020, for public business entities and early adoption is permitted for all entities. The adoption of this guidance will modify the Company’s year-end disclosures but it is not expected to have a material effect on its Consolidated Financial Statements and related disclosures.


23

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. PBF LOGISTICS LP
PBFX is a fee-based, growth-oriented, publicly traded Delaware MLP formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX engages in the processing of crude oil and the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries, as well as for third party customers. As of September 30, 2020, a substantial majority of PBFX’s revenues are derived from long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments for receiving, handling, storing and transferring crude oil, refined products and natural gas. PBF Energy also has agreements with PBFX that establish fees for certain general and administrative services and operational and maintenance services provided by PBF Holding to PBFX. These transactions, other than those with third parties, are eliminated by PBF Energy and PBF LLC in consolidation.
PBFX, a variable interest entity, is consolidated by PBF Energy through its ownership of PBF LLC. PBF LLC, through its ownership of PBF GP, has the sole ability to direct the activities of PBFX that most significantly impact its economic performance. PBF LLC is considered to be the primary beneficiary of PBFX for accounting purposes.
As of September 30, 2020, PBF LLC held a 48.0% limited partner interest in PBFX (consisting of 29,953,631 common units) with the remaining 52.0% limited partner interest held by the public unitholders. PBF LLC also indirectly owns a non-economic general partner interest in PBFX through its wholly-owned subsidiary, PBF GP, the general partner of PBFX.
PBFX Business Developments
On October 1, 2018, PBFX acquired from Crown Point International, LLC (“Crown Point”), its wholly-owned subsidiary, CPI Operations LLC (“CPI”). In connection with the acquisition, the purchase and sale agreement included an earnout provision related to an existing commercial agreement with a third party, based on the future results of certain of the acquired idled assets, which recommenced operations in October 2019. Pursuant to the terms of the commercial agreement, in the third quarter of 2020, the counterparty exercised its right to terminate the contract at the conclusion of the current contract year, resulting in an adjustment to the PBFX Contingent Consideration (as defined in “Note 9 - Commitments and Contingencies”). Refer to “Note 9 - Commitments and Contingencies” for further discussion. In addition, as a result of the contract termination, PBFX recorded a $7.0 million impairment charge to write-down the related processing unit assets and customer contract intangible asset. This impairment charge has been recorded in the current period Logistics segment income from operations.
24

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. ACQUISITIONS
Martinez Acquisition
On February 1, 2020, the Company acquired from Equilon Enterprises LLC d/b/a Shell Oil Products US (the "Seller"), the Martinez refinery and related logistics assets (collectively, the "Martinez Acquisition"), pursuant to a sale and purchase agreement dated June 11, 2019 (the “Sale and Purchase Agreement”). The Martinez refinery, located in Martinez, California, is a high-conversion, dual-coking facility that is strategically positioned in Northern California and provides for operating and commercial synergies with the Torrance refinery located in Southern California.
In addition to refining assets, the Martinez Acquisition includes a number of onsite logistics assets, including a deep-water marine facility, product distribution terminals and refinery crude and product storage facilities.
The aggregate purchase price for the Martinez Acquisition was $1,253.4 million, including final working capital of $216.1 million and the Martinez Contingent Consideration, as defined below. The transaction was financed through a combination of cash on hand, including proceeds from the 2028 Senior Notes (as defined in “Note 7 - Debt”), and borrowings under PBF Holding’s asset-based revolving credit agreement (the “Revolving Credit Facility”).
The Company accounted for the Martinez Acquisition as a business combination under GAAP whereby it recognizes assets acquired and liabilities assumed in an acquisition at their estimated fair values as of the date of acquisition. The final purchase price and fair value allocation were completed as of September 30, 2020.
The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:
(in millions)Purchase Price
Gross purchase price$960.0 
Working capital, including post close adjustments 216.1 
Contingent consideration (a)77.3 
Total consideration$1,253.4 

(a) The Martinez Acquisition includes an obligation for the Company to make post-closing earn-out payments to the Seller based on certain earnings thresholds of the Martinez refinery (as set forth in the Sale and Purchase Agreement), for a period of up to four years following the acquisition closing date (the “Martinez Contingent Consideration”). The Company recorded the Martinez Contingent Consideration based on its estimated fair value of $77.3 million at the acquisition date, which was recorded within “Other long-term liabilities” within the Condensed Consolidated Balance Sheets.

25

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the final amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

(in millions)Fair Value Allocation
Inventories$224.1 
Prepaid and other current assets5.4 
Property, plant and equipment987.9 
Operating lease right of use assets (a)7.8 
Financing lease right of use assets (a)63.5 
Deferred charges and other assets, net63.7 
Accrued expenses(1.4)
Current operating lease liabilities(1.9)
Current financing lease liabilities (b)(6.0)
Long-term operating lease liabilities(5.9)
Long-term financing lease liabilities(57.5)
Other long-term liabilities - Environmental obligation(26.3)
Fair value of net assets acquired$1,253.4 
(a) Operating and Financing lease right of use assets are recorded in Lease right of use assets within the Condensed Consolidated Balance Sheet.
(b) Current financing lease liabilities are recorded in Accrued expenses within the Condensed Consolidated Balance Sheet.

The Company’s Condensed Consolidated Financial Statements for the nine months ended September 30, 2020 include the results of operations of the Martinez refinery and related logistics assets subsequent to the Martinez Acquisition. The same period in 2019 does not include the results of operations of such assets. On an unaudited pro-forma basis, the revenues and net income (loss) of the Company, assuming the acquisition had occurred on January 1, 2019, are shown below. The unaudited pro-forma information does not purport to present what the Company’s actual results would have been had the Martinez Acquisition occurred on January 1, 2019, nor is the financial information indicative of the results of future operations. The unaudited pro-forma financial information includes the depreciation and amortization expense related to the Martinez Acquisition and interest expense associated with the related financing.

Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
(Unaudited, in millions)
PBF Energy
Pro-forma revenues$11,824.6 $21,092.3 
Pro-forma net income (loss) attributable to PBF Energy Inc. stockholders(1,125.0)141.4 
PBF LLC
Pro-forma revenues$11,824.6 $21,092.3 
Pro-forma net income (loss) attributable to PBF LLC(1,396.0)199.8 
26

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Acquisition Expenses
The Company incurred acquisition-related costs of $0.2 million and $11.0 million for the three and nine months ended September 30, 2020, respectively, consisting primarily of first quarter consulting and legal expenses related to the Martinez Acquisition. The Company incurred acquisition-related costs of $4.2 million and $7.5 million for the three and nine months ended September 30, 2019, respectively, consisting primarily of consulting and legal expenses related to completed, pending and non-consummated acquisitions. These costs are included in General and administrative expenses within the Condensed Consolidated Statements of Operations.

4. CURRENT EXPECTED CREDIT LOSSES

Credit Losses
The Company has exposure to credit losses primarily through its sales of refined products. The Company evaluates creditworthiness on an individual customer basis. The Company utilizes a financial review model for purposes of evaluating creditworthiness which is based on information from financial statements and credit reports. The financial review model enables the Company to assess the customer’s risk profile and determine credit limits on the basis of their financial strength, including but not limited to, their liquidity, leverage, debt serviceability, longevity and how they pay their bills. The Company may require security in the form of letters of credit or cash payments in advance of product delivery for certain customers that are deemed higher risk.
The Company’s payment terms on its trade receivables are relatively short, generally 30 days or less for a substantial majority of its refined products. As a result, the Company’s collection risk is mitigated to a certain extent by the fact that sales are collected in a relatively short period of time, allowing for the ability to reduce exposure on defaults if collection issues are identified. Notwithstanding, the Company reviews each customer’s credit risk profile at least annually or more frequently if warranted. Following the widespread market disruption that has resulted from the COVID-19 pandemic and related governmental responses, the Company has been performing ongoing credit reviews of its customers including monitoring for any negative credit events such as customer bankruptcy or insolvency events. As a result, the Company has adjusted payment terms or limited available trade credit for certain customers, as well as for customers within industries that are deemed to be at higher risk.
The Company performs a quarterly allowance for doubtful accounts analysis to assess whether an allowance needs to be recorded for any outstanding trade receivables. In estimating credit losses, management reviews accounts that are past due, have known disputes or have experienced any negative credit events that may result in future collectability issues. There was no allowance for doubtful accounts recorded as of September 30, 2020 and December 31, 2019.
27

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. INVENTORIES
Inventories consisted of the following:
September 30, 2020
(in millions)Titled InventoryInventory Intermediation AgreementsTotal
Crude oil and feedstocks
$1,164.1 $ $1,164.1 
Refined products and blendstocks
1,037.4 241.5 1,278.9 
Warehouse stock and other
135.7  135.7 
$2,337.2 $241.5 $2,578.7 
Lower of cost or market adjustment
(974.8)(118.3)(1,093.1)
Total inventories$1,362.4 $123.2 $1,485.6 

December 31, 2019
(in millions)Titled InventoryInventory Intermediation AgreementsTotal
Crude oil and feedstocks
$1,071.4 $2.7 $1,074.1 
Refined products and blendstocks
976.0 352.9 1,328.9 
Warehouse stock and other
120.8  120.8 
$2,168.2 $355.6 $2,523.8 
Lower of cost or market adjustment
(324.8)(76.8)(401.6)
Total inventories$1,843.4 $278.8 $2,122.2 
Inventory under the amended and restated inventory intermediation agreements with J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc. (“J. Aron”) (as amended and restated from time to time, the “Inventory Intermediation Agreements”), includes crude oil, intermediate and certain finished products (the “J. Aron Products”) purchased or produced by the Paulsboro and Delaware City refineries (the “East Coast Refineries”), and sold to counterparties in connection with such agreements. This inventory is held in the Company’s storage tanks at the East Coast Refineries and at PBFX’s assets acquired from Crown Point in October 2018 (together with the Company’s storage tanks at the East Coast Refineries, the “J. Aron Storage Tanks”).
During the three months ended September 30, 2020, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased operating income by $9.9 million, reflecting the net change in the lower of cost or market (“LCM”) inventory reserve from $1,103.0 million at June 30, 2020 to $1,093.1 million at September 30, 2020. During the nine months ended September 30, 2020, the Company recorded an adjustment to value its inventories to the lower of cost or market which decreased income from operations by $691.5 million, reflecting the net change in the LCM inventory reserve from $401.6 million at December 31, 2019 to $1,093.1 million at September 30, 2020.
During the three months ended September 30, 2019, the Company recorded an adjustment to value its inventories to the lower of cost or market which decreased operating income by $47.0 million, reflecting the net change in the LCM inventory reserve from $327.8 million at June 30, 2019 to $374.8 million at September 30, 2019. During the nine months ended September 30, 2019, the Company recorded an adjustment to value its inventories to the lower of cost or market which increased income from operations by $277.0 million, reflecting the net change in the LCM inventory reserve from $651.8 million at December 31, 2018 to $374.8 million at September 30, 2019.
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6. ACCRUED EXPENSES
Accrued expenses consisted of the following:

PBF Energy (in millions)
September 30, 2020December 31, 2019
Inventory-related accruals$697.2 $1,103.2 
Renewable energy credit and emissions obligations236.2 17.7 
Inventory intermediation agreements217.4 278.1 
Excise and sales tax payable
122.4 98.6 
Accrued transportation costs87.6 88.7 
Accrued interest72.5 12.1 
Accrued utilities42.8 40.1 
Accrued refinery maintenance and support costs42.5 16.9 
Accrued salaries and benefits35.7 81.1 
Current finance lease liabilities 14.2 6.5 
Contingent consideration13.7 10.0 
Environmental liabilities12.2 12.8 
Accrued capital expenditures8.6 32.2 
Customer deposits4.9 1.8 
Other26.2 15.8 
Total accrued expenses$1,634.1 $1,815.6 
 

PBF LLC (in millions)
September 30, 2020December 31, 2019
Inventory-related accruals$697.2 $1,103.2 
Renewable energy credit and emissions obligations236.2 17.7 
Inventory intermediation agreements217.4 278.1 
Excise and sales tax payable
122.4 98.6 
Accrued interest107.7 39.5 
Accrued transportation costs87.6 88.7 
Accrued utilities42.8 40.1 
Accrued refinery maintenance and support costs42.5 16.9 
Accrued salaries and benefits35.7 81.1 
Current finance lease liabilities 14.2 6.5 
Contingent consideration 13.7 10.0 
Environmental liabilities12.2 12.8 
Accrued capital expenditures8.6 32.2 
Customer deposits4.9 1.8 
Other30.3 19.0 
Total accrued expenses$1,673.4 $1,846.2 
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The Company has the obligation to repurchase the J. Aron Products that are held in its J. Aron Storage Tanks in accordance with the Inventory Intermediation Agreements with J. Aron. As of September 30, 2020 and December 31, 2019, a liability is recognized for the Inventory Intermediation Agreements and is recorded at market price for the J. Aron owned inventory held in the Company’s J. Aron Storage Tanks under the Inventory Intermediation Agreements, with any change in the market price being recorded in Cost of products and other.
The Company is subject to obligations to purchase Renewable Identification Numbers (“RINs”) required to comply with the Renewable Fuels Standard. The Company’s overall RINs obligation is based on a percentage of domestic shipments of on-road fuels as established by Environmental Protection Agency. To the degree the Company is unable to blend the required amount of biofuels to satisfy its RINs obligation, RINs must be purchased on the open market to avoid penalties and fines. The Company records its RINs obligation on a net basis in Accrued expenses when its RINs liability is greater than the amount of RINs earned and purchased in a given period and in Prepaid and other current assets when the amount of RINs earned and purchased is greater than the RINs liability. In addition, the Company is subject to obligations to comply with federal and state legislative and regulatory measures, including regulations in the state of California pursuant to Assembly Bill 32, to address environmental compliance and greenhouse gas and other emissions. These requirements include incremental costs to operate and maintain our facilities as well as to implement and manage new emission controls and programs. Renewable energy credit and emissions obligations fluctuate with the volume of applicable product sales and timing of credit purchases.

7. DEBT
Senior Notes
2028 Senior Notes
On January 24, 2020, PBF Holding entered into an indenture among PBF Holding and PBF Holding’s wholly-owned subsidiary, PBF Finance Corporation (together with PBF Holding, the “Issuers”), the guarantors named therein (collectively the “Guarantors”), Wilmington Trust, National Association, as Trustee and Deutsche Bank Trust Company Americas, under which the Issuers issued $1.0 billion in aggregate principal amount of 6.00% senior unsecured notes due 2028 (the “2028 Senior Notes”). The Issuers received net proceeds of approximately $987.0 million from the offering after deducting the initial purchasers’ discount and offering expenses. The Company primarily used the net proceeds to fully redeem the 7.00% senior notes due 2023 (the “2023 Senior Notes”), including accrued and unpaid interest, on February 14, 2020, and to fund a portion of the cash consideration for the Martinez Acquisition. The difference between the carrying value of the 2023 Senior Notes on the date they were reacquired and the amount for which they were reacquired has been classified as Debt extinguishment costs in the Condensed Consolidated Statement of Operations.
The 2028 Senior Notes included a registration rights arrangement whereby the Issuer and the Guarantors agreed to file with the U.S. Securities and Exchange Commission (“SEC”) and use commercially reasonable efforts to consummate an offer to exchange the 2028 Senior Notes for an issue of registered notes with terms substantially identical to the notes not later than 365 days after the date of the original issuance of the notes. This registration statement was declared effective on October 14, 2020 and it is anticipated that the exchange will be consummated during the fourth quarter of 2020. As such, the Company does not anticipate it will have to transfer any consideration as a result of the registration rights agreement and thus no loss contingency was recorded.
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The 2028 Senior Notes are guaranteed on a senior unsecured basis by substantially all of PBF Holding’s subsidiaries. The 2028 Senior Notes and guarantees are senior unsecured obligations and rank equal in right of payment with all of the Issuers’ and the Guarantors’ existing and future indebtedness, including PBF Holding’s Revolving Credit Facility and the Issuers’ 7.25% senior notes due 2025 (the “2025 Senior Notes”). The 2028 Senior Notes and the guarantees rank senior in right of payment to the Issuers’ and the Guarantors’ existing and future indebtedness that is expressly subordinated in right of payment thereto. The 2028 Senior Notes and the guarantees are effectively subordinated to any of the Issuers’ and the Guarantors’ existing or future secured indebtedness (including the Revolving Credit Facility) to the extent of the value of the collateral securing such indebtedness. The 2028 Senior Notes and the guarantees are structurally subordinated to any existing or future indebtedness and other obligations of the Issuers’ non-guarantor subsidiaries. In addition, the 2028 Senior Notes contain customary terms, events of default and covenants for an issuer of non-investment grade debt securities. These covenants include limitations on the incurrence of additional indebtedness, equity issuances, and payments. Many of these covenants will cease to apply or will be modified if the 2028 Senior Notes are rated investment grade.
At any time prior to February 15, 2023, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes in an amount not greater than the net cash proceeds of certain equity offerings at a redemption price equal to 106.000% of the principal amount of the 2028 Senior Notes, plus any accrued and unpaid interest through the date of redemption. On or after February 15, 2023, the Issuers may redeem all or part of the 2028 Senior Notes, in each case at the redemption prices described in the indenture, together with any accrued and unpaid interest through the date of redemption. In addition, prior to February 15, 2023, the Issuers may redeem all or part of the 2028 Senior Notes at a “make-whole” redemption price described in the indenture, together with any accrued and unpaid interest through the date of redemption.
2025 Senior Secured Notes
On May 13, 2020, PBF Holding entered into an indenture among the Issuers, the Guarantors, and Wilmington Trust, National Association, as Trustee, Paying Agent, Registrar, Transfer Agent, Authenticating Agent and Notes Collateral Agent, under which the Issuers issued $1.0 billion in aggregate principal amount of 9.25% senior secured notes due 2025 (the “2025 Senior Secured Notes”). The Issuers received net proceeds of approximately $982.9 million from the offering after deducting the initial purchasers’ discount and offering expenses.
The 2025 Senior Secured Notes are guaranteed on a senior secured basis by the majority of PBF Holding’s subsidiaries. The 2025 Senior Secured Notes and guarantees are senior obligations and secured, subject to certain exceptions and permitted liens, on a first-priority basis, by substantially all of PBF Holding's and the guarantors’ present and future assets (other than assets securing PBF Holding's Revolving Credit Facility), which may also constitute collateral securing certain hedging obligations and any existing or future indebtedness that is permitted to be secured on a pari passu basis with the 2025 Senior Secured Notes. The 2025 Senior Secured Notes and guarantees are senior secured obligations and rank equal in right of payment with all of the Issuers’ and the Guarantors’ existing and future senior indebtedness, including PBF Holding’s Revolving Credit Facility, the 2028 Senior Notes and the 2025 Senior Notes. The 2025 Senior Secured Notes and guarantees rank effectively senior to all of the Issuers’ and the Guarantors’ existing and future indebtedness that is not secured by the collateral (including the Revolving Credit Facility, the 2028 Senior Notes and the 2025 Senior Notes), subject to permitted liens on such collateral and certain other exceptions, and senior in right of payment to the Issuers’ and the Guarantors’ existing and future indebtedness that is expressly subordinated in right of payment thereto. The 2025 Senior Secured Notes and the guarantees are effectively subordinated to any of the Issuers’ and the Guarantors’ existing or future secured indebtedness that is secured by liens on assets owned by the Company that do not constitute part of the collateral securing the 2025 Senior Secured Notes and the guarantees (including the assets securing the Revolving Credit Facility) to the extent of the value of the collateral securing such indebtedness. The 2025 Senior Secured Notes and the guarantees are structurally subordinated to any existing or future indebtedness and other obligations of the Issuers’ non-guarantor subsidiaries. In addition, the 2025 Senior Secured Notes contain customary terms, events of default and
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covenants for an issuer of non-investment grade debt securities. These covenants include limitations on the incurrence of additional indebtedness, equity issuances, and payments. Many of these covenants will cease to apply or will be modified if the 2025 Senior Secured Notes are rated investment grade.
At any time prior to May 15, 2022, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2025 Senior Secured Notes in an amount not greater than the net cash proceeds of certain equity offerings at a redemption price equal to 109.250% of the principal amount of the 2025 Senior Secured Notes, plus any accrued and unpaid interest through the date of redemption. On or after May 15, 2022, the Issuers may redeem all or part of the 2025 Senior Secured Notes, in each case at the redemption prices described in the indenture, together with any accrued and unpaid interest through the date of redemption. In addition, prior to May 15, 2022, the Issuers may redeem all or part of the 2025 Senior Secured Notes at a “make-whole” redemption price described in the indenture, together with any accrued and unpaid interest to the date of redemption.
In addition, the Issuers may redeem in the aggregate up to 35% of the original aggregate principal amount of the 2025 Senior Secured Notes in an amount not to exceed the net cash proceeds of any loan received pursuant to a Regulatory Debt Facility (as defined in the indenture) at a redemption price (expressed as a percentage of principal amount thereof) of 104.625%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, provided, however, that at least 65% of the original aggregate principal amount of 2025 Senior Secured Notes originally issued under the indenture remains outstanding after the occurrence of each such redemption.
PBF Holding Revolving Credit Facility
The Revolving Credit Facility has a maximum commitment of $3.4 billion, a maturity date of May 2023, and a Borrowing Base, as defined in the agreement governing the Revolving Credit Facility (the “Revolving Credit Agreement”) to make funds available for working capital and other general corporate purposes. Borrowings under the Revolving Credit Facility bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR plus the Applicable Margin, all as defined in the Revolving Credit Agreement. In addition, an accordion feature allows for commitments of up to $3.5 billion.
The outstanding borrowings under the Revolving Credit Facility as of September 30, 2020 were $900.0 million. There were no outstanding borrowings under the Revolving Credit Facility as of December 31, 2019.
On February 18, 2020, in connection with its entry into a $300.0 million uncommitted receivables purchase facility (the “Receivables Facility”), the Company amended the Revolving Credit Agreement and entered into a related intercreditor agreement to allow it to sell certain Eligible Receivables (as defined in the Revolving Credit Agreement) derived from the sale of refined product over truck racks. Under the Receivables Facility, the Company sells such receivables to a bank subject to bank approval and certain conditions. The sales of receivables under the Receivables Facility are absolute and irrevocable but subject to certain repurchase obligations under certain circumstances.
On May 7, 2020, the Company further amended the Revolving Credit Facility, to increase PBF Holding’s ability to incur certain secured debt from an amount equal to 10% of its total assets to 20% of its total assets.

8. AFFILIATE NOTE PAYABLE - PBF LLC
As of September 30, 2020 and December 31, 2019, PBF LLC had an outstanding note payable with PBF Energy for an aggregate principal amount of $375.9 million and $376.4 million, respectively. During 2019, the note payable was amended to extend the maturity date from April 2020 to April 2030. The note has an annual interest rate of 2.5% and may be prepaid in whole or in part at any time, at the option of PBF LLC without penalty or premium.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. COMMITMENTS AND CONTINGENCIES
In the ordinary conduct of the Company’s business, the Company is from time to time subject to lawsuits, investigations and claims, including class action proceedings, mass tort actions, tort actions, environmental claims and employee-related matters. The outcome of these matters cannot always be predicted accurately, but the Company accrues liabilities for these matters if the Company has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. For such ongoing matters for which we have not recorded a liability but losses are reasonably possible, we are unable to estimate a range of possible losses at this time due to various reasons that may include but are not limited to, matters being in an early stage and not fully developed through pleadings, discovery or court proceedings, number of potential claimants being unknown or uncertainty regarding a number of different factors underlying the potential claims. However, the ultimate resolution of one or more of these contingencies could result in an adverse outcome that may have a material effect on our financial position, results of operations or cash flows.
Environmental Matters
The Company’s refineries, pipelines and related operations are subject to extensive and frequently changing federal, state and local laws and regulations, including, but not limited to, those relating to the discharge of materials into the environment or that otherwise relate to the protection of the environment, waste management and the characteristics and the compositions of fuels. Compliance with existing and anticipated laws and regulations can increase the overall cost of operating the refineries, including remediation, operating costs and capital costs to construct, maintain and upgrade equipment and facilities.
These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters which could include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which the Company manufactured, handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which the Company has assumed responsibility. The Company believes that its current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and will continue to be ongoing discussions about environmental and safety matters between the Company and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, the Company anticipates that continuing capital investments and changes in operating procedures will be required for the foreseeable future to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.
In connection with the acquisition of the Torrance refinery and related logistics assets, the Company assumed certain pre-existing environmental liabilities totaling $116.1 million as of September 30, 2020 ($121.3 million as of December 31, 2019), related to certain environmental remediation obligations to address existing soil and groundwater contamination and monitoring activities and other clean-up activities, which reflects the current estimated cost of the remediation obligations. The current portion of the environmental liability is recorded in Accrued expenses and the non-current portion is recorded in Other long-term liabilities.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The aggregate environmental liability reflected in the Company’s Condensed Consolidated Balance Sheets was $156.5 million and $134.6 million at September 30, 2020 and December 31, 2019, respectively, of which $144.3 million and $121.8 million, respectively, were classified as Other long-term liabilities. These liabilities include remediation and monitoring costs expected to be incurred over an extended period of time. Estimated liabilities could increase in the future when the results of ongoing investigations become known, are considered probable and can be reasonably estimated.
Contingent Consideration
In connection with the Martinez Acquisition, the Sale and Purchase Agreement includes an earn-out provision based on certain earning thresholds of the Martinez refinery. Pursuant to the agreement, the Company will make payments to the Seller based on the future earnings of the Martinez refinery in excess of certain thresholds, as defined in the agreement, for a period of up to four years following the acquisition closing date. The Company recorded the acquisition date fair value of the earn-out provision as contingent consideration of $77.3 million within “Other long-term liabilities” within the Company’s Condensed Consolidated Balance Sheets. There was no balance under the Martinez Contingent Consideration as of September 30, 2020, representing no anticipated future earn-out payments.
In connection with the PBFX acquisition of CPI from Crown Point in October 2018, the purchase and sale agreement included an earn-out provision related to an existing commercial agreement with a third party, based on the future results of certain acquired idled assets (the “PBFX Contingent Consideration”). Pursuant to the purchase and sale agreement, PBFX and Crown Point will share equally in the future operating profits of the restarted assets, as defined in the purchase and sale agreement, over a contractual term of up to three years starting in 2019. The PBFX Contingent Consideration recorded was $13.7 million and $26.1 million as of September 30, 2020 and December 31, 2019, respectively, representing the present value of expected future payments discounted at a blended rate of 8.79%. The short-term PBFX Contingent Consideration is included in “Accrued expenses” within the Company’s Condensed Consolidated Balance Sheets. At September 30, 2020, the estimated undiscounted liability totaled $13.8 million based on PBFX’s anticipated total annual earn-out payments. The acquired idled assets that are subject to the PBFX Contingent Consideration recommenced operations in October 2019.
Pursuant to the terms of the commercial agreement, in the third quarter of 2020, the counterparty exercised its right to terminate the contract at the conclusion of the current contract year, resulting in an adjustment in the fair value of the PBFX Contingent Consideration for the nine months ended September 30, 2020 of $16.4 million, reflecting the elimination of the estimated earn-out for years two and three of the performance period. There were no material changes in the fair value of the PBFX Contingent Consideration for the nine months ended September 30, 2019.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Tax Receivable Agreement
PBF Energy entered into a tax receivable agreement with the PBF LLC Series A and PBF LLC Series B unitholders (the “Tax Receivable Agreement”) that provides for the payment by PBF Energy to such persons of an amount equal to 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of (i) increases in tax basis, as described below, and (ii) certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. For purposes of the Tax Receivable Agreement, the benefits deemed realized by PBF Energy will be computed by comparing the actual income tax liability of PBF Energy (calculated with certain assumptions) to the amount of such taxes that PBF Energy would have been required to pay had there been no increase to the tax basis of the assets of PBF LLC as a result of purchases or exchanges of PBF LLC Series A Units for shares of PBF Energy Class A common stock and had PBF Energy not entered into the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless: (i) PBF Energy exercises its right to terminate the Tax Receivable Agreement, (ii) PBF Energy breaches any of its material obligations under the Tax Receivable Agreement or (iii) certain changes of control occur, in which case all obligations under the Tax Receivable Agreement will generally be accelerated and due as calculated under certain assumptions.
The payment obligations under the Tax Receivable Agreement are obligations of PBF Energy and not of PBF LLC, PBF Holding or PBFX. In general, PBF Energy expects to obtain funding for these annual payments from PBF LLC, primarily through tax distributions, which PBF LLC makes on a pro-rata basis to its owners. Such owners include PBF Energy, which holds a 99.2% interest in PBF LLC as of September 30, 2020 (99.0% as of December 31, 2019). PBF LLC generally obtains funding to pay its tax distributions by causing PBF Holding to distribute cash to PBF LLC and from distributions it receives from PBFX.
As of September 30, 2020, PBF Energy has recognized a liability for the Tax Receivable Agreement of $132.9 million ($373.5 million as of December 31, 2019) reflecting the estimate of the undiscounted amounts that PBF Energy expects to pay under the agreement, net of the impact of a deferred tax asset valuation allowance recognized in accordance with ASC 740, Income Taxes. As future taxable income is recognized, increases in our Tax Receivable Agreement liability may be necessary in conjunction with the revaluation of deferred tax assets. Refer to “Note 15 - Income Taxes” for more details.

10. LEASES
The Company leases office space, office equipment, refinery support facilities and equipment, railcars and other logistics assets primarily under non-cancelable operating leases, with terms typically ranging from one to twenty years, subject to certain renewal options as applicable. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of lease liabilities and right of use assets. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Interest expense for finance leases is incurred based on the carrying value of the lease liability. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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For substantially all classes of underlying assets, the Company has elected the practical expedient not to separate lease and non-lease components, which allows for combining the components if certain criteria are met. For certain leases of refinery support facilities, which have commenced subsequent to the year ended December 31, 2019, the Company accounts for the non-lease service component separately. There are no material residual value guarantees associated with any of the Company’s leases. There are no significant restrictions or covenants included in the Company’s lease agreements other than those that are customary in such arrangements. Certain of the Company’s leases, primarily for the Company’s commercial and logistics asset classes, include provisions for variable payments. These variable payments are typically determined based on a measure of throughput or actual days the asset has operated during the contract term or another measure of usage and are not included in the initial measurement of lease liabilities and right of use assets.
Lease Position as of September 30, 2020 and December 31, 2019
The table below presents the lease related assets and liabilities recorded on the Company’s Condensed Consolidated Balance Sheets for the periods presented:

(in millions)Classification on the Balance SheetSeptember 30, 2020December 31, 2019
Assets
Operating lease assetsLease right of use assets$857.5 $306.4 
Finance lease assetsLease right of use assets84.4 24.2 
Total lease right of use assets$941.9 $330.6 
Liabilities
Current liabilities:
Operating lease liabilitiesCurrent operating lease liabilities$85.5 $72.1 
Finance lease liabilitiesAccrued expenses14.2 6.5 
Noncurrent liabilities:
Operating lease liabilitiesLong-term operating lease liabilities770.2 233.1 
Finance lease liabilitiesLong-term financing lease liabilities72.0 18.4 
Total lease liabilities$941.9 $330.1 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lease Costs
The table below provides certain information related to costs for the Company’s leases for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
Lease Costs (in millions)
2020201920202019
Components of total lease costs:
Finance lease cost
Amortization of right of use assets$3.7 $0.3 $10.2 $0.7 
Interest on lease liabilities1.1 0.3 3.1 0.5 
Operating lease cost47.1 28.4 117.4 80.6 
Short-term lease cost23.1 22.4 71.7 70.8 
Variable lease cost2.7 2.0 9.6 5.5 
Total lease costs$77.7 $53.4 $212.0 $158.1 

Sale-leaseback Transactions
On April 17, 2020, the Company closed on the sale of five hydrogen plants to Air Products and Chemicals, Inc. (“Air Products”) in a sale-leaseback transaction for gross cash proceeds of $530.0 million and recognized a gain of $471.1 million. In connection with the sale, the Company entered into a transition services agreement through which Air Products will exclusively supply hydrogen, steam, carbon dioxide and other products (the “Products”) to the Martinez, Torrance and Delaware City refineries for a specified period (not expected to exceed 18 months). The transition services agreement also requires certain maintenance and operating activities to be provided by PBF Holding, for which the Company will be reimbursed, during the term of the agreement. In August 2020, the parties executed long-term supply agreements through which Air Products will supply the Products for a term of fifteen years at these same refineries. As a result of these transactions, the Company recorded lease right of use assets and corresponding operating lease liabilities of approximately $507.9 million.
Other Information
The table below provides supplemental cash flow information related to leases for the periods presented (in millions):
Nine Months Ended September 30,
20202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$118.3 $81.3 
Operating cash flows for finance leases3.1 0.5 
Financing cash flows for finance leases8.9 0.4 
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets 690.7 172.1 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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Lease Term and Discount Rate
The table below presents certain information related to the weighted average remaining lease term and weighted average discount rate for the Company’s leases as of September 30, 2020:

Weighted average remaining lease term - operating leases13.8 years
Weighted average remaining lease term - finance leases7.2 years
Weighted average discount rate - operating leases9.5 %
Weighted average discount rate - finance leases5.5 %

Undiscounted Cash Flows

The table below reconciles the fixed component of the undiscounted cash flows for each of the periods presented to the lease liabilities recorded on the Condensed Consolidated Balance Sheets as of September 30, 2020:
Amounts due within twelve months of September, 30, (in millions)
Finance LeasesOperating Leases
2020$18.6 $161.3 
202114.3 133.4 
202212.8 117.8 
202312.8 108.9 
202411.8 103.8 
Thereafter34.4 930.7 
Total minimum lease payments104.7 1,555.9 
Less: effect of discounting18.5 700.2 
Present value of future minimum lease payments86.2 855.7 
Less: current obligations under leases14.2 85.5 
Long-term lease obligations$72.0 $770.2 

As of September 30, 2020, the Company has not entered into any material lease agreements that have not yet commenced.


11. EQUITY
Noncontrolling Interest in PBF LLC
PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its subsidiaries. PBF Energy’s equity interest in PBF LLC was approximately 99.2% and 99.0% as of September 30, 2020 and December 31, 2019, respectively.
PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, and records a noncontrolling interest for the economic interest in PBF Energy held by the members of PBF LLC other than PBF Energy. Noncontrolling interest on the Condensed Consolidated Statements of Operations includes the portion of net income or loss attributable to the economic interest in PBF Energy held by the members of PBF LLC other than PBF Energy. Noncontrolling interest on the Condensed Consolidated Balance Sheets reflects the portion of net assets of PBF Energy attributable to the members of PBF LLC other than PBF Energy.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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The noncontrolling interest ownership percentages in PBF LLC as of December 31, 2019 and September 30, 2020 are calculated as follows:
Holders of PBF LLC Series A UnitsOutstanding Shares of PBF Energy Class A Common Stock
Total *
December 31, 20191,215,317119,804,971121,020,288
1.0 %99.0 %100.0%
September 30, 2020970,647120,151,595121,122,242
0.8 %99.2 %100.0%
——————————
*    Assumes all of the holders of PBF LLC Series A Units exchange their PBF LLC Series A Units for shares of PBF Energy’s Class A common stock on a one-for-one basis.
Noncontrolling Interest in PBFX
PBF LLC held a 48.0% limited partner interest in PBFX with the remaining 52.0% limited partner interest owned by the public common unitholders as of September 30, 2020. PBF LLC is also the sole member of PBF GP, the general partner of PBFX.
PBF Energy, through its ownership of PBF LLC, consolidates the financial results of PBFX, and records a noncontrolling interest for the economic interest in PBFX held by the public common unitholders. Noncontrolling interest on the Condensed Consolidated Statements of Operations includes the portion of net income or loss attributable to the economic interest in PBFX held by the public common unitholders of PBFX other than PBF Energy (through its ownership in PBF LLC). Noncontrolling interest on the Condensed Consolidated Balance Sheets includes the portion of net assets of PBFX attributable to the public common unitholders of PBFX.
The noncontrolling interest ownership percentages in PBFX as of December 31, 2019 and September 30, 2020 are calculated as follows:

Units of PBFX Held by the PublicUnits of PBFX Held by PBF LLCTotal
December 31, 201932,176,40429,953,63162,130,035
51.8 %48.2 %100.0 %
September 30, 202032,406,893 29,953,631 62,360,524 
52.0 %48.0 %100 %
Noncontrolling Interest in PBF Holding
In connection with the acquisition of the Chalmette refinery, PBF Holding recorded noncontrolling interests in two subsidiaries of Chalmette Refining. PBF Holding, through Chalmette Refining, owns an 80% ownership interest in both Collins Pipeline Company and T&M Terminal Company. In the three and nine months ended September 30, 2020 and 2019 the Company recorded noncontrolling interest in the earnings of these subsidiaries of less than $0.1 million.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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Changes in Equity and Noncontrolling Interests
The following tables summarize the changes in equity for the controlling and noncontrolling interests of PBF Energy for the nine months ended September 30, 2020 and 2019, respectively: 


PBF Energy (in millions)
PBF Energy Inc. EquityNoncontrolling
Interest in PBF LLC
Noncontrolling
Interest in PBF Holding
Noncontrolling
Interest in PBFX
Total Equity
Balance at January 1, 2020$3,039.6 $113.2 $10.9 $421.8 $3,585.5 
Comprehensive income (loss)
(1,096.2)(13.6)(0.1)60.4 (1,049.5)
Dividends and distributions(35.9)(0.4) (36.9)(73.2)
Stock-based compensation21.4   3.2 24.6 
Exercise of PBF LLC and PBF Energy options and warrants, net0.2    0.2 
Taxes paid for net settlements of equity-based compensation (0.9)   (0.9)
Exchanges of PBF Energy Company LLC Series A Units for PBF Energy Class A common stock2.3 (2.3)   
Other4.9   (0.8)4.1 
Balance at September 30, 2020$1,935.4 $96.9 $10.8 $447.7 $2,490.8 


PBF Energy (in millions)
PBF Energy Inc. EquityNoncontrolling
Interest in PBF LLC
Noncontrolling
Interest in PBF Holding
Noncontrolling
Interest in PBFX
Total Equity
Balance at January 1, 2019$2,676.5 $112.2 $10.9 $448.9 $3,248.5 
Comprehensive income
267.5 3.6 0.1 36.0 307.2 
Dividends and distributions(107.9)(2.7) (47.0)(157.6)
Issuance of additional PBFX common units152.0   (19.5)132.5 
Stock-based compensation20.3   5.6 25.9 
Exercise of PBF LLC and PBF Energy options and warrants, net0.2    0.2 
Other(0.9)  (1.5)(2.4)
Balance at September 30, 2019$3,007.7 $113.1 $11.0 $422.5 $3,554.3 
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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The following tables summarize the changes in equity for the controlling and noncontrolling interests of PBF LLC for the nine months ended September 30, 2020 and 2019, respectively:
PBF LLC (in millions)
PBF Energy Company LLC EquityNoncontrolling Interest in PBF Holding Noncontrolling
Interest in PBFX
Total Equity
Balance at January 1, 2020$3,176.4 $10.9 $421.8 $3,609.1 
Comprehensive income (loss)
(1,363.3)(0.1)60.4 (1,303.0)
Dividends and distributions(36.3) (36.9)(73.2)
Exercise of PBF LLC options and warrants, net(0.9)  (0.9)
Stock-based compensation21.4  3.2 24.6 
Other  (0.8)(0.8)
Balance at September 30, 2020$1,797.3 $10.8 $447.7 $2,255.8 

PBF LLC (in millions)
PBF Energy Company LLC EquityNoncontrolling
Interest in PBF Holding
Noncontrolling
Interest in PBFX
Total Equity
Balance at January 1, 2019$2,759.6 $10.9 $448.9 $3,219.4 
Comprehensive income364.6 0.1 36.0 400.7 
Dividends and distributions(163.8) (47.0)(210.8)
Exercise of PBF LLC and PBF Energy options and warrants, net(0.8)  (0.8)
Issuance of additional PBFX common units 152.0  (19.5)132.5 
Stock-based compensation20.3  5.6 25.9 
Other  (1.5)(1.5)
Balance at September 30, 2019$3,131.9 $11.0 $422.5 $3,565.4 

12. DIVIDENDS AND DISTRIBUTIONS
On March 30, 2020, PBF Energy announced that it had suspended its quarterly dividend of $0.30 per share on its Class A common stock as part of its strategic plan to respond to the impact of the COVID-19 outbreak. As a result there were no dividends and distributions for the three months ended September 30, 2020. With respect to dividends and distributions paid during the nine months ended September 30, 2020, PBF LLC made an aggregate non-tax quarterly distribution of $36.3 million, or $0.30 per unit to its members, of which $35.9 million was distributed pro-rata to PBF Energy and the balance was distributed to its other members. PBF Energy used this $35.9 million to pay a quarterly cash dividend of $0.30 per share of Class A common stock on March 17, 2020.

With respect to distributions paid during the nine months ended September 30, 2020, PBFX paid a distribution on outstanding common units of $0.520 per unit on March 17, 2020, $0.30 on June 17, 2020 and $0.30 on August 26, 2020, of which $33.6 million was distributed to PBF LLC and the balance was distributed to its public unitholders.

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. EMPLOYEE BENEFIT PLANS
Effective February 1, 2020, the Company amended the PBF Energy Pension Plan to, among other things, incorporate into the plan all employees who became employed at the Company’s Martinez, California location on February 1, 2020, in connection with the Martinez Acquisition. The components of net periodic benefit cost related to the Company’s defined benefit plans consisted of the following:
(in millions)Three Months Ended September 30,Nine Months Ended September 30,
Pension Benefits2020201920202019
Components of net periodic benefit cost:
Service cost$15.0 $10.9 $43.9 $32.7 
Interest cost1.8 2.0 5.3 6.2 
Expected return on plan assets(3.2)(2.3)(9.4)(7.1)
Amortization of prior service cost and actuarial loss0.1 0.1 0.2 0.2 
Net periodic benefit cost$13.7 $10.7 $40.0 $32.0 

(in millions)Three Months Ended September 30,Nine Months Ended September 30,
Post-Retirement Medical Plan2020201920202019
Components of net periodic benefit cost:
Service cost$0.3 $0.2 $0.8 $0.7 
Interest cost0.1 0.2 0.3 0.5 
Amortization of prior service cost and actuarial loss0.1 0.1 0.4 0.4 
Net periodic benefit cost$0.5 $0.5 $1.5 $1.6 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. REVENUES
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
As described in “Note 18 - Segment Information”, the Company’s business consists of the Refining segment and Logistics segment. The following table provides information relating to the Company’s revenues for each product or group of similar products or services by segment for the periods presented.

Three Months Ended September 30,
(in millions)20202019
Refining Segment:
Gasoline and distillates $3,121.8 $5,658.6 
Asphalt and blackoils 206.5 321.3 
Feedstocks and other 196.4 188.1 
Chemicals 81.7 183.0 
Lubricants 42.8 71.1 
Total3,649.2 6,422.1 
Logistics Segment:
Logistics89.0 86.4 
Total revenues prior to eliminations 3,738.2 6,508.5 
Elimination of intercompany revenues (70.7)(78.0)
Total Revenues $3,667.5 $6,430.5 
Nine Months Ended September 30,
(in millions)20202019
Refining Segment:
Gasoline and distillates $9,728.1 $15,662.3 
Feedstocks and other 723.0 592.7 
Asphalt and blackoils 577.6 1,206.1 
Chemicals 240.0 512.3 
Lubricants 139.6 209.3 
Total11,408.3 18,182.7 
Logistics Segment:
Logistics271.2 248.0 
Total revenues prior to eliminations 11,679.5 18,430.7 
Elimination of intercompany revenues (218.7)(224.0)
Total Revenues $11,460.8 $18,206.7 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The majority of the Company’s revenues are generated from the sale of refined petroleum products reported in the Refining segment. These revenues are largely based on the current spot (market) prices of the products sold, which represent consideration specifically allocable to the products being sold on a given day, and the Company recognizes those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and transfer of title occurs is the point when the Company’s control of the products is transferred to the Company’s customers and when its performance obligation to its customers is fulfilled. Delivery and transfer of title are specifically agreed to between the Company and customers within the contracts. The Refining segment also has contracts which contain fixed pricing, tiered pricing, minimum volume features with makeup periods, or other factors that have not materially been affected by ASC 606, Revenues from Contracts with Customers.
The Company’s Logistics segment revenues are generated by charging fees for crude oil and refined products terminaling, storage and pipeline services based on the greater of contractual minimum volume commitments, as applicable, or the delivery of actual volumes based on contractual rates applied to throughput or storage volumes. A majority of the Company’s logistics revenues are generated by intercompany transactions and are eliminated in consolidation.
Deferred Revenues
The Company records deferred revenues when cash payments are received or are due in advance of performance, including amounts which are refundable. Deferred revenue was $23.6 million and $20.1 million as of September 30, 2020 and December 31, 2019, respectively. Fluctuations in the deferred revenue balance are primarily driven by the timing and extent of cash payments received or due in advance of satisfying the Company’s performance obligations.
The Company’s payment terms vary by type and location of customers and the products offered. The period between invoicing and when payment is due is not significant (i.e. generally within two months). For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.

15. INCOME TAXES
PBF Energy is required to file federal and applicable state corporate income tax returns and recognize income taxes on its pre-tax income (loss), which to-date has consisted primarily of its share of PBF LLC’s pre-tax income (loss) (approximately 99.2% and 99.0% as of September 30, 2020 and December 31, 2019, respectively). PBF LLC is organized as a limited liability company and PBFX is an MLP, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income taxes apart from the income tax attributable to the two subsidiaries acquired in connection with the acquisition of Chalmette Refining and PBF Holding’s wholly-owned Canadian subsidiary, PBF Energy Limited, that are treated as C-Corporations for income tax purposes.
Valuation Allowance
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. Negative evidence evaluated as part of this assessment included PBF Energy’s cumulative loss incurred over the three-year period ended September 30, 2020. Such objective evidence limits PBF Energy’s ability to consider other subjective evidence, such as PBF Energy’s projections for future taxable income as market conditions, commodity prices and demand for refined petroleum products normalize.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
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On the basis of this evaluation, as of September 30, 2020, a valuation allowance of $348.6 million has been recorded to recognize only the portion of deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as PBF Energy’s projections for future taxable income.
The reported income tax provision in the PBF Energy Condensed Consolidated Statements of Operations consists of the following: 
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2020201920202019
Current income tax expense$ $0.6 $0.4 $2.4 
Deferred income tax expense (benefit)235.6 21.4 (1.1)89.6 
Total income tax expense (benefit)$235.6 $22.0 $(0.7)$92.0 

The income tax provision is based on earnings (losses) before taxes attributable to PBF Energy and excludes earnings before taxes attributable to noncontrolling interests as such interests are generally not subject to income taxes except as noted above. The difference between PBF Energy’s effective income tax rate and the United States statutory rate is reconciled below:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Provision at Federal statutory rate21.0 %21.0 %21.0 %21.0 %
Increase (decrease) attributable to flow-through of certain tax adjustments: 
State income taxes (net of federal income tax)5.2 %5.4 %5.2 %5.5 %
Nondeductible/nontaxable items(0.1)% % %0.5 %
Rate differential from foreign jurisdictions(0.1)%(0.6)%(0.1)%(0.7)%
Deferred tax asset valuation allowance (155.6)%— %(25.8)%— %
Other(0.1)%(1.8)%(0.2)%(0.6)%
Effective tax rate (129.7)%24.0 %0.1 %25.7 %
PBF Energy’s effective income tax rate for the three and nine months ended September 30, 2020, including the impact of income attributable to noncontrolling interests of $19.4 million and $46.7 million, respectively, was (145.3)% and 0.1%, respectively. PBF Energy’s effective income tax rate for the three and nine months ended September 30, 2019, including the impact of income attributable to noncontrolling interests of $16.8 million and $39.7 million respectively, was 20.3% and 23.1%, respectively.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes several provisions for corporations, including increasing the amount of deductible interest, allowing companies to carryback certain Net Operating Losses (“NOLs”) and increasing the amount of NOLs that corporations can use to offset income. The CARES Act did not materially affect the Company’s income tax provision, deferred tax assets and liabilities, and related taxes payable for the periods presented. The Company is currently assessing the future implications of these provisions, as applicable, within the CARES Act on its Consolidated Financial Statements.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The reported income tax provision in the PBF LLC Condensed Consolidated Statements of Operations consists of the following: 
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2020201920202019
Current income tax expense$ $0.2 $ $0.1 
Deferred income tax (benefit) expense(1.2)(2.2)8.6 (7.5)
Total income tax (benefit) expense$(1.2)$(2.0)$8.6 $(7.4)

The Company has determined there are no material uncertain tax positions as of September 30, 2020. The Company does not have any unrecognized tax benefits.

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16. FAIR VALUE MEASUREMENTS
The tables below present information about the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis and indicate the fair value hierarchy of the inputs utilized to determine the fair values as of September 30, 2020 and December 31, 2019.
The Company has elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty; however, fair value amounts by hierarchy level are presented on a gross basis in the tables below. The Company has posted cash margin with various counterparties to support hedging and trading activities. The cash margin posted is required by counterparties as collateral deposits and cannot be offset against the fair value of open contracts except in the event of default. The Company has no derivative contracts that are subject to master netting arrangements that are reflected gross on the Condensed Consolidated Balance Sheets.
As of September 30, 2020
Fair Value HierarchyTotal Gross Fair ValueEffect of Counter-party NettingNet Carrying Value on Balance Sheet
(in millions)Level 1Level 2Level 3
Assets:
Money market funds
$256.6 $ $ $256.6 N/A$256.6 
Commodity contracts
1.0 9.9 1.3 12.2 (12.0)0.2 
Derivatives included with inventory intermediation agreement obligations
 17.8  17.8  17.8 
Liabilities:
Commodity contracts
1.2 10.7 0.1 12.0 (12.0) 
Catalyst obligations
 86.6  86.6  86.6 
Contingent consideration obligation
  13.7 13.7  13.7 

As of December 31, 2019
Fair Value HierarchyTotal Gross Fair ValueEffect of Counter-party NettingNet Carrying Value on Balance Sheet
(in millions)Level 1Level 2Level 3
Assets:
Money market funds
$111.8 $ $ $111.8 N/A$111.8 
Commodity contracts
32.5 1.5  34.0 (33.8)0.2 
Liabilities:
Commodity contracts
32.8 1.0  33.8 (33.8) 
Catalyst obligations
 47.6  47.6  47.6 
Derivatives included with inventory intermediation agreement obligations
 1.3  1.3  1.3 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The valuation methods used to measure financial instruments at fair value are as follows:
Money market funds categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted market prices and included within Cash and cash equivalents.
The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair value hierarchy are measured at fair value using a market approach based upon future commodity prices for similar instruments quoted in active markets.
The derivatives included with inventory intermediation agreement obligations and the catalyst obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based upon commodity prices for similar instruments quoted in active markets.
The commodity contracts categorized in Level 3 of the fair value hierarchy consist of commodity price swap contracts that relate to forecasted purchases of crude oil for which quoted forward market prices are not readily available due to market illiquidity. The forward prices used to value these swaps were derived using broker quotes, prices from other third party sources and other available market based data.
The contingent consideration obligation at September 30, 2020 is categorized in Level 3 of the fair value hierarchy and is estimated using discounted cash flow models based on management’s estimate of the future cash flows related to the earn-out periods.

Non-qualified pension plan assets are measured at fair value using a market approach based on published net asset values of mutual funds as a practical expedient. As of September 30, 2020 and December 31, 2019, $21.3 million and $10.3 million, respectively, were included within Deferred charges and other assets, net for these non-qualified pension plan assets.

The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value hierarchy, which includes the change in estimated future earnings related to both the Martinez Contingent Consideration and the PBFX Contingent Consideration:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)20202020
Balance at beginning of period $40.3 $26.1 
Additions 77.3 
Accretion on discounted liabilities1.0 3.8 
Settlements0.3 0.7 
Unrealized gain included in earnings(29.1)(95.4)
Balance at end of period $12.5 $12.5 

There were no transfers between levels during the three and nine months ended September 30, 2020 or 2019, respectively.


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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair value of debt
The table below summarizes the carrying value and fair value of debt as of September 30, 2020 and December 31, 2019.
September 30, 2020December 31, 2019
(in millions)
Carrying
value
Fair
 value
Carrying
 value
Fair
value
2025 Senior Secured Notes (a)$1,000.0 $1,040.9 $ $ 
2028 Senior Notes (a)1,000.0 667.7   
2025 Senior Notes (a)725.0 542.5 725.0 776.5 
2023 Senior Notes (a) (b)  500.0 519.7 
PBFX 2023 Senior Notes (a)526.8 496.1 527.2 543.0 
PBF Rail Term Loan (c)9.2 9.2 14.5 14.5 
PBFX Revolving Credit Facility (c)213.0 213.0 283.0 283.0 
Revolving Credit Facility (c)900.0 900.0   
Catalyst financing arrangements (d)86.6 86.6 47.6 47.6 
4,460.6 3,956.0 2,097.3 2,184.3 
Less - Current debt    
Less - Unamortized deferred financing costs(49.5)n/a(32.4)n/a
Long-term debt$4,411.1 $3,956.0 $2,064.9 $2,184.3 

(a) The estimated fair value, categorized as a Level 2 measurement, was calculated based on the present value of future expected payments utilizing implied current market interest rates based on quoted prices of the outstanding senior notes.
(b) As disclosed in “Note 7 - Debt”, the 2023 Senior Notes were redeemed in full on February 14, 2020.
(c) The estimated fair value approximates carrying value, categorized as a Level 2 measurement, as these borrowings bear interest based upon short-term floating market interest rates.
(d) Catalyst financing arrangements are valued using a market approach based upon commodity prices for similar instruments quoted in active markets and are categorized as a Level 2 measurement. The Company has elected the fair value option for accounting for its catalyst repurchase obligations as the Company’s liability is directly impacted by the change in fair value of the underlying catalyst.

17. DERIVATIVES
The Company uses derivative instruments to mitigate certain exposures to commodity price risk. The Company entered into the Inventory Intermediation Agreements that contain purchase obligations for certain volumes of crude oil, intermediates and refined products. The purchase obligations related to crude oil, intermediates and refined products under these agreements are derivative instruments that have been designated as fair value hedges in order to hedge the commodity price volatility of certain refinery inventory. The fair value of these purchase obligation derivatives is based on market prices of the underlying crude oil, intermediates and refined products. The level of activity for these derivatives is based on the level of operating inventories.
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2020, there were no barrels of crude oil and feedstocks (27,580 barrels at December 31, 2019) outstanding under these derivative instruments designated as fair value hedges. As of September 30, 2020, there were 2,363,535 barrels of intermediates and refined products (3,430,635 barrels at December 31, 2019) outstanding under these derivative instruments designated as fair value hedges. These volumes represent the notional value of the contract.
The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of September 30, 2020, there were 8,019,000 barrels of crude oil and 1,530,000 barrels of refined products (5,511,000 and 5,788,000, respectively, as of December 31, 2019), outstanding under short and long term commodity derivative contracts not designated as hedges representing the notional value of the contracts.
The Company also uses derivative instruments to mitigate the risk associated with the price of credits needed to comply with various governmental and regulatory environmental compliance programs. For such contracts that represent derivatives, the Company elects the normal purchase normal sale exception under ASC 815, Derivatives and Hedging, and therefore does not record them at fair value.
The following tables provide information about the fair values of these derivative instruments as of September 30, 2020 and December 31, 2019 and the line items in the Condensed Consolidated Balance Sheets in which the fair values are reflected.
Description

Balance Sheet Location
Fair Value
Asset/(Liability)
(in millions)
Derivatives designated as hedging instruments:
September 30, 2020:
Derivatives included with the inventory intermediation agreement obligationsAccrued expenses$17.8 
December 31, 2019:
Derivatives included with the inventory intermediation agreement obligations
Accrued expenses
$(1.3)
Derivatives not designated as hedging instruments:
September 30, 2020:
Commodity contracts
Accounts receivable
$0.2 
December 31, 2019:
Commodity contractsAccounts receivable$0.2 

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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides information about the gains or losses recognized in income on these derivative instruments and the line items in the Condensed Consolidated Statements of Operations in which such gains and losses are reflected.
Description
Location of Gain or (Loss) Recognized in
 Income on Derivatives
Gain or (Loss)
Recognized in
Income on Derivatives
(in millions)
Derivatives designated as hedging instruments:
For the three months ended September 30, 2020:
Derivatives included with the inventory intermediation agreement obligationsCost of products and other$(6.6)
For the three months ended September 30, 2019:
Derivatives included with the inventory intermediation agreement obligationsCost of products and other$23.6 
For the nine months ended September 30, 2020:
Derivatives included with the inventory intermediation agreement obligationsCost of products and other$19.1 
For the nine months ended September 30, 2019:
Derivatives included with the inventory intermediation agreement obligationsCost of products and other$(11.4)
Derivatives not designated as hedging instruments:
For the three months ended September 30, 2020:
Commodity contractsCost of products and other$(9.1)
For the three months ended September 30, 2019:
Commodity contractsCost of products and other$2.2 
For the nine months ended September 30, 2020:
Commodity contractsCost of products and other$55.9 
For the nine months ended September 30, 2019:
Commodity contractsCost of products and other$34.8 
Hedged items designated in fair value hedges:
For the three months ended September 30, 2020:
Crude oil, intermediate and refined product inventoryCost of products and other$6.6 
For the three months ended September 30, 2019:
Crude oil, intermediate and refined product inventoryCost of products and other$(23.6)
For the nine months ended September 30, 2020:
Crude oil, intermediate and refined product inventoryCost of products and other$(19.1)
For the nine months ended September 30, 2019:
Crude oil, intermediate and refined product inventoryCost of products and other$11.4 

The Company had no ineffectiveness related to fair value hedges for the three and nine months ended September 30, 2020 or 2019, respectively.

51

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

18. SEGMENT INFORMATION
The Company’s operations are organized into two reportable segments, Refining and Logistics. Operations that are not included in the Refining and Logistics segments are included in Corporate. Intersegment transactions are eliminated in the Condensed Consolidated Financial Statements and are included in Eliminations.
Refining
The Company’s Refining segment includes the operations of its six refineries, including certain related logistics assets that are not owned by PBFX. The Company’s refineries are located in Delaware City, Delaware, Paulsboro, New Jersey, Toledo, Ohio, Chalmette, Louisiana, Torrance, California and Martinez, California. The refineries produce unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The Company purchases crude oil, other feedstocks and blending components from various third-party suppliers. The Company sells products throughout the Northeast, Midwest, Gulf Coast and West Coast of the United States, as well as in other regions of the United States and Canada, and is able to ship products to other international destinations.
Logistics
The Company’s Logistics segment is comprised of PBFX, a publicly-traded MLP, formed to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX’s assets primarily consist of rail and truck terminals and unloading racks, tank farms and pipelines that were acquired from or contributed by PBF LLC and are located at, or nearby, the Company’s refineries. PBFX provides various rail, truck and marine terminaling services, pipeline transportation services and storage services to PBF Holding and/or its subsidiaries and third-party customers through fee-based commercial agreements. PBFX currently does not generate significant third-party revenues and intersegment related-party revenues are eliminated in consolidation. From a PBF Energy and PBF LLC perspective, the Company’s chief operating decision maker evaluates the Logistics segment as a whole without regard to any of PBFX’s individual operating segments.
The Company evaluates the performance of its segments based primarily on income from operations. Income from operations includes those revenues and expenses that are directly attributable to management of the respective segment. The Logistics segment’s revenues include intersegment transactions with the Company’s Refining segment at prices the Company believes are substantially equivalent to the prices that could have been negotiated with unaffiliated parties with respect to similar services. Activities of the Company’s business that are not included in the two operating segments are included in Corporate. Such activities consist primarily of corporate staff operations and other items that are not specific to the normal operations of the two operating segments. The Company does not allocate non-operating income and expense items, including income taxes, to the individual segments. The Refining segment’s operating subsidiaries and PBFX are primarily pass-through entities with respect to income taxes.
Total assets of each segment consist of property, plant and equipment, inventories, cash and cash equivalents, accounts receivables and other assets directly associated with the segment’s operations. Corporate assets consist primarily of deferred tax assets, non-operating property, plant and equipment and other assets not directly related to the Company’s refinery and logistics operations.
Disclosures regarding the Company’s reportable segments with reconciliations to consolidated totals for the three and nine months ended September 30, 2020 and September 30, 2019 are presented below. In connection with certain contributions by PBF LLC to PBFX, the accompanying segment information is retrospectively adjusted to include the historical results of those assets in the Logistics segment for all periods presented prior to such contributions, as applicable.

52

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, 2020
PBF Energy - (in millions)
RefiningLogisticsCorporate  EliminationsConsolidated Total
Revenues$3,649.2 $89.0 $ $(70.7)$3,667.5 
Depreciation and amortization expense115.9 14.4 2.7  133.0 
Income (loss) from operations (367.0)55.6 (31.3) (342.7)
Interest expense, net(0.8)11.5 59.7  70.4 
Capital expenditures53.0 1.7 2.0  56.7 

Three Months Ended September 30, 2019
RefiningLogisticsCorporate  EliminationsConsolidated Total
Revenues$6,422.1 $86.4 $ $(78.0)$6,430.5 
Depreciation and amortization expense98.7 9.0 2.1  109.8 
Income (loss) from operations 169.8 44.4 (62.3) 151.9 
Interest expense, net(0.7)13.4 27.0  39.7 
Capital expenditures117.2 8.0 2.7  127.9 

Nine Months Ended September 30, 2020

RefiningLogisticsCorporateEliminationsConsolidated Total
Revenues$11,408.3 $271.2 $ $(218.7)$11,460.8 
Depreciation and amortization expense332.4 36.9 8.4  377.7 
Income (loss) from operations (1,138.8)153.4 (103.3) (1,088.7)
Interest expense, net0.7 37.0 147.4  185.1 
Capital expenditures (3)1,500.9 9.6 9.2  1,519.7 

Nine Months Ended September 30, 2019
RefiningLogisticsCorporate  EliminationsConsolidated Total
Revenues$18,182.7 $248.0 $ $(224.0)$18,206.7 
Depreciation and amortization expense288.3 26.6 7.8  322.7 
Income (loss) from operations (1)(2)583.0 116.4 (165.5)(7.9)526.0 
Interest expense, net0.7 38.0 82.6  121.3 
Capital expenditures600.2 23.2 6.4  629.8 

Balance at September 30, 2020
RefiningLogisticsCorporate  EliminationsConsolidated Total
Total assets $9,250.1 $941.8 $55.3 $(55.9)$10,191.3 

Balance at December 31, 2019
RefiningLogisticsCorporate  EliminationsConsolidated Total
Total assets$8,154.8 $973.0 $52.7 $(48.1)$9,132.4 


53

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, 2020
PBF LLC - (in millions)
RefiningLogisticsCorporateEliminationsConsolidated Total
Revenues$3,649.2 $89.0 $ $(70.7)$3,667.5 
Depreciation and amortization expense115.9 14.4 2.7  133.0 
Income (loss) from operations(367.0)55.6 (31.1) (342.5)
Interest expense, net(0.8)11.5 62.3  73.0 
Capital expenditures53.0 1.7 2.0  56.7 

Three Months Ended September 30, 2019
RefiningLogisticsCorporateEliminationsConsolidated Total
Revenues$6,422.1 $86.4 $ $(78.0)$6,430.5 
Depreciation and amortization expense98.7 9.0 2.1  109.8 
Income (loss) from operations 169.8 44.4 (61.9) 152.3 
Interest expense, net(0.7)13.4 29.6  42.3 
Capital expenditures 117.2 8.0 2.7  127.9 

Nine Months Ended September 30, 2020

RefiningLogisticsCorporateEliminationsConsolidated Total
Revenues$11,408.3 $271.2 $ $(218.7)$11,460.8 
Depreciation and amortization expense332.4 36.9 8.4  377.7 
Income (loss) from operations(1,138.8)153.4 (102.8) (1,088.2)
Interest expense, net0.7 37.0 155.1  192.8 
Capital expenditures (3)1,500.9 9.6 9.2  1,519.7 

Nine Months Ended September 30, 2019
RefiningLogisticsCorporate  EliminationsConsolidated Total
Revenues$18,182.7 $248.0 $ $(224.0)$18,206.7 
Depreciation and amortization expense288.3 26.6 7.8  322.7 
Income (loss) from operations (1)(2)583.0 116.4 (164.4)(7.9)527.1 
Interest expense, net0.7 38.0 89.6  128.3 
Capital expenditures600.2 23.2 6.4  629.8 

Balance at September 30, 2020
RefiningLogisticsCorporate  EliminationsConsolidated Total
Total assets$9,250.1 $941.8 $53.7 $(55.9)$10,189.7 

Balance at December 31, 2019
RefiningLogisticsCorporate  EliminationsConsolidated Total
Total assets$8,154.8 $973.0 $49.4 $(48.1)$9,129.1 

54

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)    On April 24, 2019, PBFX entered into a contribution agreement with PBF LLC (the “TVPC Contribution Agreement”), pursuant to which PBF LLC contributed to PBFX all of the issued and outstanding limited liability company interests of TVP Holding Company LLC (“TVP Holding”) for total consideration of $200.0 million (the “TVPC Acquisition”). Prior to the TVPC Acquisition, TVP Holding owned a 50% equity interest in Torrance Valley Pipeline Company LLC (“TVPC”). Subsequent to the closing of the TVPC Acquisition on May 31, 2019, PBFX owns 100% of the membership interests in TVPC.
(2)    Prior to the TVPC Contribution Agreement, the Logistics segment included 100% of the income from operations of TVPC, as TVPC was consolidated by PBFX. PBFX recorded net income attributable to noncontrolling interest for the 50% equity interest in TVPC held by PBF Holding. PBF Holding (included in the Refining segment) recorded equity income in investee related to its 50% noncontrolling ownership interest in TVPC. For purposes of the Company’s Condensed Consolidated Financial Statements, PBF Holding’s equity income in investee and PBFX’s net income attributable to noncontrolling interest eliminated in consolidation.
(3)    The Refining segment includes capital expenditures of $1,176.2 million for the acquisition of the Martinez refinery in the first quarter of 2020.


55

PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

19. NET INCOME (LOSS) PER SHARE OF PBF ENERGY
The Company grants certain equity-based compensation awards to employees and non-employee directors that are considered to be participating securities. Due to the presence of participating securities, the Company has calculated net income (loss) per share of PBF Energy Class A common stock using the two-class method.
The following table sets forth the computation of basic and diluted net income (loss) per share of PBF Energy Class A common stock attributable to PBF Energy for the periods presented:

(in millions, except share and per share amounts)Three Months Ended September 30,Nine Months Ended September 30,
Basic Earnings Per Share:
2020201920202019
Allocation of earnings:
Net income (loss) attributable to PBF Energy Inc. stockholders
$(417.2)$69.5 $(1,094.0)$266.4 
Less: Income allocated to participating securities
 0.2 0.1 0.4 
Income (loss) available to PBF Energy Inc. stockholders - basic
$(417.2)$69.3 $(1,094.1)$266.0 
Denominator for basic net income (loss) per Class A common share - weighted average shares
119,684,030 119,921,346 119,561,388 119,897,504 
Basic net income (loss) attributable to PBF Energy per Class A common share
$(3.49)$0.58 $(9.15)$2.22 
Diluted Earnings Per Share:
Numerator:
Income (loss) available to PBF Energy Inc. stockholders - basic
$(417.2)$69.3 $(1,094.1)$266.0 
Plus: Net income (loss) attributable to noncontrolling interest (1)
 0.9 (13.6)3.6 
Less: Income tax benefit (expense) on net income attributable to noncontrolling interest (1)
 (0.3)3.6 (0.9)
Numerator for diluted net income (loss) per PBF Energy Class A common share - net income (loss) attributable to PBF Energy Inc. stockholders (1)
$(417.2)$69.9 $(1,104.1)$268.7 
Denominator:(1)
Denominator for basic net income (loss) per PBF Energy Class A common share-weighted average shares
119,684,030 119,921,346 119,561,388 119,897,504 
Effect of dilutive securities:(2)
Conversion of PBF LLC Series A Units
 1,206,325 1,066,849 1,206,325 
Common stock equivalents
 461,508  768,035 
Denominator for diluted net income (loss) per PBF Energy Class A common share-adjusted weighted average shares
119,684,030 121,589,179 120,628,237 121,871,864 
Diluted net income (loss) attributable to PBF Energy Inc. stockholders per PBF Energy Class A common share
$(3.49)$0.57 $(9.15)$2.20 
___________________________________________
 
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PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)    The diluted earnings per share calculation generally assumes the conversion of all outstanding PBF LLC Series A Units to PBF Energy Class A common stock. The net income (loss) attributable to PBF Energy used in the numerator of the diluted earnings per share calculation is adjusted to reflect the net income (loss), as well as the corresponding income tax expense (benefit) (based on a 26.3% estimated annualized statutory corporate tax rate for the three and nine months ended September 30, 2020 and a 26.5% estimated annualized statutory corporate tax rate for the three and nine months ended September 30, 2019), attributable to the converted units.
During the three months ended September 30, 2020, 975,133 PBF LLC Series A Units convertible into PBF Energy Class A common stock were excluded from the denominator in computing diluted net income (loss) per share because including them would have had an anti-dilutive effect. As the potential conversion of the PBF LLC Series A Units and common stock equivalents were not included, the numerator used in the calculation of diluted net income (loss) per share was equal to the numerator used in the calculation of basic net income (loss) per share and does not include the net income (loss) and income tax attributable to the net income (loss) associated with the potential conversion of the PBF LLC Series A Units and common stock equivalents.
(2)    Represents an adjustment to weighted-average diluted shares outstanding to assume the full exchange of common stock equivalents, including options and warrants for PBF LLC Series A Units and performance share units and options for shares of PBF Energy Class A common stock as calculated under the treasury stock method (to the extent the impact of such exchange would not be anti-dilutive). Common stock equivalents exclude the effects of performance share units and options and warrants to purchase 12,358,105 and 12,152,756 shares of PBF Energy Class A common stock and PBF LLC Series A units because they were anti-dilutive for the three and nine months ended September 30, 2020. Common stock equivalents exclude the effects of performance share units and options and warrants to purchase 7,739,275 and 6,003,867 shares of PBF Energy Class A common stock and PBF LLC Series A units because they are anti-dilutive for the three and nine months ended September 30, 2019, respectively. For periods showing a net loss, all common stock equivalents and unvested restricted stock are considered anti-dilutive.


20. SUBSEQUENT EVENTS
East Coast Refining Reconfiguration
On October 29, 2020, PBF Energy announced their plan to reconfigure the East Coast refinery system comprised of the Delaware City and Paulsboro refineries. As part of the reconfiguration process, the Company will be idling certain of their major processing units at the Paulsboro refinery, resulting in lower overall throughput and inventory levels in addition to decreases in capital and operating costs.
The reconfiguration and optimization process is expected to be complete by the end of the year and will provide the Company with crude optionality and increased flexibility to respond to evolving market conditions. As a result of the reconfiguration, the Company expects to incur charges in the fourth quarter of 2020 of approximately $15.0 million related to severance and employee related expenses.
PBFX Distributions
On October 29, 2020, the Board of Directors of PBF GP announced a distribution of $0.30 per unit on outstanding common units of PBFX. The distribution is payable on November 30, 2020 to PBFX unitholders of record at the close of business on November 16, 2020.


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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited financial statements of PBF Energy and PBF LLC included in the Annual Report on Form 10-K for the year ended December 31, 2019 and the unaudited financial statements and related notes included in this report. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements.”
PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 99.2% of the outstanding economic interests in PBF LLC as of September 30, 2020. PBF LLC is a holding company for the companies that directly and indirectly own and operate our business. PBF Holding is a wholly-owned subsidiary of PBF LLC and PBF Finance is a wholly-owned subsidiary of PBF Holding. As of September 30, 2020, PBF LLC also holds a 48.0% limited partner interest and a non-economic general partner interest in PBFX, a publicly-traded MLP.
Unless the context indicates otherwise, the terms “we,” “us,” and “our” refer to PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding and its subsidiaries and PBFX and its subsidiaries. Discussions on areas that either apply only to PBF Energy or PBF LLC are clearly noted in such sections.

58


Overview
We are one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. We sell our products throughout the Northeast, Midwest, Gulf Coast and West Coast of the United States, as well as in other regions of the United States, Canada and Mexico and are able to ship products to other international destinations. As of September 30, 2020, we own and operate six domestic oil refineries and related assets with a combined processing capacity, known as throughput, of approximately 1,050,000 barrels per day (“bpd”), and a weighted-average Nelson Complexity Index of 12.8. We operate in two reportable business segments: Refining and Logistics. Our six oil refineries are all engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX operates certain logistics assets such as crude oil and refined petroleum products terminals, pipelines, and storage facilities, which are aggregated into the Logistics segment.
Our six refineries are located in Delaware City, Delaware, Paulsboro, New Jersey, Toledo, Ohio, Chalmette, Louisiana, Torrance, California and Martinez, California. Each refinery is briefly described in the table below:
RefineryRegionNelson Complexity IndexThroughput Capacity (in bpd)PADD
Crude Processed (1)
Source (1)
Delaware CityEast Coast11.3190,0001light sweet through heavy sourwater, rail
PaulsboroEast Coast13.2180,0001light sweet through heavy sourwater
ToledoMid-Continent9.2170,0002light sweetpipeline, truck, rail
ChalmetteGulf Coast12.7189,0003light sweet through heavy sourwater, pipeline
TorranceWest Coast14.9155,0005medium and heavypipeline, water, truck
MartinezWest Coast16.1157,0005medium and heavypipeline and water
________
(1) Reflects the typical crude and feedstocks and related sources utilized under normal operating conditions and prevailing market environments.
As of September 30, 2020, PBF Energy owned 120,172,826 PBF LLC Series C Units and our current and former executive officers and directors and certain employees and others held 970,647 PBF LLC Series A Units (we refer to all of the holders of the PBF LLC Series A Units as “the members of PBF LLC other than PBF Energy”). As a result, the holders of our issued and outstanding shares of our PBF Energy Class A common stock have approximately 99.2% of the voting power in us, and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock have approximately 0.8% of the voting power in us (99.0% and 1.0% as of December 31, 2019, respectively).
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Business Developments
Recent significant business developments affecting us are discussed below.
COVID-19
The outbreak of the COVID-19 pandemic and certain developments in the global oil markets continue to negatively impact worldwide economic and commercial activity and financial markets, as well as global demand for petroleum and petrochemical products. The COVID-19 pandemic and related governmental responses have also resulted in significant business and operational disruptions, including business and school closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces and has resulted in significantly lower demand for refined petroleum products. We believe, but cannot guarantee, that demand for refined petroleum products will ultimately rebound as governmental restrictions are lifted. However, the ultimate significance of the COVID-19 pandemic on our business will be dictated by its currently unknowable duration and the rate at which people are willing and able to resume activities even after governmental restrictions are lifted. In addition, recent global geopolitical and macroeconomic events have further contributed to the overall volatility in crude oil and refined product prices and may continue to do so in the future.
The price of refined products we sell and the crude oil we purchase impacts our revenues, income from operations, net income and cash flows. In addition, a decline in the market prices for products and feedstocks held in our inventories below the carrying value of our inventory may result in the adjustment of the value of our inventories to the lower market price and a corresponding loss on the value of our inventories, and any such adjustment is likely to be material.
We are actively responding to the impacts from these matters on our business. In late March and through early April 2020, we started reducing the amount of crude oil processed at our refineries in response to the decreased demand for our products and we temporarily idled various units at certain of our refineries to optimize our production in light of prevailing market conditions. Currently, our refineries are still operating at reduced throughput levels across our refining system as demand for refined products continues to be lower than historical norms due to the COVID-19 pandemic.
As previously announced, we have adjusted our operational plans to the evolving market conditions and taken steps to lower our 2020 operating expenses budget through significant reductions in discretionary activities and third party services. We continue to target and execute these expense reduction measures. Through the end of the third quarter, we exceeded our full-year goal of $140.0 million in total operating expense reductions by achieving over $225.0 million in reductions, including energy. While some of these savings are a result of reduced operational tempo, the majority are deliberate operating and other expense reductions. In addition, we continue to operate our refineries at reduced rates and expect near-term throughput to range from 700,000 to 800,000 barrels across our refining system. As the market conditions develop and the demand outlook becomes clearer, we will continue to adjust our operations in response.
On October 29, 2020, we announced an operational reconfiguration of our East Coast refining system comprised of our Delaware City and Paulsboro refineries. As part of the reconfiguration, the Paulsboro refinery will be idling certain of their major processing units. The reconfiguration is expected to be complete by year-end 2020 with future East Coast throughput capacity expected to be approximately 260,000 barrels per day, depending on market conditions. Annual operating and capital expenditures savings are expected to be approximately $100.0 million and $50.0 million, respectively, relative to average historic levels. As a result of the reconfiguration, we expects to incur charges in the fourth quarter of 2020 of approximately $15.0 million related to severance and employee related expenses.
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In addition to the steps above with respect to our operations, we also have continued our focus on preserving liquidity and keeping our employees safe. We previously disclosed several transactions and initiatives related to these areas which included raising net proceeds of approximately $982.9 million in conjunction with our May issuance of 9.25% senior secured notes due 2025 (the “2025 Senior Secured Notes”), the sale of five hydrogen plants in April for gross proceeds of $530.0 million, significant reductions of approximately $357.0 million in 2020 planned capital expenditures, minimizing corporate overhead expenses primarily through temporary salary reductions, the suspension of PBF Energy’s quarterly dividend and the establishment of a company wide COVID-19 response team.
We continue to evaluate various other liquidity and cash flow optimization options in addition to safely and responsibly bringing back our workforce to the refineries and corporate office locations. As part of these cost saving initiatives, we reduced our workforce across our refineries in the second quarter in response to current challenging business conditions, which resulted in a $12.9 million charge. We have also continued to utilize our COVID-19 response team to implement additional social distancing measures across the workplace in addition to the continued enhancement of personal protective equipment and the cleanliness of our facilities. Through the guidance of our COVID-19 response team, we have started to bring back a portion of our workforce to their primary locations on a phased in approach, and we will continue to rely on our team and the evolution of the COVID-19 pandemic as we evaluate the appropriate time and way in which we will phase in the return of the rest of our workforce.
Many uncertainties remain with respect to the COVID-19 pandemic, including the extent to which the COVID-19 pandemic will continue to impact our business and operations, the effectiveness of the actions undertaken by national, regional, state and local governments and health officials to contain the virus or treat its effects, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume. We are unable to predict the ultimate economic impacts from the COVID-19 pandemic, however, we have been and will likely continue to be adversely impacted. There can be no guarantee that measures taken to date to mitigate known impacts of the COVID-19 pandemic will be effective.
Refer to “Liquidity” and “Part II - Other Information - Item 1A. Risk Factors” for further information.

Factors Affecting Comparability Between Periods
Our results have been affected by the following events, the understanding of which will aid in assessing the comparability of our period to period financial performance and financial condition.
COVID-19
The impact of the unprecedented global health and economic crisis sparked by the COVID-19 pandemic was amplified late in the quarter ended March 31, 2020 due to movements made by the world’s largest oil producers to increase market share. This created simultaneous shocks in oil supply and demand resulting in an economic challenge to our industry which has not occurred since our formation. This combination has resulted in significant demand reduction for our refined products and atypical volatility in oil commodity prices, which may continue for the foreseeable future. Our results for the three and nine months ended September 30, 2020 were impacted by the sustained decreased demand for refined products and the significant decline in the price of crude oil, both of which negatively impacted our revenues, cost of products sold and operating income and lowered our liquidity. Throughput rates across our refining system also decreased and we are currently operating our refineries at reduced rates. Refer to “Item 1A. Risk Factors” included in “Part II - Other Information” of this Form 10-Q for further information.
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Tax Receivable Agreement
As of September 30, 2020, PBF Energy has recognized a liability for the Tax Receivable Agreement of $132.9 million ($373.5 million as of December 31, 2019) reflecting the estimate of the undiscounted amounts that the Company expects to pay under the agreement, net of the impact of a deferred tax asset valuation allowance recognized in accordance with ASC 740, Income Taxes. As future taxable income is recognized, increases in our Tax Receivable Agreement liability may be necessary in conjunction with the revaluation of deferred tax assets. Refer to “Note 9 - Commitments and Contingencies” and “Note 15 - Income Taxes” for more details.
Severance Costs
Following the onset of the COVID-19 pandemic, we have implemented a number of cost reduction initiatives to strengthen our financial flexibility and rationalize overhead expenses, including reductions in our workforce. During the second quarter of 2020, we reduced headcount across our refineries, which resulted in approximately $12.9 million of severance related costs included in General and administrative expenses.
Sale of Hydrogen Plants
On April 17, 2020, we closed on the sale of five hydrogen plants to Air Products and Chemicals, Inc. (“Air Products”) in a sale-leaseback transaction for gross cash proceeds of $530.0 million and recognized a gain of $471.1 million. In connection with the sale, we entered into a transition services agreement through which Air Products will exclusively supply hydrogen, steam, carbon dioxide and other products (the “Products”) to the Martinez, Torrance and Delaware City refineries for a specified period (not expected to exceed 18 months). The transition services agreement also requires certain maintenance and operating activities to be provided by PBF Holding, for which we will be reimbursed, during the term of the agreement. In August 2020, the parties executed long-term supply agreements through which Air Products will supply the Products for a term of fifteen years at these same refineries.
Debt and Credit Facilities
Catalyst Financing Obligations
On September 25, 2020, we closed on agreements to sell a portion of our precious metals catalyst to certain major commercial banks for approximately $51.9 million and subsequently leased the catalyst back. The precious metals financing arrangements cover a portion of the catalyst used at our Delaware City, Martinez and Toledo refineries. The volumes of the precious metal catalyst and the interest rates are fixed over the term of each financing arrangement. At maturity in 2021, we are obligated to repurchase the precious metals catalyst at fair market value.
Senior Notes
On May 13, 2020, we issued $1.0 billion in aggregate principal amount of the 2025 Senior Secured Notes. The net proceeds from this offering were approximately $982.9 million after deducting the initial purchasers’ discount and offering expenses. We used the net proceeds for general corporate purposes.
On January 24, 2020, we issued $1.0 billion in aggregate principal amount of 6.00% senior unsecured notes due 2028 (the “2028 Senior Notes”). The net proceeds from this offering were approximately $987.0 million after deducting the initial purchasers’ discount and offering expenses. We used the proceeds primarily to fully redeem our 7.00% senior notes due 2023 (the “2023 Senior Notes”) and to fund a portion of the cash consideration for the Martinez Acquisition (as defined below).
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On February 14, 2020, we exercised our rights under the indenture governing the 2023 Senior Notes to redeem all of the outstanding 2023 Senior Notes at a price of 103.5% of the aggregate principal amount thereof plus accrued and unpaid interest. The aggregate redemption price for all 2023 Senior Notes approximated $517.5 million plus accrued and unpaid interest. The difference between the carrying value of the 2023 Senior Notes on the date they were redeemed and the amount for which they were redeemed was $22.2 million and has been classified as Debt extinguishment costs in the Condensed Consolidated Statement of Operations as of September 30, 2020.
Refer to “Note 7 - Debt” of our Notes to Condensed Consolidated Financial Statements, for further information.
Revolving Credit Facility
During the nine months ended September 30, 2020, we used advances under our PBF Holding’s asset-based revolving credit agreement (the “Revolving Credit Facility”) to fund a portion of the Martinez Acquisition (as defined below) and for other general corporate purposes. The outstanding borrowings under the Revolving Credit Facility as of September 30, 2020 were $900.0 million. There were no outstanding borrowings under the Revolving Credit Facility as of December 31, 2019.
PBFX Revolving Credit Facility
During the nine months ended September 30, 2020, we made net repayments of $70.0 million on the PBFX Revolving Credit Facility, resulting in outstanding borrowings as of September 30, 2020 of $213.0 million. There was $283.0 million of outstanding borrowings under the PBFX five-year, $500.0 million amended and restated revolving credit facility (the “PBFX Revolving Credit Facility”) as of December 31, 2019.
Martinez Acquisition
On February 1, 2020, we acquired from Equilon Enterprises LLC d/b/a Shell Oil Products US (the "Seller"), the Martinez refinery and related logistics assets (collectively, the "Martinez Acquisition"), pursuant to a sale and purchase agreement dated June 11, 2019 (the “Sale and Purchase Agreement”). The Martinez refinery is located on an 860-acre site in the City of Martinez, 30 miles northeast of San Francisco, California. The refinery is a high-conversion 157,000 bpd, dual-coking facility with a Nelson Complexity Index of 16.1, making it one of the most complex refineries in the United States. The facility is strategically positioned in Northern California and provides for operating and commercial synergies with the Torrance refinery located in Southern California. The Martinez Acquisition further increased our total throughput capacity to over 1,000,000 bpd.
In addition to refining assets, the Martinez Acquisition includes a number of high-quality onsite logistics assets including a deep-water marine facility, product distribution terminals and refinery crude and product storage facilities with approximately 8.8 million barrels of shell capacity.
The aggregate purchase price for the Martinez Acquisition was $1,253.4 million, including final working capital of $216.1 million and the obligation to make post-closing earn-out payments to the Seller based on certain earnings thresholds of the Martinez refinery (as set forth in the Sale and Purchase Agreement), for a period of up to four years following the closing date (the “Martinez Contingent Consideration”). The transaction was financed through a combination of cash on hand, including proceeds from the 2028 Senior Notes, and borrowings under the Revolving Credit Facility.
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Torrance Land Sale
On August 1, 2019, we closed on a third-party sale of parcels of real property acquired as part of the Torrance refinery, but not part of the refinery itself. The sale resulted in a gain of approximately $33.1 million in the third quarter of 2019, included within Gain on sale of assets in the Condensed Consolidated Statements of Operations.
PBFX Equity Offering
On April 24, 2019, PBFX entered into subscription agreements to sell an aggregate of 6,585,500 common units to certain institutional investors in a registered direct public offering (the “2019 Registered Direct Offering”) for gross proceeds of approximately $135.0 million. The 2019 Registered Direct Offering closed on April 29, 2019.
PBFX Assets and Transactions
PBFX’s assets consist of various logistics assets. Apart from business associated with certain third-party acquisitions, PBFX’s revenues are derived from long-term, fee-based commercial agreements with subsidiaries of PBF Holding, which include minimum volume commitments, for receiving, handling, transferring and storing crude oil, refined products and natural gas. These transactions are eliminated by PBF Energy and PBF LLC in consolidation.
Since the inception of PBFX in 2014, PBF LLC and PBFX have entered into a series of drop-down transactions. Such transactions and third-party acquisitions made by PBFX in the current or prior periods are discussed below.
TVPC Acquisition
On April 24, 2019, PBFX entered into a contribution agreement with PBF LLC, pursuant to which PBF LLC contributed to PBFX all of the issued and outstanding limited liability company interests of TVP Holding Company LLC (“TVP Holding”) for total consideration of $200.0 million (the “TVPC Acquisition”). Prior to the TVPC Acquisition, TVP Holding owned a 50% membership interest in Torrance Valley Pipeline Company LLC (“TVPC”). Subsequent to the closing of the TVPC Acquisition on May 31, 2019, PBFX owns 100% of the membership interests in TVPC. The transaction was financed through a combination of proceeds from the 2019 Registered Direct Offering and borrowings under the PBFX Revolving Credit Facility.
PBFX IDR Restructuring
On February 28, 2019, PBFX closed on the transaction contemplated by the Equity Restructuring Agreement with PBF LLC and PBF Logistics GP LLC (“PBF GP”), pursuant to which PBFX’s incentive distribution rights (the “IDRs”) held by PBF LLC were canceled and converted into 10,000,000 newly issued PBFX common units (the “IDR Restructuring”). Subsequent to the closing of the IDR Restructuring, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions by PBFX.
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Results of Operations
The tables below reflect our consolidated financial and operating highlights for the three and nine months ended September 30, 2020 and 2019 (amounts in millions, except per share data). Differences between the results of operations of PBF Energy and PBF LLC primarily pertain to income taxes, interest expense and noncontrolling interest as shown below. Earnings per share information applies only to the financial results of PBF Energy. We operate in two reportable business segments: Refining and Logistics. Our oil refineries, excluding the assets owned by PBFX, are all engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX is a publicly-traded MLP that operates certain logistics assets such as crude oil and refined petroleum products terminals, pipelines and storage facilities. PBFX’s operations are aggregated into the Logistics segment. We do not separately discuss our results by individual segments as, apart from PBFX’s third-party acquisitions, our Logistics segment did not have any significant third-party revenues and a significant portion of its operating results eliminate in consolidation.

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PBF Energy Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$3,667.5 $6,430.5 $11,460.8 $18,206.7 
Cost and expenses:
Cost of products and other3,378.6 5,700.2 11,095.0 15,865.2 
Operating expenses (excluding depreciation and amortization expense as reflected below)471.9 436.5 1,445.7 1,348.7 
Depreciation and amortization expense130.3 107.7 369.3 314.9 
Cost of sales3,980.8 6,244.4 12,910.0 17,528.8 
General and administrative expenses (excluding depreciation and amortization expense as reflected below)46.6 64.7 187.0 175.9 
Depreciation and amortization expense2.7 2.1 8.4 7.8 
Change in fair value of contingent consideration(28.6)— (93.5)— 
Impairment expense7.0 — 7.0 — 
Loss (gain) on sale of assets 1.7 (32.6)(469.4)(31.8)
Total cost and expenses4,010.2 6,278.6 12,549.5 17,680.7 
Income (loss) from operations(342.7)151.9 (1,088.7)526.0 
Other income (expense):
Interest expense, net (70.4)(39.7)(185.1)(121.3)
Change in Tax Receivable Agreement liability252.2 — 240.6 — 
Change in fair value of catalyst obligations(2.4)(3.8)4.2 (6.4)
Debt extinguishment costs— — (22.2)— 
Other non-service components of net periodic benefit (cost)1.1 (0.1)3.2 (0.2)
Income (loss) before income taxes (162.2)108.3 (1,048.0)398.1 
Income tax expense (benefit)235.6 22.0 (0.7)92.0 
Net income (loss)(397.8)86.3 (1,047.3)306.1 
Less: net income attributable to noncontrolling interests19.4 16.8 46.7 39.7 
Net income (loss) attributable to PBF Energy Inc. stockholders$(417.2)$69.5 $(1,094.0)$266.4 
Consolidated gross margin$(313.3)$186.1 $(1,449.2)$677.9 
Gross refining margin (1)
$203.1 $647.6 $108.0 $2,106.6 
Net income (loss) available to Class A common stock per share:
Basic$(3.49)$0.58 $(9.15)$2.22 
Diluted$(3.49)$0.57 $(9.15)$2.20 

(1) See Non-GAAP Financial Measures.

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PBF LLCThree Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$3,667.5 $6,430.5 $11,460.8 $18,206.7 
Cost and expenses:
Cost of products and other3,378.6 5,700.2 11,095.0 15,865.2 
Operating expenses (excluding depreciation and amortization expense as reflected below)471.9 436.5 1,445.7 1,348.7 
Depreciation and amortization expense130.3 107.7 369.3 314.9 
Cost of sales3,980.8 6,244.4 12,910.0 17,528.8 
General and administrative expenses (excluding depreciation and amortization expense as reflected below)46.4 64.3 186.5 174.8 
Depreciation and amortization expense2.7 2.1 8.4 7.8 
Change in fair value of contingent consideration(28.6)— (93.5)— 
Impairment expense 7.0 — 7.0 — 
Loss (gain) on sale of assets 1.7 (32.6)(469.4)(31.8)
Total cost and expenses4,010.0 6,278.2 12,549.0 17,679.6 
Income (loss) from operations(342.5)152.3 (1,088.2)527.1 
Other income (expense):
Interest expense, net (73.0)(42.3)(192.8)(128.3)
Change in fair value of catalyst obligations(2.4)(3.8)4.2 (6.4)
Debt extinguishment costs — — (22.2)— 
Other non-service components of net periodic benefit (cost)1.1 (0.1)3.2 (0.2)
Income (loss) before income taxes (416.8)106.1 (1,295.8)392.2 
Income tax (benefit) expense(1.2)(2.0)8.6 (7.4)
Net income (loss) (415.6)108.1 (1,304.4)399.6 
Less: net income attributable to noncontrolling interests22.8 16.0 60.3 36.1 
Net income (loss) attributable to PBF Energy Company LLC$(438.4)$92.1 $(1,364.7)$363.5 


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Operating HighlightsThree Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Key Operating Information
Production (bpd in thousands)716.7 863.0 750.2 817.9 
Crude oil and feedstocks throughput (bpd in thousands)706.1 850.9 744.6 816.4 
Total crude oil and feedstocks throughput (millions of barrels)65.0 78.3 204.0 222.9 
Consolidated gross margin per barrel of throughput $(4.82)$2.38 $(7.10)$3.04 
Gross refining margin, excluding special items, per barrel of throughput (1)
$2.98 $8.87 $3.92 $8.21 
Refinery operating expense, per barrel of throughput$6.96 $5.26 $6.78 $5.72 
Crude and feedstocks (% of total throughput) (2)
Heavy 43 %32 %43 %31 %
Medium 25 %30 %26 %30 %
Light 18 %25 %17 %25 %
Other feedstocks and blends14 %13 %14 %14 %
Total throughput 100 %100 %100 %100 %
Yield (% of total throughput)
Gasoline and gasoline blendstocks54 %50 %50 %48 %
Distillates and distillate blendstocks28 %33 %31 %32 %
Lubes%%%%
Chemicals%%%%
Other18 %15 %18 %17 %
Total yield102 %101 %101 %100 %


(1)    See Non-GAAP Financial Measures.
(2)    We define heavy crude oil as crude oil with American Petroleum Institute (“API”) gravity less than 24 degrees. We define medium crude oil as crude oil with API gravity between 24 and 35 degrees. We define light crude oil as crude oil with API gravity higher than 35 degrees.
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The table below summarizes certain market indicators relating to our operating results as reported by Platts. 
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(dollars per barrel, except as noted)
Dated Brent crude oil$43.05 $61.86 $40.74 $64.71 
West Texas Intermediate (WTI) crude oil$40.91 $56.40 $38.12 $57.08 
Light Louisiana Sweet (LLS) crude oil$42.46 $60.60 $40.13 $63.35 
Alaska North Slope (ANS) crude oil $42.75 $62.98 $41.32 $65.23 
Crack Spreads
Dated Brent (NYH) 2-1-1$8.30 $14.72 $9.30 $12.73 
WTI (Chicago) 4-3-1$7.08 $16.51 $6.56 $16.69 
LLS (Gulf Coast) 2-1-1$6.53 $14.32 $7.79 $12.32 
ANS (West Coast-LA) 4-3-1$11.70 $18.81 $11.41 $18.49 
ANS (West Coast-SF) 3-2-1$10.88 $18.38 $9.77 $17.20 
Crude Oil Differentials
Dated Brent (foreign) less WTI$2.14 $5.46 $2.62 $7.63 
Dated Brent less Maya (heavy, sour)$3.88 $6.36 $5.95 $5.58 
Dated Brent less WTS (sour)$2.09 $6.01 $2.72 $8.76 
Dated Brent less ASCI (sour)$1.38 $2.98 $1.99 $3.11 
WTI less WCS (heavy, sour)$9.29 $12.79 $10.58 $11.78 
WTI less Bakken (light, sweet)$1.23 $0.74 $2.57 $0.53 
WTI less Syncrude (light, sweet)$1.94 $(0.89)$1.58 $(0.30)
WTI less LLS (light, sweet)$(1.55)$(4.20)$(2.01)$(6.27)
WTI less ANS (light, sweet)$(1.84)$(6.58)$(3.20)$(8.15)
Natural gas (dollars per MMBTU)$2.12 $2.33 $1.92 $2.56 

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019
Overview— PBF Energy net loss was $397.8 million for the three months ended September 30, 2020 compared to net income of $86.3 million for the three months ended September 30, 2019. PBF LLC net loss was $415.6 million for the three months ended September 30, 2020 compared to net income of $108.1 million for the three months ended September 30, 2019. Net loss attributable to PBF Energy was $417.2 million, or $(3.49) per diluted share, for the three months ended September 30, 2020 ($(3.49) per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss, or $(2.87) per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss excluding special items, as described below in Non-GAAP Financial Measures) compared to net income attributable to PBF Energy of $69.5 million, or $0.57 per diluted share, for the three months ended September 30, 2019 ($0.57 per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net income, or $0.66 per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net income excluding special items, as described below in Non-GAAP Financial Measures). The net loss attributable to PBF Energy represents PBF Energy’s equity interest in PBF LLC’s pre-tax income, less applicable income tax expense. PBF Energy’s weighted-average equity interest in PBF LLC was 99.2% and 99.0% for the three months ended September 30, 2020 and 2019, respectively.
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Our results for the three months ended September 30, 2020 were positively impacted by special items consisting of a non-cash, pre-tax lower of cost or market (“LCM”) inventory adjustment of approximately $9.9 million, or $7.3 million net of tax, a change in fair value of the contingent consideration associated with earn-out obligations related to both the Martinez Acquisition and PBFX CPI acquisition, of $28.6 million, or $21.1 million net of tax and a pre-tax benefit of $252.2 million, or $185.9 million net of tax, related to the change in our Tax Receivable Agreement liability (as defined in “Note 9 - Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements). Our results for the three months ended September 30, 2020 were negatively impacted by impairment expense of $7.0 million, or $5.2 million net of tax, related to the write-down of certain PBFX long-lived assets and a net tax expense of $282.3 million associated with the remeasurement of certain deferred tax assets. Our results for the three months ended September 30, 2019 were negatively impacted by a special item consisting of a pre-tax LCM inventory adjustment of approximately $47.0 million, or $34.6 million net of tax, partially offset by a pre-tax gain on the sale of land at our Torrance refinery of $33.1 million, or $24.3 million net of tax. The LCM inventory adjustments were recorded due to movements in the price of crude oil and refined products in the periods presented.
Excluding the impact of these special items, our results were negatively impacted by the ongoing COVID-19 pandemic which has caused a significant decline in the demand for our refined products and a decrease in the prices for crude oil and refined products, both of which have negatively impacted our revenues, cost of products sold and operating income. In addition, during the current quarter we experienced unfavorable movements in certain crude differentials, and overall lower throughput volumes and barrels sold across our refineries, as well as lower refining margins. All of our operating regions experienced lower refining margins for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Additionally, our results for the three months ended September 30, 2020 were negatively impacted by increased depreciation and amortization expense associated with the Martinez Acquisition and our continued investment in our refining assets.
Revenues— Revenues totaled $3.7 billion for the three months ended September 30, 2020 compared to $6.4 billion for the three months ended September 30, 2019, a decrease of approximately $2.7 billion, or 42.2%. Revenues per barrel were $49.57 and $69.85 for the three months ended September 30, 2020 and 2019, respectively, a decrease of 29.0% directly related to lower hydrocarbon commodity prices. For the three months ended September 30, 2020, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 251,400 bpd, 108,400 bpd, 125,600 bpd and 220,700 bpd, respectively. For the three months ended September 30, 2019, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 357,200 bpd, 151,100 bpd, 178,000 bpd and 164,600 bpd, respectively. For the three months ended September 30, 2020, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 287,500 bpd, 118,000 bpd, 137,400 bpd and 261,200 bpd, respectively. For the three months ended September 30, 2019, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 413,900 bpd, 163,300 bpd, 223,700 bpd and 199,600 bpd, respectively.
The throughput rates at our refineries were lower in the three months ended September 30, 2020 compared to the same period in 2019. Our Martinez refinery was not acquired until the first quarter of 2020 and is therefore not included in the prior period West Coast throughput. We operated our refineries at reduced rates during the third quarter and, based on current market conditions, we plan on continuing to operate our refineries at lower utilization until such time that sustained product demand justifies higher production. Total refined product barrels sold were higher than throughput rates, reflecting sales from inventory as well as sales and purchases of refined products outside our refineries.
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Consolidated Gross Margin— Consolidated gross margin totaled $(313.3) million for the three months ended September 30, 2020 compared to $186.1 million for the three months ended September 30, 2019, a decrease of approximately $499.4 million. Gross refining margin (as described below in Non-GAAP Financial Measures) totaled $203.1 million, or $3.13 per barrel of throughput for the three months ended September 30, 2020 compared to $647.6 million, or $8.27 per barrel of throughput for the three months ended September 30, 2019, a decrease of approximately $444.5 million. Gross refining margin excluding special items totaled $193.2 million or $2.98 per barrel of throughput for the three months ended September 30, 2020 compared to $694.6 million or $8.87 per barrel of throughput for the three months ended September 30, 2019, a decrease of $501.4 million.
Consolidated gross margin and gross refining margin were positively impacted by a non-cash LCM adjustment of approximately $9.9 million on a net basis, resulting from the increase in crude oil and refined product prices from the second quarter in 2020 to the end of the third quarter of 2020. Gross refining margin excluding the impact of special items decreased due to unfavorable movements in crude differentials and refining margins and decreased throughput rates across the majority of our refineries. For the three months ended September 30, 2019, special items impacting our margin calculations included a non-cash LCM inventory adjustment of approximately $47.0 million on a net basis, resulting from a decrease in crude oil and refined product prices.
Additionally, our results continue to be impacted by significant costs to comply with the Renewable Fuel Standard (“RFS”). Total RFS costs were $86.6 million for the three months ended September 30, 2020 in comparison to $31.6 million for the three months ended September 30, 2019.
Average industry margins and crude oil differentials were generally lower during the three months ended September 30, 2020 in comparison to the same period in 2019, primarily due to the extent of the impacts of the COVID-19 pandemic on regional demand and commodity prices.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was approximately $8.30 per barrel, or 43.6% lower, in the three months ended September 30, 2020, as compared to $14.72 per barrel in the same period in 2019. Our margins were negatively impacted from our refinery specific slate on the East Coast by tightening in the Dated Brent/Maya differentials, which decreased by $2.48 per barrel, offset by an increase in the WTI/Bakken differentials of $0.49 per barrel, in comparison to the same period in 2019. In addition, the WTI/WCS differential decreased significantly to $9.29 per barrel in the three months ended September 30, 2020 compared to $12.79 in the same period in 2019, which unfavorably impacted the cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread was $7.08 per barrel, or 57.1% lower, in the three months ended September 30, 2020 as compared to $16.51 per barrel in the same period in 2019. Our margins were positively impacted from our refinery specific slate in the Mid-Continent by an increasing WTI/Bakken differential, which averaged $1.23 per barrel in the three months ended September 30, 2020, as compared to $0.74 per barrel in the same period in 2019. Additionally, the WTI/Syncrude differential averaged a discount of $1.94 per barrel during the three months ended September 30, 2020 as compared to a premium of $0.89 per barrel in the same period of 2019.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $6.53 per barrel, or 54.4% lower, in the three months ended September 30, 2020 as compared to $14.32 per barrel in the same period in 2019. Margins on the Gulf Coast were positively impacted from our refinery specific slate by an increasing WTI/LLS differential, which averaged a premium of $1.55 per barrel during the three months ended September 30, 2020 as compared to a premium of $4.20 per barrel in the same period of 2019.
On the West Coast the ANS (West Coast) 4-3-1 industry crack spread was $11.70 per barrel, or 37.8% lower, in the three months ended September 30, 2020 as compared to $18.81 per barrel in the same period in 2019. Margins on the West Coast were positively impacted from our refinery specific slate by a strengthening WTI/ANS differential, which averaged a premium of $1.84 per barrel during the three months ended September 30, 2020 as compared to a premium of $6.58 per barrel in the same period of 2019.
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Favorable movements in these benchmark crude differentials typically result in lower crude costs and positively impact our earnings while reductions in these benchmark crude differentials typically result in higher crude costs and negatively impact our earnings.
Operating Expenses— Operating expenses totaled $471.9 million for the three months ended September 30, 2020 compared to $436.5 million for the three months ended September 30, 2019, an increase of $35.4 million, or 8.1%. Of the total $471.9 million of operating expenses for the three months ended September 30, 2020, $452.4 million, or $6.96 per barrel of throughput, related to expenses incurred by the Refining segment, while the remaining $19.5 million related to expenses incurred by the Logistics segment ($411.8 million, or $5.26 per barrel of throughput, and $24.7 million of operating expenses for the three months ended September 30, 2019 related to the Refining and Logistics segments, respectively). Increases in operating expenses were mainly attributed to costs associated with the Martinez refinery and related logistic assets which totaled approximately $93.8 million for the three months ended September 30, 2020. Total operating expenses for the three months ended September 30, 2020, excluding our Martinez refinery, decreased due to our cost reduction initiatives taken to strengthen our financial flexibility and offset the negative impact of COVID-19, such as significant reductions in discretionary activities and third party services. Operating expenses related to our Logistics segment decreased as a result of lower discretionary spending, including maintenance and outside service costs, in response to the COVID-19 pandemic, as well as lower utility expenses due to lower energy usage.
General and Administrative Expenses— General and administrative expenses totaled $46.6 million for the three months ended September 30, 2020 compared to $64.7 million for the three months ended September 30, 2019, a decrease of approximately $18.1 million or 28.0%. The decrease in general and administrative expenses for the three months ended September 30, 2020 in comparison to the three months ended September 30, 2019 primarily related to a reduction in overhead expenses through temporary salary reductions to a large portion of our workforce. Our general and administrative expenses are comprised of personnel, facilities and other infrastructure costs necessary to support our refineries and related logistics assets.
Loss on Sale of Assets— There was a loss of $1.7 million for the three months ended September 30, 2020 related to the sale of non-operating refinery assets. There was a gain of $32.6 million on the sale of assets for the three months ended September 30, 2019 mainly attributed to the sale of a parcel of land at our Torrance refinery.
Depreciation and Amortization Expense— Depreciation and amortization expense totaled $133.0 million for the three months ended September 30, 2020 (including $130.3 million recorded within Cost of sales) compared to $109.8 million for the three months ended September 30, 2019 (including $107.7 million recorded within Cost of sales), an increase of $23.2 million. The increase was a result of additional depreciation expense associated with the assets acquired in the Martinez Acquisition and a general increase in our fixed asset base due to capital projects and turnarounds completed since the third quarter of 2019.
Change in Fair Value of Contingent Consideration— Change in fair value of contingent consideration was a gain of $28.6 million for the three months ended September 30, 2020. This change represents the decrease in the estimated fair value of the Martinez Contingent Consideration and the PBFX Contingent Consideration (as defined in “Note 9 - Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements) associated with acquisition related earn-out obligations. There were no such costs in the same period of 2019.
Change in Fair Value of Catalyst Obligations— Change in fair value of catalyst obligations represented a loss of $2.4 million for the three months ended September 30, 2020 compared to a loss of $3.8 million for the three months ended September 30, 2019. These losses relate to the change in value of the precious metals underlying the sale and leaseback of our refineries’ precious metal catalysts, which we are obligated to repurchase at fair market value upon lease termination.
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Impairment expense— Impairment expense totaled $7.0 million for the three months ended September 30, 2020, resulting from an impairment charge related to the write-down of certain PBFX long-lived assets.
Change in Tax Receivable Agreement Liability— Change in Tax Receivable Agreement liability for the three months ended September 30, 2020 represented a gain of $252.2 million. This gain was primarily the result of a deferred tax asset valuation allowance recorded in accordance with ASC 740, Income Taxes related to the reduction of deferred tax assets associated with the payments made or expected to be made in connection with the Tax Receivable Agreement liability. There was no change in the Tax Receivable Agreement liability for the three months ended September 30, 2019.
Interest Expense, net— PBF Energy interest expense totaled $70.4 million for the three months ended September 30, 2020 compared to $39.7 million for the three months ended September 30, 2019, an increase of approximately $30.7 million. This net increase is mainly attributable to higher interest costs associated with the issuance of the 2028 Senior Notes in February 2020, the 2025 Senior Secured Notes in May 2020 and higher outstanding borrowings on our Revolving Credit Facility. Interest expense includes interest on long-term debt including the PBFX credit facilities, costs related to the sale and leaseback of our precious metal catalysts, financing costs associated with the Inventory Intermediation Agreements with J. Aron, letter of credit fees associated with the purchase of certain crude oils and the amortization of deferred financing costs. PBF LLC interest expense totaled $73.0 million and $42.3 million for the three months ended September 30, 2020 and September 30, 2019, respectively (inclusive of $2.6 million and $2.6 million, respectively, of incremental interest expense on the affiliate note payable with PBF Energy that eliminates in consolidation at the PBF Energy level).
Income Tax Expense— PBF LLC is organized as a limited liability company and PBFX is an MLP, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income tax. However, two subsidiaries of Chalmette Refining, L.L.C. (“Chalmette Refining”) and our Canadian subsidiary are treated as C-Corporations for income tax purposes and may incur income taxes with respect to their earnings, as applicable. The members of PBF LLC are required to include their proportionate share of PBF LLC’s taxable income or loss, which includes PBF LLC’s allocable share of PBFX’s pre-tax income or loss, on their respective tax returns. PBF LLC generally makes distributions to its members, per the terms of PBF LLC’s amended and restated limited liability company agreement, related to such taxes on a pro-rata basis. PBF Energy recognizes an income tax expense or benefit in our Condensed Consolidated Financial Statements based on PBF Energy’s allocable share of PBF LLC’s pre-tax income or loss, which was approximately 99.2% and 99.0%, on a weighted-average basis for the three months ended September 30, 2020 and 2019, respectively. PBF Energy’s Condensed Consolidated Financial Statements do not reflect any benefit or provision for income taxes on the pre-tax income or loss attributable to the noncontrolling interests in PBF LLC or PBFX (although, as described above, PBF LLC must make tax distributions to all its members on a pro-rata basis). PBF Energy’s effective tax rate, excluding the impact of noncontrolling interests, for the three months ended September 30, 2020 and 2019 was (129.7)% and 24.0%, respectively. The effective tax rate for the three months ended September 30, 2020 was significantly impacted by the recording of a $348.6 million deferred tax asset valuation allowance.
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Noncontrolling Interest— PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, including PBFX. With respect to the consolidation of PBF LLC, the Company records a noncontrolling interest for the economic interest in PBF LLC held by members other than PBF Energy, and with respect to the consolidation of PBFX, the Company records a noncontrolling interest for the economic interests in PBFX held by the public unitholders of PBFX, and with respect to the consolidation of PBF Holding, the Company records a 20% noncontrolling interest for the ownership interests in two subsidiaries of Chalmette Refining held by a third party. The total noncontrolling interest on the Condensed Consolidated Statements of Operations represents the portion of the Company’s earnings or loss attributable to the economic interests held by members of PBF LLC other than PBF Energy, by the public common unitholders of PBFX and by the third-party stockholders of certain of Chalmette Refining’s subsidiaries. The total noncontrolling interest on the Condensed Consolidated Balance Sheets represents the portion of the Company’s net assets attributable to the economic interests held by the members of PBF LLC other than PBF Energy, by the public common unitholders of PBFX and by the third-party stockholders of the two Chalmette Refining subsidiaries. PBF Energy’s weighted-average equity noncontrolling interest ownership percentage in PBF LLC for the three months ended September 30, 2020 and 2019 was approximately 0.8% and 1.0%, respectively. The carrying amount of the noncontrolling interest on our Condensed Consolidated Balance Sheets attributable to the noncontrolling interest is not equal to the noncontrolling interest ownership percentage due to the effect of income taxes and related agreements that pertain solely to PBF Energy.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019
Overview— PBF Energy net loss was $1,047.3 million for the nine months ended September 30, 2020 compared to net income of $306.1 million for the nine months ended September 30, 2019. PBF LLC net loss was $1,304.4 million for the nine months ended September 30, 2020 compared to net income of $399.6 million for the nine months ended September 30, 2019. Net loss attributable to PBF Energy stockholders was $1,094.0 million, or $(9.15) per diluted share, for the nine months ended September 30, 2020 ($(9.15) per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss, or $(7.25) per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss excluding special items, as described below in Non-GAAP Financial Measures) compared to net income attributable to PBF Energy stockholders of $266.4 million, or $2.20 per diluted share, for the nine months ended September 30, 2019 ($2.20 per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net income, or $0.33 per share on a fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss excluding special items, as described below in Non-GAAP Financial Measures). The net loss attributable to PBF Energy stockholders represents PBF Energy’s equity interest in PBF LLC’s pre-tax loss, less applicable income tax expense. PBF Energy’s weighted-average equity interest in PBF LLC was 99.1% and 99.0% for the nine months ended September 30, 2020 and 2019, respectively.
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Our results for the nine months ended September 30, 2020 were positively impacted by special items consisting of a gain on the sale of hydrogen plants of $471.1 million, or $347.2 million net of tax, a change in fair value of the contingent consideration related to both the Martinez Acquisition and the PBFX CPI acquisition of $93.5 million, or $68.9 million net of tax, and a pre-tax change in the Tax Receivable Agreement liability of $240.6 million, or $177.3 million net of tax. Our results for the nine months ended September 30, 2020 were negatively impacted by special items consisting of a non-cash, pre-tax LCM inventory adjustment of approximately $691.5 million, or $509.6 million net of tax, pre-tax, debt extinguishment costs associated with the early redemption of our 2023 Senior Notes of $22.2 million, or $16.4 million net of tax, severance costs related to second quarter reductions in workforce of $12.9 million, or $9.5 million net of tax, impairment expense of $7.0 million or $5.2 million net of tax, related to the write-down of certain PBFX long-lived assets in the third quarter of the current year and net tax expense of $282.3 million associated with the remeasurement of certain deferred tax assets. Our results for the nine months ended September 30, 2019 were positively impacted by a non-cash pre-tax LCM inventory adjustment of approximately $277.0 million, or $203.7 million net of tax and a pre-tax gain on the sale of land at our Torrance refinery of $33.1 million, or $24.3 million net of tax. The LCM inventory adjustments were recorded due to movements in the price of crude oil and refined products in the periods presented.
Excluding the impact of these special items, our results were negatively impacted by the ongoing COVID-19 pandemic which has caused a significant decline in the demand for our refined products and a decrease in the prices for crude oil and refined products, both of which have negatively impacted our revenues, cost of products sold and operating income. In addition, during the nine months ended September 30, 2020 we experienced unfavorable movements in certain crude differentials and overall lower throughput volumes and barrels sold across our refineries, as well as lower refining margins. All our operating regions experienced lower refining margins for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Our results for the nine months ended September 30, 2020 were negatively impacted by higher general and administrative expenses associated with severance charges and integration costs associated with the Martinez Acquisition and increased depreciation and amortization expense associated with the Martinez Acquisition and our continued investment in our refining assets.
Revenues— Revenues totaled $11.5 billion for the nine months ended September 30, 2020 compared to $18.2 billion for the nine months ended September 30, 2019, a decrease of approximately $6.7 billion, or 36.8%. Revenues per barrel were $48.67 and $70.23 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of 30.7% directly related to lower hydrocarbon commodity prices. For the nine months ended September 30, 2020, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 274,300 bpd, 91,900 bpd, 144,000 bpd and 234,400 bpd, respectively. For the nine months ended September 30, 2019, the total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 329,500 bpd, 154,100 bpd, 181,400 bpd and 151,400 bpd, respectively. For nine months ended September 30, 2020, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 310,100 bpd, 113,800 bpd, 169,000 bpd and 266,500 bpd, respectively. For the nine months ended September 30, 2019, the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged approximately 374,200 bpd, 164,400 bpd, 227,700 bpd and 183,300 bpd, respectively.
The throughput rates at our refineries were lower in the nine months ended September 30, 2020 compared to the same period in 2019. Our Martinez refinery was not acquired until the first quarter of 2020 and is therefore not included in the prior period West Coast throughput. We operated our refineries at reduced rates beginning in March, and, based on current market conditions, we plan on continuing to operate our refineries at lower utilization until such time that sustained product demand justifies higher production. Total refined product barrels sold were higher than throughput rates, reflecting sales from inventory as well as sales and purchases of refined products outside our refineries.
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Consolidated Gross Margin— Consolidated gross margin totaled $(1,449.2) million for the nine months ended September 30, 2020, compared to $677.9 million for the nine months ended September 30, 2019, a decrease of approximately $2,127.1 million. Gross refining margin (as described below in Non-GAAP Financial Measures) totaled $108.0 million, or $0.53 per barrel of throughput for the nine months ended September 30, 2020 compared to $2,106.6 million, or $9.45 per barrel of throughput for the nine months ended September 30, 2019, a decrease of approximately $1,998.6 million. Gross refining margin excluding special items totaled $799.5 million or $3.92 per barrel of throughput for the nine months ended September 30, 2020 compared to $1,829.6 million or $8.21 per barrel of throughput for the nine months ended September 30, 2019, a decrease of $1,030.1 million.
Consolidated gross margin and gross refining margin were negatively impacted by a non-cash LCM adjustment of approximately $691.5 million on a net basis resulting from the decrease in crude oil and refined product prices from the year ended 2019 to the end of the third quarter of 2020. Gross refining margin excluding the impact of special items decreased due to unfavorable movements in certain crude differentials, an overall decrease in throughput rates and refining margins. For the nine months ended September 30, 2019, special items impacting our margin calculations included a non-cash LCM inventory adjustment of approximately $277.0 million on a net basis, resulting from an increase in crude oil and refined product prices.
Additionally, our results continue to be impacted by significant costs to comply with the RFS. Total RFS costs were $183.4 million for the nine months ended September 30, 2020 in comparison to $92.0 million for the nine months ended September 30, 2019.
Average industry margins were mixed during the nine months ended September 30, 2020 in comparison to the same period in 2019, primarily due to varying timing and extent of the impacts of the COVID-19 pandemic on regional demand and commodity prices in 2020, in addition to impacts related to 2019 planned turnarounds, all of which were completed in the first half of the prior year.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was approximately $9.30 per barrel, or 26.9% lower, in the nine months ended September 30, 2020, as compared to $12.73 per barrel in the same period in 2019. Our margins were positively impacted from our refinery specific slate on the East Coast by stronger Dated Brent/Maya and WTI/Bakken differentials, which increased by $0.37 per barrel and $2.04 per barrel, respectively, in comparison to the same period in 2019. The WTI/WCS differential slightly decreased to $10.58 per barrel in 2020 compared to $11.78 in 2019, which unfavorably impacted our cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread was $6.56 per barrel, or 60.7% lower, in the nine months ended September 30, 2020 as compared to $16.69 per barrel in the same period in 2019. Our margins were positively impacted from our refinery specific slate in the Mid-Continent by an increasing WTI/Bakken differential, which averaged a discount of $2.57 per barrel in the nine months ended September 30, 2020, as compared to a discount of $0.53 per barrel in the same period in 2019. Additionally, the WTI/Syncrude differential averaged a discount of $1.58 per barrel during the nine months ended September 30, 2020 as compared to a premium of $0.30 per barrel in the same period of 2019.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $7.79 per barrel, or 36.8% lower, in the nine months ended September 30, 2020 as compared to $12.32 per barrel in the same period in 2019. Margins on the Gulf Coast were positively impacted from our refinery specific slate by a strengthening WTI/LLS differential, which averaged a premium of $2.01 per barrel during the nine months ended September 30, 2020 as compared to a premium of $6.27 per barrel in the same period of 2019.
On the West Coast, the ANS (West Coast) 4-3-1 industry crack spread was $11.41 per barrel, or 38.3% lower, in the nine months ended September 30, 2020 as compared to $18.49 per barrel in the same period in 2019. Additionally, margins on the West Coast were positively impacted from our refinery specific slate by a strengthening WTI/ANS differential, which averaged a premium of $3.20 per barrel during the nine months ended September 30, 2020 as compared to a premium of $8.15 per barrel in the same period of 2019.
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Favorable movements in these benchmark crude differentials typically result in lower crude costs and positively impact our earnings while reductions in these benchmark crude differentials typically result in higher crude costs and negatively impact our earnings.
Operating Expenses— Operating expenses totaled $1,445.7 million for the nine months ended September 30, 2020 compared to $1,348.7 million for the nine months ended September 30, 2019, an increase of approximately $97.0 million, or 7.2%. Of the total $1,445.7 million of operating expenses for the nine months ended September 30, 2020, $1,383.6 million or $6.78 per barrel of throughput, related to expenses incurred by the Refining segment, while the remaining $62.1 million related to expenses incurred by the Logistics segment ($1,274.9 million or $5.72 per barrel of throughput, and $73.8 million of operating expenses for the nine months ended September 30, 2019 related to the Refining and Logistics segments, respectively). Increases in operating expenses were mainly attributed to costs associated with the Martinez refinery and related logistic assets which totaled approximately $262.0 million for the nine months ended September 30, 2020. Total operating expenses for the nine months ended September 30, 2020, excluding our Martinez refinery, decreased due to our cost reduction initiatives taken to strengthen our financial flexibility and offset the negative impact of COVID-19, such as significant reductions in discretionary activities and third party services. Operating expenses related to our Logistics segment decreased as a result of lower discretionary spending, including maintenance and outside service costs, in response to the COVID-19 pandemic, as well as lower environmental clean-up remediation costs and lower utility expenses due to reduced energy usage.
General and Administrative Expenses— General and administrative expenses totaled $187.0 million for the nine months ended September 30, 2020 compared to $175.9 million for the nine months ended September 30, 2019, an increase of approximately $11.1 million or 6.3%. The increase in general and administrative expenses for the nine months ended September 30, 2020 in comparison to the nine months ended September 30, 2019 primarily related to headcount reduction severance costs across the refineries as well as integration costs pertaining to the Martinez Acquisition. These costs increases were offset by a reduction in overhead expenses through temporary salary reductions to a large portion of our workforce. Our general and administrative expenses are comprised of personnel, facilities and other infrastructure costs necessary to support our refineries and related logistics assets.
Gain on Sale of Assets— There was a gain of $469.4 million for the nine months ended September 30, 2020 related primarily to the sale of five hydrogen plants. There was a gain of $31.8 million on the sale of assets for the nine months ended September 30, 2019, primarily attributable to the sale of a parcel of land at our Torrance refinery.
Depreciation and Amortization Expense— Depreciation and amortization expense totaled $377.7 million for the nine months ended September 30, 2020 (including $369.3 million recorded within Cost of sales) compared to $322.7 million for the nine months ended September 30, 2019 (including $314.9 million recorded within Cost of sales), an increase of approximately $55.0 million. The increase was a result of additional depreciation expense associated with the assets acquired in the Martinez Acquisition and a general increase in our fixed asset base due to capital projects and turnarounds completed since the third quarter of 2019.
Change in Fair Value of Contingent Consideration— Change in fair value of contingent consideration represented a gain of $93.5 million for the nine months ended September 30, 2020. This change represents the decrease in the estimated fair value of the Martinez Contingent Consideration and the PBFX Contingent Consideration, both associated with acquisition related earn-out obligations. There were no such costs in the same period of 2019.
Impairment expense— Impairment expense totaled $7.0 million for the nine months ended September 30, 2020, resulting from a write-down of certain PBFX long-lived assets.
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Change in Tax Receivable Agreement Liability— Change in Tax Receivable Agreement liability for the nine months ended September 30, 2020 represented a gain of $240.6 million. This gain was primarily the result of a deferred tax asset valuation allowance recorded in accordance with ASC 740, Income Taxes related to the reduction of deferred tax assets associated with the payments made or expected to be made in connection with the Tax Receivable Agreement liability. There was no change in the Tax Receivable Agreement liability for the nine months ended September 30, 2019.

Change in Fair Value of Catalyst Obligations— Change in fair value of catalyst obligations represented a gain of $4.2 million for the nine months ended September 30, 2020 compared to a loss of $6.4 million for the nine months ended September 30, 2019. These gains and losses relate to the change in value of the precious metals underlying the sale and leaseback of our refineries’ precious metal catalysts, which we are obligated to repurchase at fair market value upon lease termination.
Debt Extinguishment Costs— Debt extinguishment costs of $22.2 million incurred in the nine months ended September 30, 2020 relate to the early redemption of our 2023 Senior Notes. There were no such costs in the same period of 2019.
Interest Expense, net— PBF Energy interest expense totaled $185.1 million for the nine months ended September 30, 2020 compared to $121.3 million for the nine months ended September 30, 2019, an increase of approximately $63.8 million. This net increase is mainly attributable to higher interest costs associated with the issuance of the 2028 Senior Notes in February 2020, the issuance of the 2025 Senior Secured Notes in May 2020 and higher outstanding borrowings on our Revolving Credit Facility. Interest expense includes interest on long-term debt including the PBFX credit facilities, costs related to the sale and leaseback of our precious metal catalysts, financing costs associated with the Inventory Intermediation Agreements with J. Aron, letter of credit fees associated with the purchase of certain crude oils and the amortization of deferred financing costs. PBF LLC interest expense totaled $192.8 million and $128.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively (inclusive of $7.7 million and $7.0 million, respectively, of incremental interest expense on the affiliate note payable with PBF Energy that eliminates in consolidation at the PBF Energy level).
Income Tax Expense— PBF LLC is organized as a limited liability company and PBFX is an MLP, both of which are treated as “flow-through” entities for federal income tax purposes and therefore are not subject to income tax. However, two subsidiaries of Chalmette Refining and our Canadian subsidiary are treated as C-Corporations for income tax purposes and may incur income taxes with respect to their earnings, as applicable. The members of PBF LLC are required to include their proportionate share of PBF LLC’s taxable income or loss, which includes PBF LLC’s allocable share of PBFX’s pre-tax income or loss, on their respective tax returns. PBF LLC generally makes distributions to its members, per the terms of PBF LLC’s amended and restated limited liability company agreement, related to such taxes on a pro-rata basis. PBF Energy recognizes an income tax expense or benefit in our Condensed Consolidated Financial Statements based on PBF Energy’s allocable share of PBF LLC’s pre-tax income or loss, which was approximately 99.1% and 99.0%, on a weighted-average basis for the nine months ended September 30, 2020 and 2019, respectively. PBF Energy’s Condensed Consolidated Financial Statements do not reflect any benefit or provision for income taxes on the pre-tax income or loss attributable to the noncontrolling interests in PBF LLC or PBFX (although, as described above, PBF LLC must make tax distributions to all its members on a pro-rata basis). PBF Energy’s effective tax rate, excluding the impact of noncontrolling interests, for the nine months ended September 30, 2020 and 2019 was 0.1% and 25.7%, respectively. The effective tax rate for the nine months ended September 30, 2020 was significantly impacted by the recording of a $348.6 million deferred tax asset valuation allowance.
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Noncontrolling Interest— PBF Energy is the sole managing member of, and has a controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF Energy operates and controls all of the business and affairs of PBF LLC and its subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its subsidiaries, including PBFX. With respect to the consolidation of PBF LLC, the Company records a noncontrolling interest for the economic interest in PBF LLC held by members other than PBF Energy, and with respect to the consolidation of PBFX, the Company records a noncontrolling interest for the economic interests in PBFX held by the public unitholders of PBFX, and with respect to the consolidation of PBF Holding, the Company records a 20% noncontrolling interest for the ownership interests in two subsidiaries of Chalmette Refining held by a third party. The total noncontrolling interest on the Condensed Consolidated Statements of Operations represents the portion of the Company’s earnings or loss attributable to the economic interests held by members of PBF LLC other than PBF Energy, by the public common unitholders of PBFX and by the third-party stockholders of certain of Chalmette Refining’s subsidiaries. The total noncontrolling interest on the Condensed Consolidated Balance Sheets represents the portion of the Company’s net assets attributable to the economic interests held by the members of PBF LLC other than PBF Energy, by the public common unitholders of PBFX and by the third-party stockholders of the two Chalmette Refining subsidiaries. PBF Energy’s weighted-average equity noncontrolling interest ownership percentage in PBF LLC for the nine months ended September 30, 2020 and 2019 was approximately 0.9% and 1.0%, respectively. The carrying amount of the noncontrolling interest on our Condensed Consolidated Balance Sheets attributable to the noncontrolling interest is not equal to the noncontrolling interest ownership percentage due to the effect of income taxes and related agreements that pertain solely to PBF Energy.
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Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance that are calculated and presented on the basis of methodologies other than in accordance with GAAP (“Non-GAAP”). These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. Such Non-GAAP financial measures are presented only in the context of PBF Energy’s results and are not presented or discussed in respect to PBF LLC.
Special Items
The Non-GAAP measures presented include Adjusted Fully-Converted Net Income (Loss) excluding special items, EBITDA excluding special items and gross refining margin excluding special items. Special items for the periods presented relate to LCM inventory adjustments, changes in the Tax Receivable Agreement liability, debt extinguishment costs, changes in fair value of contingent consideration, gain on sale of hydrogen plants, severance costs related to reductions in workforce, impairment expense, net tax expense on remeasurement of deferred tax assets and gain on sale of assets at our Torrance refinery. See “Notes to Non-GAAP Financial Measures” below for more details on all special items disclosed. Although we believe that Non-GAAP financial measures, excluding the impact of special items, provide useful supplemental information to investors regarding the results and performance of our business and allow for helpful period-over-period comparisons, such Non-GAAP measures should only be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.
Adjusted Fully-Converted Net Income (Loss) and Adjusted Fully-Converted Net Income (Loss) Excluding Special Items
PBF Energy utilizes results presented on an Adjusted Fully-Converted basis that reflects an assumed exchange of all PBF LLC Series A Units for shares of PBF Energy Class A common stock. In addition, we present results on an Adjusted Fully-Converted basis excluding special items as described above. We believe that these Adjusted Fully-Converted measures, when presented in conjunction with comparable GAAP measures, are useful to investors to compare PBF Energy results across different periods and to facilitate an understanding of our operating results. Neither Adjusted Fully-Converted Net Income (Loss) nor Adjusted Fully-Converted Net Income (Loss) excluding special items should be considered an alternative to net income presented in accordance with GAAP. Adjusted Fully-Converted Net Income (Loss) and Adjusted Fully-Converted Net Income (Loss) excluding special items presented by other companies may not be comparable to our presentation, since each company may define these terms differently. The differences between Adjusted Fully-Converted and GAAP results are as follows:
1.    Assumed exchange of all PBF LLC Series A Units for shares of PBF Energy Class A common stock. As a result of the assumed exchange of all PBF LLC Series A Units, the noncontrolling interest related to these units is converted to controlling interest. Management believes that it is useful to provide the per-share effect associated with the assumed exchange of all PBF LLC Series A Units.
2.    Income Taxes. Prior to PBF Energy’s initial public offering (“IPO”), PBF Energy was organized as a limited liability company treated as a “flow-through” entity for income tax purposes, and even after PBF Energy’s IPO, not all of its earnings are subject to corporate-level income taxes. Adjustments have been made to the Adjusted Fully-Converted tax provisions and earnings to assume that PBF Energy had adopted its post-IPO corporate tax structure for all periods presented and is taxed as a C-corporation in the U.S. at the prevailing corporate rates. These assumptions are consistent with the assumption in clause 1 above that all PBF LLC Series A Units are exchanged for shares of PBF Energy Class A common stock, as the assumed exchange would change the amount of PBF Energy’s earnings that are subject to corporate income tax.
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The following table reconciles PBF Energy’s Adjusted Fully-Converted results with its results presented in accordance with GAAP for the three and nine months ended September 30, 2020 and 2019 (in millions, except share and per share amounts):

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income (loss) attributable to PBF Energy Inc. stockholders$(417.2)$69.5 $(1,094.0)$266.4 
Less: Income allocated to participating securities— 0.2 0.1 0.4 
Income (loss) available to PBF Energy Inc. stockholders - basic(417.2)69.3 (1,094.1)266.0 
Add: Net income (loss) attributable to noncontrolling interest (1)
(3.5)0.9 (13.6)3.6 
Less: Income tax benefit (expense) (2)
0.9 (0.3)3.6 (0.9)
Adjusted fully-converted net income (loss)$(419.8)$69.9 $(1,104.1)$268.7 
Special Items: (3)
Add: Non-cash LCM inventory adjustment(9.9)47.0 691.5 (277.0)
Add: Change in Tax Receivable Agreement liability (252.2)— (240.6)— 
Add: Debt extinguishment costs — — 22.2 — 
Add: Change in fair value of contingent consideration (28.6)— (93.5)— 
Add: Gain on sale of hydrogen plants— — (471.1)— 
Add: Severance costs— — 12.9 — 
Add: Impairment expense 7.0 — 7.0 — 
Add: Gain on Torrance land sale— (33.1)— (33.1)
Add: Net tax expense on remeasurement of deferred tax assets 282.3 — 282.3 — 
Add: Recomputed income taxes on special items 74.6 (3.7)18.8 82.0 
Adjusted fully-converted net income (loss) excluding special items$(346.6)$80.1 $(874.6)$40.6 
Weighted-average shares outstanding of PBF Energy Inc.119,684,030 119,921,346 119,561,388 119,897,504 
Conversion of PBF LLC Series A Units (4)
975,133 1,206,325 1,066,849 1,206,325 
Common stock equivalents (5)
— 461,508 — 768,035 
Fully-converted shares outstanding-diluted120,659,163 121,589,179 120,628,237 121,871,864 
Diluted net income (loss) per share$(3.49)$0.57 $(9.15)$2.20 
Adjusted fully-converted net income (loss) per fully exchanged, fully diluted shares outstanding (5)
$(3.49)$0.57 $(9.15)$2.20 
Adjusted fully-converted net income (loss) excluding special items per fully exchanged, fully diluted shares outstanding (3) (5)
$(2.87)$0.66 $(7.25)$0.33 
——————————
See Notes to Non-GAAP Financial Measures.
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Gross Refining Margin and Gross Refining Margin Excluding Special Items
Gross refining margin is defined as consolidated gross margin excluding refinery depreciation, refinery operating expense, and gross margin of PBFX. We believe both gross refining margin and gross refining margin excluding special items are important measures of operating performance and provide useful information to investors because they are helpful metric comparisons to the industry refining margin benchmarks, as the refining margin benchmarks do not include a charge for refinery operating expenses and depreciation. In order to assess our operating performance, we compare our gross refining margin (revenues less cost of products and other) to industry refining margin benchmarks and crude oil prices as defined in the table below.
Neither gross refining margin nor gross refining margin excluding special items should be considered an alternative to consolidated gross margin, income from operations, net cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Gross refining margin and gross refining margin excluding special items presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
The following table presents our GAAP calculation of gross margin and a reconciliation of gross refining margin to the most directly comparable GAAP financial measure, consolidated gross margin, on a historical basis, as applicable, for each of the periods indicated (in millions, except per barrel amounts):
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Three Months Ended September 30,
20202019
$per barrel of throughput$per barrel of throughput
Calculation of gross margin:
Revenues$3,667.5 $56.46 $6,430.5 $82.15 
Less: Cost of sales3,980.8 61.28 6,244.4 79.77 
Consolidated gross margin$(313.3)$(4.82)$186.1 $2.38 
Reconciliation of consolidated gross margin to gross refining margin:
Consolidated gross margin$(313.3)$(4.82)$186.1 $2.38 
Add: PBFX operating expense22.7 0.35 28.4 0.36 
Add: PBFX depreciation expense14.4 0.22 9.0 0.11 
Less: Revenues of PBFX(89.0)(1.37)(86.4)(1.10)
Add: Refinery operating expense452.4 6.96 411.8 5.26 
Add: Refinery depreciation expense 115.9 1.79 98.7 1.26 
Gross refining margin$203.1 $3.13 $647.6 $8.27 
Special items:(3)
Add: Non-cash LCM inventory adjustment(9.9)(0.15)47.0 0.60 
Gross refining margin excluding special items$193.2 $2.98 $694.6 $8.87 
Nine Months Ended September 30,
20202019
$per barrel of throughput$per barrel of throughput
Calculation of consolidated gross margin:
Revenues$11,460.8 $56.18 $18,206.7 $81.69 
Less: Cost of sales12,910.0 63.28 17,528.8 78.65 
Consolidated gross margin$(1,449.2)$(7.10)$677.9 $3.04 
Reconciliation of consolidated gross margin to gross refining margin:
Consolidated gross margin$(1,449.2)$(7.10)$677.9 $3.04 
Add: PBFX operating expense75.5 0.37 86.9 0.39 
Add: PBFX depreciation expense36.9 0.18 26.6 0.12 
Less: Revenues of PBFX(271.2)(1.33)(248.0)(1.11)
Add: Refinery operating expense1,383.6 6.78 1,274.9 5.72 
Add: Refinery depreciation expense 332.4 1.63 288.3 1.29 
Gross refining margin$108.0 $0.53 $2,106.6 $9.45 
Special items:(3)
Add: Non-cash LCM inventory adjustment 691.5 3.39 (277.0)(1.24)
Gross refining margin excluding special items$799.5 $3.92 $1,829.6 $8.21 
——————————
See Notes to Non-GAAP Financial Measures.
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EBITDA, EBITDA Excluding Special Items and Adjusted EBITDA
Our management uses EBITDA (earnings before interest, income taxes, depreciation and amortization), EBITDA excluding special items and Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations, and in communications with our board of directors, creditors, analysts and investors concerning our financial performance. Our outstanding indebtedness for borrowed money and other contractual obligations also include similar measures as a basis for certain covenants under those agreements which may differ from the Adjusted EBITDA definition described below.
    EBITDA, EBITDA excluding special items and Adjusted EBITDA are not presentations made in accordance with GAAP and our computation of EBITDA, EBITDA excluding special items and Adjusted EBITDA may vary from others in our industry. In addition, Adjusted EBITDA contains some, but not all, adjustments that are taken into account in the calculation of the components of various covenants in the agreements governing our senior notes and other credit facilities. EBITDA, EBITDA excluding special items and Adjusted EBITDA should not be considered as alternatives to income from operations or net income as measures of operating performance. In addition, EBITDA, EBITDA excluding special items and Adjusted EBITDA are not presented as, and should not be considered, an alternative to cash flows from operations as a measure of liquidity. Adjusted EBITDA is defined as EBITDA before adjustments for items such as stock-based compensation expense, the non-cash change in the fair value of catalyst obligations, gain on sale of hydrogen plants, the write down of inventory to the LCM, changes in the liability for Tax Receivable Agreement due to factors out of PBF Energy’s control such as changes in tax rates, debt extinguishment costs related to refinancing activities, change in the fair value of contingent consideration and certain other non-cash items. Other companies, including other companies in our industry, may calculate EBITDA, EBITDA excluding special items and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures. EBITDA, EBITDA excluding special items and Adjusted EBITDA also have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include that EBITDA, EBITDA excluding special items and Adjusted EBITDA:
do not reflect depreciation expense or our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
do not reflect changes in, or cash requirements for, our working capital needs;
do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
do not reflect realized and unrealized gains and losses from certain hedging activities, which may have a substantial impact on our cash flow;
do not reflect certain other non-cash income and expenses; and
exclude income taxes that may represent a reduction in available cash.

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The following tables reconcile net income (loss) as reflected in PBF Energy’s results of operations to EBITDA, EBITDA excluding special items and Adjusted EBITDA for the periods presented (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Reconciliation of net income (loss) to EBITDA and EBITDA excluding special items:
Net income (loss)$(397.8)$86.3 $(1,047.3)$306.1 
Add: Depreciation and amortization expense133.0 109.8 377.7 322.7 
Add: Interest expense, net 70.4 39.7 185.1 121.3 
Add: Income tax expense (benefit)235.6 22.0 (0.7)92.0 
EBITDA$41.2 $257.8 $(485.2)$842.1 
Special Items(3)
Add: Non-cash LCM inventory adjustment (9.9)47.0 691.5 (277.0)
Add: Change in Tax Receivable Agreement liability (252.2)— (240.6)— 
Add: Debt extinguishment costs— — 22.2 — 
Add: Change in fair value of contingent consideration(28.6)— (93.5)— 
Add: Gain on sale of hydrogen plants— — (471.1)— 
Add: Severance costs — — 12.9 — 
Add: Impairment expense7.0 — 7.0 — 
Add: Gain on Torrance land sale— (33.1)— (33.1)
EBITDA excluding special items$(242.5)$271.7 $(556.8)$532.0 
Reconciliation of EBITDA to Adjusted EBITDA:
EBITDA$41.2 $257.8 $(485.2)$842.1 
Add: Stock-based compensation10.4 8.4 29.1 28.4 
Add: Change in fair value of catalyst obligations2.4 3.8 (4.2)6.4 
Add: Change in fair value of contingent consideration (3)
(28.6)— (93.5)— 
Add: Non-cash LCM inventory adjustment (3)
(9.9)47.0 691.5 (277.0)
Add: Gain on sale of hydrogen plants (3)
— — (471.1)— 
Add: Change in Tax Receivable Agreement liability(3)
(252.2)— (240.6)— 
Add: Impairment expense(3)
7.0 — 7.0 — 
Add: Debt extinguishment costs (3)
— — 22.2 — 
Add: Severance costs (3)
— — 12.9 — 
Adjusted EBITDA$(229.7)$317.0 $(531.9)$599.9 
——————————
See Notes to Non-GAAP Financial Measures.
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Notes to Non-GAAP Financial Measures
The following notes are applicable to the Non-GAAP Financial Measures above: 
(1)    Represents the elimination of the noncontrolling interest associated with the ownership by the members of PBF LLC other than PBF Energy, as if such members had fully exchanged their PBF LLC Series A Units for shares of PBF Energy Class A common stock.
(2)    Represents an adjustment to reflect PBF Energy’s estimated annualized statutory corporate tax rate of approximately 26.3% and 26.5% for the 2020 and 2019 periods, respectively, applied to net income (loss) attributable to noncontrolling interest for all periods presented. The adjustment assumes the full exchange of existing PBF LLC Series A Units as described in (1) above.
(3)    Special items:
    LCM inventory adjustment - LCM is a GAAP requirement related to inventory valuation that mandates inventory to be stated at the lower of cost or market. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) inventory valuation methodology, in which the most recently incurred costs are charged to cost of sales and inventories are valued at base layer acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and net realizable selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may exceed market values. In such instances, we record an adjustment to write down the value of inventory to market value in accordance with GAAP. In subsequent periods, the value of inventory is reassessed and an LCM inventory adjustment is recorded to reflect the net change in the LCM inventory reserve between the prior period and the current period. The net impact of these LCM inventory adjustments are included in the Refining segment’s income from operations, but are excluded from the operating results presented, as applicable, in order to make such information comparable between periods.
    The following table includes the LCM inventory reserve as of each date presented (in millions):

20202019
January 1,$401.6 $651.8 
June 30,1,103.0 327.8 
September 30, 1,093.1 374.8 
    The following table includes the corresponding impact of changes in the LCM inventory reserve on income (loss) from operations and net income (loss) for the periods presented (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net LCM inventory adjustment benefit (charge) in income (loss) from operations$9.9 $(47.0)$(691.5)$277.0 
Net LCM inventory adjustment benefit (charge) in net income (loss) 7.3 (34.6)(509.6)203.7 
    
    Debt Extinguishment Costs - During the nine months ended September 30, 2020, we recorded pre-tax debt extinguishment costs of $22.2 million related to the redemption of the 2023 Senior Notes. These nonrecurring charges decreased net income by $16.4 million for the nine months ended September 30, 2020. There were no such costs in any of the other periods presented.
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Change in Tax Receivable Agreement liability - During the three months ended September 30, 2020, we recorded a change in the Tax Receivable Agreement liability that increased income before income taxes and net income by $252.2 million and $185.9 million, respectively. During the nine months ended September 30, 2020, we recorded a change in the Tax Receivable Agreement liability that increased income before income taxes and net income by $240.6 million and $177.3 million, respectively. The changes in the Tax Receivable Agreement liability reflect charges or benefits attributable to changes in our obligation under the Tax Receivable Agreement due to factors out of our control such as changes in tax rates, as well as periodic adjustments to our liability based, in part, on an updated estimate of the amounts that we expect to pay, using assumptions consistent with those used in our concurrent estimate of the deferred tax asset valuation allowance. There was no change in the Tax Receivable Agreement liability for the three and nine months ended September 30, 2019.
Change in Fair Value of Contingent Consideration - During the three months ended September 30, 2020, we recorded a change in fair value of the contingent consideration related to the Martinez Contingent Consideration and the PBFX Contingent Consideration which increased income from operations and net income by $28.6 million and $21.1 million, respectively. During the nine months ended September 30, 2020, we recorded a change in the fair value of the contingent consideration primarily related to the Martinez Contingent Consideration which increased income from operations and net income by $93.5 million and $68.9 million, respectively. There were no such changes in fair value of contingent consideration during the three and nine months ended September 30, 2019.
Gain on sale of Hydrogen Plants - During the nine months ended September 30, 2020, we recorded a gain on the sale of five hydrogen plants. The gain increased income from operations and net income by $471.1 million and $347.2 million, respectively.
Impairment expense - During the three and nine months ended September 30, 2020, we recorded an impairment charge which decreased income from operations and net income by $7.0 million and $5.2 million, respectively, resulting from the write-down of certain PBFX long-lived assets. There were no such charges during the three and nine months ended September 30, 2019.
Gain on sale of Torrance land - During the three and nine months ended September 30, 2019, we recorded a gain on the sale of a parcel of real property acquired as part of the Torrance refinery, but not part of the refinery itself. The gain increased income from operations and net income by $33.1 million and $24.3 million, respectively.
Severance Costs - During the nine months ended September 30, 2020, we recorded a severance charge related to reductions in our workforce that decreased income from operations and net income by $12.9 million and $9.5 million, respectively. There were no such costs in any of the other periods presented.
Recomputed Income taxes on special items - The income tax impact on these special items, other than the net tax expense special item discussed below, is calculated using the tax rates shown in (2) above.
Net tax expense on remeasurement of deferred tax assets - During the three and nine months ended September 30, 2020, we recorded a deferred tax valuation allowance of $348.6 million in accordance with ASC 740, Income Taxes. This amount includes tax expense of approximately $66.3 million related to our net change in the Tax Receivable Agreement liability or a net tax expense of $282.3 million related primarily to the remeasurement of deferred tax assets. There was no such expense in the three or nine months ended September 30, 2019.
(4)    Represents an adjustment to weighted-average diluted shares outstanding to assume the full exchange of existing PBF LLC Series A Units as described in (1) above.
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(5)    Represents weighted-average diluted shares outstanding assuming the conversion of all common stock equivalents, including options and warrants for PBF LLC Series A Units and performance share units and options for shares of PBF Energy Class A common stock as calculated under the treasury stock method (to the extent the impact of such exchange would not be anti-dilutive) for the three and nine months ended September 30, 2020 and 2019, respectively. Common stock equivalents exclude the effects of performance share units and options and warrants to purchase 12,358,105 and 12,152,756 shares of PBF Energy Class A common stock and PBF LLC Series A Units because they are anti-dilutive for the three and nine months ended September 30, 2020, respectively. Common stock equivalents exclude the effects of performance share units and options and warrants to purchase 7,739,275 and 6,003,867 shares of PBF Energy Class A common stock and PBF LLC Series A Units because they are anti-dilutive for the three and nine months ended September 30, 2019, respectively. For periods showing a net loss, all common stock equivalents and unvested restricted stock are considered anti-dilutive.

Liquidity and Capital Resources
Overview
Typically our primary sources of liquidity are our cash flows from operations, cash and cash equivalents and borrowing availability under our credit facilities; however, due to the COVID-19 pandemic and the current extraordinary and volatile market conditions, our business and results of operations are being negatively impacted. The demand destruction as a result of the worldwide economic slowdown and governmental responses, including travel restrictions, and stay-at-home orders, has resulted in a significant decrease in the demand for and market prices for our products. In addition, recent global geopolitical and macroeconomic events have further contributed to the overall volatility in crude oil and refined product prices, contributing to an adverse impact on our liquidity. We are focused on assessing and adapting to the challenging operating environment and continually evaluating our strategic measures to preserve liquidity and strengthen our balance sheet. Our response to the current economic environment and its impact on our liquidity is more fully described in the “Liquidity” section below.
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Cash Flow Analysis
The below cash flow analysis includes details by cash flow activity based on the results of PBF Energy. Material changes that exist between the PBF Energy and PBF LLC cash flows are explained thereafter.
Cash Flows from Operating Activities
Net cash used in operating activities was $792.6 million for the nine months ended September 30, 2020 compared to net cash provided by operating activities of $432.2 million for the nine months ended September 30, 2019. Our operating cash flows for the nine months ended September 30, 2020 included our net loss of $1,047.3 million, gain on sale of assets mainly related to the sale of the hydrogen plants of $469.4 million, change in the Tax Receivable Agreement liability of $240.6 million, net non-cash charges relating to the change in the fair value of our inventory repurchase obligations of $19.1 million, change in the fair value of the contingent consideration of $93.5 million, change in the fair value of our catalyst obligations of $4.2 million, and deferred income taxes of $1.1 million, partially offset by depreciation and amortization of $391.9 million, pension and other post-retirement benefits costs of $41.5 million, stock-based compensation of $29.1 million, debt extinguishment costs related to the early redemption of our 2023 Senior Notes of $22.2 million, impairment expense of $7.0 million, and a net non-cash charge of $691.5 million relating to an LCM inventory adjustment. In addition, net changes in operating assets and liabilities reflects cash uses of $100.6 million driven by the timing of inventory purchases, payments for accrued expenses and accounts payables and collections of accounts receivables. Our operating cash flows for the nine months ended September 30, 2019 included our net income of $306.1 million, depreciation and amortization of $331.3 million, deferred income taxes of $89.6 million, pension and other post-retirement benefits costs of $33.6 million, net non-cash charges relating to the change in the fair value of our inventory repurchase obligations of $11.4 million, stock-based compensation of $28.4 million and changes in the fair value of our catalyst obligations of $6.4 million partially offset by a net non-cash benefit of $277.0 million relating to an LCM inventory adjustment and a gain on sale of assets of $31.8 million. In addition, net changes in operating assets and liabilities reflected cash uses of $65.8 million driven by the timing of inventory purchases, payments for accrued expenses and accounts payables and collections of accounts receivables.

Cash Flows from Investing Activities
Net cash used in investing activities was $990.3 million for the nine months ended September 30, 2020 compared to net cash used in investing activities of $593.5 million for the nine months ended September 30, 2019. The net cash flows used in investing activities for the nine months ended September 30, 2020 was comprised of cash outflows of $1,176.2 million used to fund the Martinez Acquisition, capital expenditures totaling $158.0 million, expenditures for refinery turnarounds of $175.8 million, and expenditures for other assets of $9.7 million, partially offset by proceeds from sale of assets of $529.4 million. Net cash used in investing activities for the nine months ended September 30, 2019 was comprised of cash outflows of $309.0 million for capital expenditures, expenditures for refinery turnarounds of $282.6 million, and expenditures for other assets of $38.2 million, partially offset by proceeds of $36.3 million mainly related to the sale of land at our Torrance refinery.
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Cash Flows from Financing Activities
Net cash provided by financing activities was $2,250.6 million for the nine months ended September 30, 2020 compared to net cash provided by financing activities of $100.3 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, net cash provided by financing activities consisted of cash proceeds of $982.9 million from the issuance of the 2025 Senior Secured Notes net of related issuance costs, cash proceeds of $469.9 million from the issuance of the 2028 Senior Notes net of cash paid to redeem the 2023 Senior Notes and related issuance costs, net borrowings under our Revolving Credit Facility of $900.0 million, proceeds from catalyst financing arrangements of $51.9 million and proceeds from insurance premium financing of $12.7 million, partially offset by net repayments on the PBFX Revolving Credit Facility of $70.0 million, net settlements of precious metal catalyst obligations of $8.8 million, distributions and dividends of $72.5 million, principal amortization payments of the PBF Rail Term Loan of $5.4 million, and payments on finance leases of $8.9 million and deferred financing costs and other of $1.2 million. For the nine months ended September 30, 2019, net cash provided by financing activities consisted of $132.5 million in net proceeds from the issuance of PBFX common units, net borrowings from the PBFX Revolving Credit Facility of $127.0 million, proceeds from insurance premium financing of $7.5 million, and proceeds from stock options exercised of $0.2 million, partially offset by distributions and dividends of $156.1 million, principal amortization payments of the PBF Rail Term Loan of $5.2 million, deferred financing costs and other of $0.6 million, net settlements of precious metal catalyst obligations of $3.5 million, and repurchases of our common stock in connection with tax withholding obligations upon the vesting of certain restricted stock awards of $1.5 million. Additionally, during the nine months ended September 30, 2019, we borrowed and repaid $1,350.0 million under our Revolving Credit Facility resulting in no net change to amounts outstanding for the nine months ended September 30, 2019.
The cash flow activity of PBF LLC for the period ended September 30, 2020 is materially consistent with that of PBF Energy discussed above, other than changes in deferred income taxes and certain working capital items, which are different from PBF Energy due to certain tax related items not applicable to PBF LLC. Additionally, the PBF LLC cash flows reflect activity related to the affiliate note payable with PBF Energy of $0.5 million included in cash flows from financing activities, which eliminates in consolidation at PBF Energy.
The cash flow activity of PBF LLC for the period ended September 30, 2019 is materially consistent with that of PBF Energy discussed above, other than changes in deferred income taxes and certain working capital items, which are different from PBF Energy due to certain tax related items not applicable to PBF LLC. Additionally, the PBF LLC cash flows reflect activity related to the affiliate note payable with PBF Energy of $0.8 million included in cash flows from financing activities, which eliminates in consolidation at PBF Energy.
Debt and Credit Facilities
PBF Holding Revolving Credit Facility
The Revolving Credit Facility has a maximum commitment available to us of $3.4 billion and matures in May 2023. Borrowings under the Revolving Credit Facility bear interest at the Alternative Base Rate plus the Applicable Margin or at the Adjusted LIBOR plus the Applicable Margin, all as defined in the Revolving Credit Agreement. In addition, an accordion feature allows for commitments of up to $3.5 billion.
On February 18, 2020, in connection with the entry into a $300.0 million uncommitted receivables purchase facility (the “Receivables Facility”), we amended the Revolving Credit Facility and entered into a related intercreditor agreement to allow us to sell certain Eligible Receivables, as defined in the agreement governing the Revolving Credit Facility (the “Revolving Credit Agreement”) derived from the sale of refined products over truck racks. Under the Receivables Facility, we sell such receivables to a bank subject to bank approval and certain conditions. The sales of receivables under the Receivables Facility are absolute and irrevocable but subject to certain repurchase obligations under certain circumstances.
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On May 7, 2020, we further amended the Revolving Credit Facility, to increase PBF Holding’s ability to incur certain secured debt from an amount equal to 10% of its total assets to 20% of its total assets.
PBFX Revolving Credit Facility
The PBFX Revolving Credit Facility has a maximum commitment available to PBFX of $500.0 million and matures in July 2023. PBFX has the ability to further increase the maximum availability by an additional $250.0 million to a total commitment of $750.0 million, subject to receiving increased commitments from lenders or other financial institutions and satisfaction of certain conditions. Borrowings under the PBFX Revolving Credit Facility bear interest either at the Alternative Base Rate plus the Applicable Margin or at the London Interbank Offering Rate (“LIBOR”) plus the Applicable Margin, all as defined in the agreement governing the PBFX Revolving Credit Facility (the “PBFX Revolving Credit Agreement”).
Senior Notes
On January 24, 2020, PBF Holding entered into an indenture among PBF Holding’s wholly-owned subsidiary, PBF Finance (together with PBF Holding, the “Issuers”), the guarantors named therein (collectively the “Guarantors”), Wilmington Trust, National Association, as Trustee and Deutsche Bank Trust Company Americas, under which the Issuers issued $1.0 billion in aggregate principal amount of the 2028 Senior Notes. The Issuers received net proceeds of approximately $987.0 million from the offering after deducting the initial purchasers’ discount and offering expenses. We used the net proceeds primarily to fully redeem the 2023 Senior Notes, including accrued and unpaid interest, on February 14, 2020, and to fund a portion of the cash consideration for the Martinez Acquisition.
On May 13, 2020, PBF Holding entered into an indenture among the Issuers, the Guarantors, and Wilmington Trust, National Association, as Trustee, Paying Agent, Registrar, Transfer Agent, Authenticating Agent and Notes Collateral Agent, under which the Issuers issued $1.0 billion in aggregate principal amount of the 2025 Senior Secured Notes. The Issuers received net proceeds of approximately $982.9 million from the offering after deducting the initial purchasers’ discount and offering expenses. We used the net proceeds for general corporate purposes.
Refer to “Note 7 - Debt” of our Notes to Condensed Consolidated Financial Statements, for further information.
We are in compliance as of September 30, 2020 with all covenants, including financial covenants, in all of our debt agreements.
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Liquidity
The outbreak of the COVID-19 pandemic and certain developments in the global oil markets began negatively impacting our liquidity beginning towards the end of the first quarter of 2020.
As of September 30, 2020, our liquidity was approximately $1.9 billion based on $1.3 billion of cash, excluding cash held at PBFX, and more than $600.0 million of availability under our asset-backed revolving credit facility. Our total liquidity includes the amount of excess availability under the Revolving Credit Facility, which includes our cash on hand. In addition, PBFX had approximately $282.1 million of borrowing capacity under the PBFX Revolving Credit Facility. The PBFX Revolving Credit Facility is available to fund working capital, acquisitions, distributions, capital expenditures and other general corporate purposes incurred by PBFX.
Due to the unprecedented events caused by the COVID-19 pandemic and the negative impact it has caused to our liquidity, we have taken the following measures to strengthen our balance sheet and increase our flexibility and responsiveness:
Implemented cost reduction and cash preservation initiatives, including a significant decrease in 2020 planned capital expenditures, lowering 2020 operating expenses driven by minimizing discretionary activities and third party services, headcount reductions, and cutting corporate overhead expenses through temporary salary reductions to a significant portion of our workforce;
Suspended our quarterly dividend of $0.30 per share, anticipated to preserve approximately $35.0 million of cash each quarter, to support the balance sheet;
Closed on the sale of five hydrogen facilities for gross cash proceeds of $530.0 million on April 17, 2020;
Issued $1.0 billion in aggregate principal amount of the 2025 Senior Secured Notes for net proceeds of approximately $982.9 million. See “Note 7 - Debt” of our Notes to Condensed Consolidated Financial Statements for additional details related to the notes offering; and
Entered into catalyst financing arrangements on September 25, 2020 for net proceeds of approximately $51.9 million.
Announced on October 29, 2020 the operational reconfiguration of our East Coast refining system comprised of our Delaware City and Paulsboro refineries. The reconfiguration is expected to be complete by year end 2020 and will result in the idling of certain Paulsboro refining units and overall lower throughput and inventory levels. Annual operating and capital expenditures savings are expected to be approximately $100.0 million and $50.0 million, respectively, relative to average historic levels
We are actively responding to the impacts of the COVID-19 pandemic and ongoing rebalancing in the global oil markets. As previously announced, we have adjusted our operational plans to the evolving market conditions and taken steps to lower our 2020 operating expenses budget through significant reductions in discretionary activities and third party services. We continue to target and execute the expense reduction measures. Through the end of the third quarter, we exceeded our full-year goal of $140.0 million in total operating expense reductions by achieving over $225.0 million in reductions, including energy. While some of these savings are a result of reduced operational tempo, the majority are deliberate operating and other expense reductions.
Our refining capital spending program is on track to meet our revised guidance of approximately $360.0 million for 2020, with the bulk of the spending having occurred in the first and second quarters. For the remainder of 2020, we expect to incur approximately $45.0 million to $50.0 million in refining capital expenditures.
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We have no expected debt maturities due in 2020.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. Based on our preliminary analysis of the CARES Act, we are exploring the following opportunities:
Deferral of social security payroll tax matches that would otherwise be required in 2020;
Receipt of a payroll tax credit in 2020, to the extent allowable, for expenses related to paying wages and health benefits to employees who are not working as a result of closures and reduced receipts associated with the COVID-19 pandemic; and
Carryforward of tax loss incurred in 2020, as applicable, to utilize in future years when our 2020 tax return is filed.
We intend to explore any available potential benefits under the CARES Act, including loans, investments or guarantees, and any other such current or future government programs for which we qualify, including those described above. We cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all.
While it is impossible to estimate the duration or complete financial impact of the COVID-19 pandemic, we believe that the strategic actions we have taken, plus our cash flows from operations and available capital resources will be sufficient to meet our and our subsidiaries’ capital expenditures, working capital needs, and debt service requirements, for the next twelve months. We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because the impact that the COVID-19 pandemic is having on us and our industry is ongoing and unprecedented. The extent of the impact of the COVID-19 pandemic on our business, financial condition, results of operation and liquidity will depend largely on future developments, including the duration of the outbreak, particularly within the geographic areas where we operate, and the related impact on overall economic activity, all of which are uncertain and cannot be predicted with certainty at this time. As a result, we may require additional capital, and, from time to time, may pursue funding strategies in the capital markets or through private transactions to strengthen our liquidity and/or fund strategic initiatives. Such additional financing may not be available on favorable terms or at all.
Refer to “Business Developments” and “Part II - Other Information, Item 1A. Risk Factors” for further information.
Working Capital
PBF Energy’s working capital at September 30, 2020 was $1,356.7 million, consisting of $3,312.6 million in total current assets and $1,955.9 million in total current liabilities. PBF Energy’s working capital at December 31, 2019 was $1,314.5 million, consisting of $3,823.7 million in total current assets and $2,509.2 million in total current liabilities. PBF LLC’s working capital at September 30, 2020 was $1,315.7 million, consisting of $3,310.9 million in total current assets and $1,995.2 million in total current liabilities. PBF LLC’s working capital at December 31, 2019 was $1,281.7 million, consisting of $3,821.5 million in total current assets and $2,539.8 million in total current liabilities.
Working capital has increased during the nine months ended September 30, 2020 primarily as a result of proceeds from financing activities, partially offset by operating losses.
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Capital Spending
Capital spending, excluding $1,176.2 million attributed to the Martinez Acquisition, was $343.5 million for the nine months ended September 30, 2020, which primarily included costs for the construction of the Delaware City refinery hydrogen plant, turnaround costs at our Toledo refinery, safety related enhancements and facility improvements at our refineries, and approximately $9.6 million of capital expenditures related to PBFX. Due to current challenging market conditions, we have taken strategic steps to increase our flexibility and responsiveness, one of which is the reduction of over $350.0 million in 2020 planned capital expenses. We currently expect to spend an aggregate of approximately $360.0 million in net refining capital expenditures during 2020, excluding PBFX, for facility improvements, maintenance and turnarounds with the intention of satisfying all required safety, environmental and regulatory capital commitments. In addition, PBFX expects to spend an aggregate of approximately $6.5 million to $11.0 million in net capital expenditures during the remainder of 2020.
On February 1, 2020 we acquired the Martinez refinery and related logistic assets. The purchase price for the Martinez Acquisition was $960.0 million in cash, plus final working capital of $216.1 million and $77.3 million in the Martinez Contingent Consideration. The transaction was financed through a combination of cash on hand, including proceeds from our 2028 Senior Notes, and borrowings under our Revolving Credit Facility.
Contractual Obligations and Commitments
In connection with the Martinez Acquisition and additional financing transactions, including the 2028 Senior Notes and the 2025 Senior Secured Notes offerings, and the redemption of the 2023 Senior Notes, we entered into or assumed certain contractual obligations and commitments, as described below, not previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
In connection with the issuance of the 2028 Senior Notes and 2025 Senior Secured Notes, and the redemption of the 2023 Senior Notes during the nine months ended September 30, 2020, our long-term debt obligations were reduced in 2023 for the $500.0 million redemption of the 2023 Senior Notes and increased in 2025 and 2028 by $1.0 billion for the issuance of the 2028 Senior Notes and 2025 Senior Secured Notes. The 2028 Senior Notes pay interest semi-annually in cash in arrears on February 15 and August 15 each year, beginning on August 15, 2020 and will mature on February 15, 2028. The 2025 Senior Secured Notes pay interest semi-annually in cash in arrears on May 15 and November 15 of each year, beginning on November 15, 2020 and will mature on May 15, 2025. During the nine months ended September 30, 2020, we also incurred borrowings under the Revolving Credit Facility to fund a portion of the Martinez Acquisition and for other general corporate purposes. At September 30, 2020, we had outstanding borrowings under the Revolving Credit Facility of $900.0 million that are currently due in May 2023. As a result of this debt activity, our obligation to make interest payments on outstanding debt are expected to increase as follows: $37.8 million in the remainder of 2020, $135.5 million in 2021 and 2022, $125.5 million in 2023, $152.5 million in 2024, and a $256.3 million thereafter.
Refer to “Note 7 - Debt” of our Notes to Condensed Consolidated Financial Statements for further information.
We have entered into certain leases and other rental-related agreements in connection with the Martinez Acquisition that resulted in additional contractual obligations as follows: $11.3 million in 2020, $20.2 million in aggregate in 2021 and 2022, $18.9 million in aggregate in 2023 and 2024 and $37.4 million thereafter.
In connection with our sale of five hydrogen facilities to Air Products in the second quarter of 2020, we have entered into 15-year off-take lease arrangements, covering hydrogen produced at each of the five plants on terms in line with similar arrangements in place elsewhere in our refining system that resulted in additional contractual obligations as follows: $76.9 million in 2020 and $109.6 million annually thereafter until conclusion of the arrangement.
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We have also entered into a 15-year lease for hydrogen supply in connection with the completion of a new hydrogen generation facility constructed on site at our Delaware City refinery that commenced in the third quarter of 2020, which will result in additional contractual obligations of $7.1 million in 2020 and $14.2 million annually thereafter until the maturity of the lease.
In connection with the Martinez Acquisition, we entered into various five-year crude supply agreements for approximately 145,000 bpd, which are subject to certain volume reductions at our discretion. Following the COVID-19 pandemic and extraordinary market disruption and volatility that it has caused, there has been a significant decrease in the market price of crude oil. While the extent of this market disruption and duration of significantly lower crude oil prices is uncertain, if it does persist for an extended period of time, our obligations for our crude and feedstock supply agreements would be significantly less than the amounts disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
Crude and Feedstock Supply Agreements
Certain of our purchases of crude oil under our agreements with foreign national oil companies require that we post letters of credit, if open credit terms are exceeded, and arrange for shipment. We pay for the crude when invoiced, at which time any applicable letters of credit are lifted. We have a contract with Saudi Arabian Oil Company (“Saudi Aramco”) pursuant to which we have been purchasing up to approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at our Paulsboro refinery. In connection with the acquisition of the Chalmette refinery we entered into a contract with Petróleos de Venezuela S.A. (“PDVSA”) for the supply of 40,000 to 60,000 bpd of crude oil that can be processed at any of our East or Gulf Coast refineries. We have not sourced crude oil under this agreement since 2017 when PDVSA suspended deliveries due to the parties’ inability to agree to mutually acceptable payment terms and because of U.S. government sanctions against PDVSA. Notwithstanding the suspension, the recent U. S. sanctions imposed against PDVSA and Venezuela would prevent us from purchasing crude oil under this agreement. In connection with the closing of the acquisition of the Torrance refinery, we entered into a crude supply agreement with Exxon Mobil Oil Corporation (“ExxonMobil”) for approximately 60,000 bpd of crude oil that can be processed at our Torrance refinery. We currently purchase all of our crude and feedstock needs independently from a variety of suppliers on the spot market or through term agreements for our Delaware City and Toledo refineries.
We have entered into various five-year crude supply agreements with Shell Oil Products for approximately 145,000 bpd, in the aggregate, to support our West Coast and Mid-Continent refinery operations. In addition, we have entered into certain offtake agreements for our West Coast system with the same counterparty for clean products with varying terms up to 15 years.
Inventory Intermediation Agreements
We entered into Inventory Intermediation Agreements with J. Aron, to support the operations of the East Coast Refineries. The Inventory Intermediation Agreement by and among J. Aron, PBF Holding and Delaware City Refining Company LLC “DCR” expires on June 30, 2021, which term may be further extended by mutual consent of the parties to June 30, 2022. The Inventory Intermediation Agreement by and among J. Aron, PBF Holding and Paulsboro Refining Company LLC expires on December 31, 2021, which term may be further extended by mutual consent of the parties to December 31, 2022. If not extended, at expiration, we will be required to repurchase the inventories outstanding under the Inventory Intermediation Agreement at that time.
At September 30, 2020, the LIFO value of crude oil, intermediates and finished products owned by J. Aron included within Inventory in our Condensed Consolidated Balance Sheets was $241.5 million. We accrue a corresponding liability for such crude oil, intermediates and finished products.
Off-Balance Sheet Arrangements and Contractual Obligations and Commitments
We have no off-balance sheet arrangements as of September 30, 2020, other than outstanding letters of credit of approximately $164.0 million.
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Tax Receivable Agreement Obligations
We expect that the payments that we may make under the Tax Receivable Agreement will be substantial. As of September 30, 2020, PBF Energy has recognized a liability for the Tax Receivable Agreement of $132.9 million, reflecting our estimate of the undiscounted amounts that we expect to pay under the agreement due to exchanges of PBF LLC Series A Units for shares of PBF Energy’s Class A common stock that occurred prior to that date, and to be paid out in future years as taxable income is recorded. In addition, under certain circumstances, our obligations under the Tax Receivable Agreement may be accelerated and determined based on certain assumptions set forth therein. Assuming that the market value of a share of our Class A common stock equals $5.69 per share (the closing price on September 30, 2020) and that LIBOR were to be 1.85%, we estimate as of September 30, 2020 that the aggregate amount of these accelerated payments would have been approximately $329.9 million if all tax benefits related to the Tax Receivable Agreement were to be realized. These payment obligations are obligations of PBF Energy and not of PBF LLC or any of its subsidiaries including PBF Holding or PBFX. However, because PBF Energy is a holding company with no operations of its own, PBF Energy’s ability to make payments under the Tax Receivable Agreement is dependent upon a number of factors, including its subsidiaries’ ability to make distributions for the benefit of PBF LLC’s members, including PBF Energy, its ability, if necessary, to finance its obligations under the Tax Receivable Agreement and existing indebtedness which may limit PBF Energy’s subsidiaries’ ability to make distributions.
Future payments under the Tax Receivable Agreement by us in respect of subsequent exchanges of PBF LLC Series A Units for shares of PBF Energy Class A common stock would be in addition to the amounts above and are expected to be substantial. The foregoing numbers are merely estimates - the actual payments could differ materially and assume that there are no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding Tax Receivable Agreement payments.
Dividend and Distribution Policy
PBF Energy
With respect to dividends and distributions paid during the nine months ended September 30, 2020, PBF LLC made aggregate non-tax quarterly distributions of $36.3 million, or $0.30 per unit to its members, of which $35.9 million was distributed pro-rata to PBF Energy and the balance was distributed to its other members. PBF Energy used this $35.9 million to pay quarterly cash dividends of $0.30 per share of Class A common stock on March 17, 2020.
While it is impossible to estimate the duration or ultimate financial impact of the COVID-19 pandemic on our business, our results have been adversely impacted in a significant manner. As part of our strategic plan to navigate these current extraordinary and volatile markets, we have suspended PBF Energy’s quarterly dividend of $0.30 per share on its Class A common stock. We will continue to monitor and evaluate our dividend policy as market conditions develop and our business outlook becomes clearer.
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The declaration, amount and payment of any future dividends on shares of PBF Energy Class A common stock will be at the sole discretion of PBF Energy’s Board Of Directors, and we are not obligated under any applicable laws, our governing documents or any contractual agreements with our existing owners or otherwise to declare or pay any dividends or other distributions (other than the obligations of PBF LLC to make tax distributions to its members).
PBF Logistics LP
Due to the uncertainty of the full impact of the COVID-19 pandemic will have on its business, PBFX has decided to reduce their quarterly distribution to its minimum quarterly distribution of $0.30 per unit, which represents a shift in its distribution strategy to build cash flow coverage, de-lever the business and strengthen its financial resources as they continue to pursue potential organic growth projects or strategic acquisition opportunities. However, PBFX intends to continue to pay at least the minimum quarterly distribution of $0.30 per unit per quarter, or $1.20 per unit on an annualized basis, which aggregates to approximately $18.8 million per quarter and approximately $75.2 million on an annualized basis, based on the number of common units outstanding as of September 30, 2020.
During the nine months ended September 30, 2020, PBFX made quarterly cash distributions totaling $69.7 million of which $33.6 million was distributed to PBF LLC and the balance was distributed to its public unitholders.
On October 29, 2020, the Board of Directors of PBFX’s general partner, PBF GP, announced a distribution of $0.30 per unit on outstanding common units of PBFX. The distribution is payable on November 30, 2020 to PBFX common unitholders of record at the close of business on November 16, 2020.
As of September 30, 2020, PBFX had $4.9 million outstanding letters of credit, $282.1 million available under the PBFX Revolving Credit Facility and cash and cash equivalents of $27.9 million to fund its operations, if necessary. Accordingly, as of September 30, 2020, there was sufficient cash and cash equivalents and borrowing capacity under its credit facilities available to PBFX to make distributions to unitholders.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates. Our critical accounting estimates are included in our annual report on Form 10-K for the year ended December 31, 2019. As of September 30, 2020, the following accounting policy is included as it involves estimates that are considered critical due to the level of subjectivity and judgment involved, as well as the impact on our financial position and results of operations. We believe that all of our estimates are reasonable. Estimates of the sensitivity to earnings that would result from changes in the assumptions used in determining our estimates are not practicable due to the number of assumptions and contingencies involved, and the wide range of possible outcomes.
Impairment of Long-Lived Assets
Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods.
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The global crisis resulting from the COVID-19 pandemic has had a substantial impact on the economy and overall consumer demand for energy and hydrocarbon products. As a result of the significant decrease in PBF Energy’s stock price in 2020, enduring throughput reductions across our refineries and noticeable decrease in demand for our products, we determined that an impairment triggering event had occurred. Therefore, we performed an interim impairment assessment on certain long-lived assets as of September 30, 2020. As a result of the interim impairment test, we determined that our long-lived assets were not impaired when comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets over their remaining estimated useful life. If adverse market conditions persist or there is further deterioration in the general economic environment due to the COVID-19 pandemic, there could be additional indicators that our assets are impaired requiring evaluation that may result in future impairment charges to earnings. Refer to “Note 1 - Description of the Business and Basis of Presentation” of our Notes to Condensed Consolidated Financial Statements.
Income Taxes and Tax Receivable Agreement
As a result of PBF Energy’s acquisition of PBF LLC Series A Units or exchanges of PBF LLC Series A Units for PBF Energy Class A common stock, it expects to benefit from amortization and other tax deductions reflecting the step up in tax basis in the acquired assets. Those deductions will be allocated to PBF Energy and will be taken into account in reporting its taxable income. As a result of a federal income tax election made by PBF LLC, applicable to a portion of PBF Energy’s acquisition of PBF LLC Series A Units, the income tax basis of the assets of PBF LLC, underlying a portion of the units PBF Energy acquired, has been adjusted based upon the amount that PBF Energy paid for that portion of its PBF LLC Series A Units. PBF Energy entered into the Tax Receivable Agreement (as defined in “Note 9 - Commitments and Contingencies” of the Notes to our Condensed Consolidated Financial Statements) which provides for the payment by PBF Energy equal to 85% of the amount of the benefits, if any, that it is deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. As a result of these transactions, PBF Energy’s tax basis in its share of PBF LLC’s assets will be higher than the book basis of these same assets. This resulted in a deferred tax asset of $198.4 million as of September 30, 2020.
Deferred taxes are calculated using a liability method, whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences represent the differences between reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes on the Condensed Consolidated Statements of Operations. As a result of management’s assessment of the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets as of September 30, 2020, a valuation allowance of $348.6 million was recorded to recognize only the portion of deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future taxable income. As a result of the valuation allowance, the liability associated with the Tax Receivable Agreement was reduced.
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Pursuant to the Tax Receivable Agreement PBF Energy entered into at the time of its initial public offering, it is required to pay the current and former PBF LLC Series A unitholders, who exchange their units for PBF Energy stock or whose units we purchase, approximately 85% of the cash savings in income taxes that PBF Energy is deemed to realize as a result of the increase in the tax basis of its interest in PBF LLC, including tax benefits attributable to payments made under the Tax Receivable Agreement. These payment obligations are of PBF Energy and not of PBF LLC or any of its subsidiaries. PBF Energy has recognized a liability for the Tax Receivable Agreement reflecting its estimate of the undiscounted amounts that it expects to pay under the agreement. PBF Energy’s estimate of the Tax Receivable Agreement liability is based, in part, on forecasts of future taxable income over the anticipated life of PBF Energy’s future business operations, assuming no material changes in the relevant tax law. The assumptions used in the forecasts are subject to substantial uncertainty about PBF Energy’s future business operations and the actual payments that it is required to make under the Tax Receivable Agreement could differ materially from its current estimates. PBF Energy must adjust the estimated Tax Receivable Agreement liability each time we purchase PBF LLC Series A Units or upon an exchange of PBF LLC Series A Units for PBF Energy Class A common stock. Such adjustments will be based on forecasts of future taxable income and PBF Energy’s future business operations at the time of such purchases or exchanges. Periodically, PBF Energy may adjust the liability based on an updated estimate of the amounts that it expects to pay, using assumptions consistent with those used in its concurrent estimate of the deferred tax asset valuation allowance. These periodic adjustments to the Tax Receivable Agreement liability, if any, are recorded in general and administrative expense and may result in adjustments to our income tax expense and deferred tax assets and liabilities.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks, including changes in commodity prices and interest rates. Our primary commodity price risk is associated with the difference between the prices we sell our refined products and the prices we pay for crude oil and other feedstocks. We may use derivative instruments to manage the risks from changes in the prices of crude oil and refined products, natural gas, interest rates, or to capture market opportunities.
Commodity Price Risk
Our earnings, cash flow and liquidity are significantly affected by a variety of factors beyond our control, including the supply of, and demand for, crude oil, other feedstocks, refined products and natural gas. The supply of and demand for these commodities depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, planned and unplanned downtime in refineries, pipelines and production facilities, production levels, the availability of imports, the marketing of competitive and alternative fuels, and the extent of government regulation. As a result, the prices of these commodities can be volatile. Our revenues fluctuate significantly with movements in industry refined product prices, our cost of sales fluctuates significantly with movements in crude oil and feedstock prices and our operating expenses fluctuate with movements in the price of natural gas. We manage our exposure to these commodity price risks through our supply and offtake agreements as well as through the use of various commodity derivative instruments.
We may use non-trading derivative instruments to manage exposure to commodity price risks associated with the purchase or sale of crude oil and feedstocks, finished products and natural gas outside of our supply and offtake agreements. The derivative instruments we use include physical commodity contracts and exchange-traded and over-the-counter financial instruments. We mark-to-market our commodity derivative instruments and recognize the changes in their fair value in our statements of operations.
The negative impact of the unprecedented global health and economic crisis sparked by the COVID-19 pandemic, combined with uncertainty around future output levels of the world’s largest oil producers has increased unpredictability in oil supply and demand resulting in an economic challenge to our industry which has not occurred since our formation. This combination has resulted in significant demand reduction for our refined products and abnormal volatility in oil commodity prices, which may continue for the foreseeable future.
At September 30, 2020 and December 31, 2019, we had gross open commodity derivative contracts representing 9.5 million barrels and 11.3 million barrels, respectively, with an unrealized net gain of $0.2 million, respectively. The open commodity derivative contracts as of September 30, 2020 expire at various times during 2020.
We carry inventories of crude oil, intermediates and refined products (“hydrocarbon inventories”) on our Condensed Consolidated Balance Sheets, the values of which are subject to fluctuations in market prices. Our hydrocarbon inventories totaled approximately 30.7 million barrels and 30.2 million barrels at September 30, 2020 and December 31, 2019, respectively. The average cost of our hydrocarbon inventories was approximately $79.63 and $79.63 per barrel on a LIFO basis at September 30, 2020 and December 31, 2019, respectively, excluding the net impact of LCM inventory adjustments of approximately $1,093.1 million and $401.6 million, respectively. If market prices of our inventory decline to a level below our average cost, we may be required to write down the carrying value of our hydrocarbon inventories to market.
Our predominant variable operating cost is energy, which is comprised primarily of natural gas and electricity. We are therefore sensitive to movements in natural gas prices. Assuming normal operating conditions, we expect our annual consumption to range from 75 million to 95 million MMBTUs of natural gas in total across our six refineries. Accordingly, a $1.00 per MMBTU change in natural gas prices would increase or decrease our natural gas costs by approximately $75.0 million to $95.0 million.
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Compliance Program Price Risk
We are exposed to market risks related to the volatility in the price of credits needed to comply with various governmental and regulatory compliance programs, which includes RINs, required to comply with RFS. Our overall RINs obligation is based on a percentage of our domestic shipments of on-road fuels as established by Environmental Protection Agency (“EPA”). To the degree we are unable to blend the required amount of biofuels to satisfy our RINs obligation, we must purchase RINs on the open market. To mitigate the impact of this risk on our results of operations and cash flows we may purchase RINs or other environmental credits when the price of these instruments is deemed favorable.
In addition, we are exposed to risks associated with complying with federal and state legislative and regulatory measures to address greenhouse gas and other emissions. Requirements to reduce emissions could result in increased costs to operate and maintain our facilities as well as implement and manage new emission controls and programs put in place. For example, AB32 in California requires the state to reduce its GHG emissions to 1990 levels by 2020. Compliance with such emission standards may require the purchase of emission credits or similar instruments.
Certain of these compliance contracts or instruments qualify as derivative instruments. We generally elect the normal purchase normal sale exception under ASC 815, Derivatives and Hedging, for such instruments, and therefore do not record these contracts at their fair value.
Interest Rate Risk
The maximum commitment under our Revolving Credit Facility is $3.4 billion. Borrowings under the Revolving Credit Facility bear interest either at the Alternative Base Rate plus the Applicable Margin or at Adjusted LIBOR plus the Applicable Margin, all as defined in the Revolving Credit Agreement. If this facility was fully drawn, a 1.0% change in the interest rate would increase or decrease our interest expense by approximately $25.1 million annually.
The PBFX Revolving Credit Facility, with a maximum commitment of $500.0 million, bears interest either at the Alternative Base Rate plus the Applicable Margin or at Adjusted LIBOR plus the Applicable Margin, all as defined in the PBFX Revolving Credit Agreement. If this facility was fully drawn, a 1.0% change in the interest rate would increase or decrease our interest expense by approximately $4.0 million annually.
In addition, the PBF Rail Term Loan, which bears interest at a variable rate, had an outstanding principal balance of $9.2 million at September 30, 2020. A 1.0% change in the interest rate would increase or decrease our interest expense by approximately $0.1 million annually, assuming the current outstanding principal balance on the PBF Rail Term Loan remained outstanding.
We also have interest rate exposure in connection with our Inventory Intermediation Agreements under which we pay a time value of money charge based on LIBOR.
Credit Risk
We are subject to risk of losses resulting from nonpayment or nonperformance by our counterparties. We continue to closely monitor the creditworthiness of customers to whom we grant credit and establish credit limits in accordance with our credit policy.
We continually monitor our market risk exposure, including the impact and developments related to the COVID-19 pandemic combined with the output policies of the world’s largest oil producers which have introduced significant volatility in the financial markets subsequent to our year ended December 31, 2019.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
PBF Energy and PBF LLC conducted separate evaluations, under the supervision and with the participation of each company’s management, including the principal executive officer and principal financial officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)) as of September 30, 2020. Based upon these evaluations, as required by Exchange Act Rule 13a-15(b), the principal executive officer and principal financial officer, in each case, concluded that the disclosure controls and procedures are effective as of September 30, 2020.
Changes in Internal Control Over Financial Reporting
On February 1, 2020, we completed the Martinez Acquisition. We are in the process of integrating Martinez Refining Company LLC’s (“Martinez Refining”) operations, including internal controls over financial reporting and, therefore, management's evaluation and conclusion as to the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q excludes any evaluation of the internal controls over financial reporting of Martinez Refining. We expect the integration of Martinez Refining's operations, including internal controls over financial reporting to be complete within one year of its acquisition. Martinez Refining accounts for approximately 8% of our total assets and approximately 12% of our total revenues as of and for the nine months ended September 30, 2020.
Management has not identified any other changes in PBF Energy's or PBF LLC’s internal controls over financial reporting during the three months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, PBF Energy’s or PBF LLC’s internal controls over financial reporting.

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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On December 28, 2016, the Delaware Department of Natural Resources and Environmental Control issued the Coastal Zone Act permit for the ethanol project (the “Ethanol Permit”) to DCR allowing the utilization of existing tanks and existing marine loading equipment at their existing facilities to enable denatured ethanol to be loaded from storage tanks to marine vessels and shipped to offsite facilities. On January 13, 2017, the issuance of the Ethanol Permit was appealed by two environmental groups. On February 27, 2017, the Coastal Zone Industrial Control Board (the “Coastal Zone Board”) held a public hearing and dismissed the appeal, determining that the appellants did not have standing. The appellants filed an appeal of the Coastal Zone Board’s decision with the Delaware Superior Court (the “Superior Court”) on March 30, 2017. On January 19, 2018, the Superior Court rendered an Opinion regarding the decision of the Coastal Zone Board to dismiss the appeal of the Ethanol Permit for the ethanol project. The judge determined that the record created by the Coastal Zone Board was insufficient for the Superior Court to make a decision, and therefore remanded the case back to the Coastal Zone Board to address the deficiency in the record. Specifically, the Superior Court directed the Coastal Zone Board to address any evidence concerning whether the appellants’ claimed injuries would be affected by the increased quantity of ethanol shipments. On remand, the Coastal Zone Board met on January 28, 2019 and reversed its previous decision on standing ruling that the appellants have standing to appeal the issuance of the Ethanol Permit. The parties to the action filed a joint motion with the Coastal Zone Board, requesting that the Board concur with the parties’ proposal to secure from the Superior Court confirmation that all rights and claims are preserved for any subsequent appeal to the Superior Court, and that the matter then be scheduled for a hearing on the merits before the Coastal Zone Board. The Coastal Zone Board notified the parties in January of 2020 that it concurred with the parties’ proposed course of action. The appellants and DCR subsequently filed a motion with the Superior Court requesting relief consistent with what was described to the Coastal Zone Board. In March of 2020, the Superior Court issued a letter relinquishing jurisdiction over the matter, and concurring with the parties’ proposal to allow the case to proceed to a hearing on the merits before the Coastal Zone Board. The parties must now jointly propose to the Coastal Zone Board a schedule for prehearing activity and a merits hearing to resolve the matter. The parties must, therefore, submit to the Coastal Zone Board a joint proposed schedule to govern future proceedings related to the merits hearing to resolve the matter.
On September 11, 2020, DCR received two Citations and Notification of Penalties, with sub-parts, from the Occupational Safety and Health Administration of the U.S. Department of Labor (“OSHA”) related to a combustion incident occurring on March 11, 2020. The citation seeks to impose penalties in the amount of $401,923 related to alleged violations of the Occupation Safety and Health Act of 1970. An informal conference with OSHA on October 2, 2020 was unsuccessful in resolving the matter, and, as a result, DCR filed a Notice of Contest with OSHA contesting the citations in their entirety at the end of the informal conference.

In connection with the acquisition of the Torrance refinery and related logistics assets, we assumed certain pre-existing environmental liabilities related to certain environmental remediation obligations to address existing soil and groundwater contamination and monitoring activities, which reflect the estimated cost of the remediation obligations. In addition, in connection with the acquisition of the Torrance refinery and related logistics assets, we purchased a ten year, $100.0 million environmental insurance policy to insure against unknown environmental liabilities. Furthermore, in connection with the acquisition, we assumed responsibility for certain specified environmental matters that occurred prior to our ownership of the refinery and logistics assets, including specified incidents and/or Notices of Violation (“NOV”) issued by regulatory agencies in various years before our ownership, including the Southern California Air Quality Management District (“SCAQMD”) and the Division of Occupational Safety and Health of the State of California (“Cal/OSHA”).
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Subsequent to the acquisition, further NOVs were issued by the SCAQMD, Cal/OSHA, the City of Torrance, the City of Torrance Fire Department, and the Los Angeles County Sanitation District related to alleged operational violations, emission discharges and/or flaring incidents at the refinery and the logistics assets both before and after our acquisition. EPA in November 2016 conducted a Risk Management Plan (“RMP”) inspection following the acquisition related to Torrance operations and issued preliminary findings in March 2017 concerning RMP potential operational violations. Since EPA’s issuance of the preliminary findings in March 2017, we have been in substantive discussions to resolve the preliminary findings. Effective January 9, 2020, we and EPA entered into a Consent Agreement and Final Order (“CAFO”), effective as of January 9, 2020, which contains no admission by us for any alleged violations in the CAFO, includes a release from all alleged violations in the CAFO, requires payment of a penalty of $125,000 and the implementation of a supplemental environmental project (“SEP”) of at least $219,000 that must be completed by December 15, 2021. The SEP will consist of configuring the northeast fire water monitor to automatically deploy water upon detection of a release.
EPA and the California Department of Toxic Substances Control (“DTSC”) in December 2016 conducted a Resource Conservation and Recovery Act (“RCRA”) inspection following the acquisition related to Torrance operations and also issued in March 2017 preliminary findings concerning RCRA potential operational violations. On June 14, 2018, the Torrance refinery and DTSC reached settlement regarding the oil bearing materials. Following this settlement, in June 2018, DTSC referred the remaining alleged RCRA violations from EPA’s and DTSC’s December 2016 inspection to the California Attorney General for final resolution. The Torrance refinery and the California Attorney General are in discussions to resolve these alleged remaining RCRA violations.
On May 8, 2020, we received a letter from the SCAQMD proposing to settle a NOV relating to Title V deviations alleged to have occurred in the first half of 2017 for $878,450. We are evaluating the allegations and will be communicating with the SCAQMD regarding the allegations and the settlement offer upon the completion of our review.
As the ultimate outcomes of the matters discussed above are uncertain, we cannot currently estimate the final amount or timing of their resolution but any such amount is not expected to have a material impact on our financial position, results of operations or cash flows, individually or in the aggregate.
On February 17, 2017, in Arnold Goldstein, et al. v. Exxon Mobil Corporation, et al., we and PBF LLC, and our subsidiaries, PBF Western Region LLC and Torrance Refining Company LLC (“Torrance Refining”) and the manager of our Torrance refinery along with ExxonMobil were named as defendants in a class action and representative action complaint filed on behalf of Arnold Goldstein, John Covas, Gisela Janette La Bella and others similarly situated. The complaint was filed in the Superior Court of the State of California, County of Los Angeles (the “Court”) and alleges negligence, strict liability, ultra-hazardous activity, a continuing private nuisance, a permanent private nuisance, a continuing public nuisance, a permanent public nuisance and trespass resulting from the February 18, 2015 electrostatic precipitator (“ESP”) explosion at the Torrance refinery which was then owned and operated by ExxonMobil. The operation of the Torrance refinery by the PBF entities subsequent to our acquisition in July 2016 is also referenced in the complaint. To the extent that plaintiffs’ claims relate to the ESP explosion, ExxonMobil has retained responsibility for any liabilities that would arise from the lawsuit pursuant to the agreement relating to the acquisition of the Torrance refinery. On July 2, 2018, the Court granted leave to plaintiffs’ to file a Second Amended Complaint alleging groundwater contamination. With the filing of the Second Amended Complaint, Plaintiffs’ added an additional plaintiff. On March 18, 2019, the class certification hearing was held and the judge took the matter under submission. On April 1, 2019, the judge issued an order denying class certification. On April 15, 2019, Plaintiffs filed a Petition with the Ninth Circuit for Permission to Appeal the Order Denying Motion for Class Certification. The appeal is currently pending with the Ninth Circuit. On May 3, 2019, Plaintiffs filed a Motion with the Central District Court for Leave to File a Renewed Motion for Class Certification. On May 22, 2019, the judge granted Plaintiffs’ motion. We filed our opposition to the motion on July 29, 2019. The Plaintiffs’ motion was heard on September 23, 2019. On October 15, 2019, the judge granted certification to two limited classes of property
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owners, rejecting two other proposed subclasses based on negligence and on strict liability for ultrahazardous activities. The certified subclasses relate to trespass claims for ground contamination and nuisance for air emissions. Discovery is ongoing. Trial currently is scheduled to commence on July 27, 2021. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
On September 18, 2018, in Michelle Kendig and Jim Kendig, et al. v. ExxonMobil Oil Corporation, et al., PBF Energy Limited and Torrance Refining along with ExxonMobil Oil Corporation and ExxonMobil Pipeline Company were named as defendants in a class action and representative action complaint filed on behalf of Michelle Kendig, Jim Kendig and others similarly situated. The complaint was filed in the Superior Court of the State of California, County of Los Angeles and alleges failure to authorize and permit uninterrupted rest and meal periods, failure to furnish accurate wage statements, violation of the Private Attorneys General Act and violation of the California Unfair Business and Competition Law. Plaintiffs seek to recover unspecified economic damages, statutory damages, civil penalties provided by statute, disgorgement of profits, injunctive relief, declaratory relief, interest, attorney’s fees and costs. To the extent that plaintiffs’ claims accrued prior to July 1, 2016, ExxonMobil has retained responsibility for any liabilities that would arise from the lawsuit pursuant to the agreement relating to the acquisition of the Torrance refinery and logistics assets. On October 26, 2018, the matter was removed to the Federal Court, California Central District. A mediation hearing between the parties was held on August 23, 2019. From the mediation hearing, the parties have reached a tentative agreement in principle to settle. On March 17, 2019, plaintiffs filed with the court a Notice of Motion and Motion for Preliminary Approval of Settlement Agreement for the Court’s approval of the proposed settlement pursuant to which Torrance Refining would pay $2.9 million to resolve the matter and receive a full release and discharge from any and all claims and make no admission of any wrongdoing or liability. On May 1, 2020 the court entered an order preliminarily approving the proposed settlement. On August 6, 2020, the settlement of $2.9 million was paid to the class claims administrator. On August 17, 2020 the court granted approval of the final settlement.
On September 7, 2018, in Jeprece Roussell, et al. v. PBF Consultants, LLC, et al., the Plaintiff filed an action in the 19th Judicial District Court for the Parish of East Baton Rouge, alleges numerous causes of action, including wrongful death, premises liability, negligence, and gross negligence against PBF Holding, PBFX Operating Company LLC, Chalmette Refining, two individual employees of the Chalmette refinery (the “PBF Defendants”), two entities, PBF Consultants, LLC (“PBF Consultants”) and PBF Investments LLC that are Louisiana companies that are not associated with our companies, as well as Clean Harbors, Inc. and Clean Harbors Environmental Services, Inc. (collectively, “Clean Harbors”), Mr. Roussell’s employer. Mr. Roussell was fatally injured on March 31, 2018 while employed by Clean Harbors and performing clay removal work activities inside a clay treating vessel located at the Chalmette refinery. Plaintiff seeks unspecified compensatory damages for pain and suffering, past and future mental anguish, impairment, past and future economic loss, attorney’s fees and court costs. On September 25, 2018, the PBF Defendants filed an answer in the state court action denying the allegations. On October 10, 2018, the PBF Defendants filed to remove the case to the United States District Court for the Middle District of Louisiana. On November 9, 2018, Plaintiff filed a motion to remand the matter back to state court and the PBF Defendants filed a response on November 30, 2018. On December 21, 2018, Plaintiff filed a motion for leave to file a reply memorandum and the reply memorandum was filed December 27, 2018. On April 15, 2019 the Federal Magistrate Judge filed a Report and Recommendation denying Plaintiff’s motion to remand and dismissing without prejudice the claims against John Sprafka, Wayne LaCombe, PBF Consultants and PBF Investments. On June 24, 2019, the Federal Judge adopted the Magistrate Judge’s Report and Recommendation denying Plaintiff’s motion to remand and dismissing without prejudice the claims against John Sprafka, Wayne LaCombe, PBF Consultants and PBF Investments. On September 18, 2020 the Magistrate Judge granted Plaintiff’s motion to amend in order to add a non-diverse plaintiff and remand to state court. PBF Defendants filed an opposition to Plaintiff’s motion to amend on October 2, 2020. On October 5, 2020, the Magistrate Judge granted Plaintiff’s motion to amend and remanded the case back to state court. Discovery will continue in state court. We cannot currently estimate the amount or the timing of the resolution of this matter. The PBF Defendants previously issued a tender of defense and indemnity to Clean Harbors and its insurer pursuant to indemnity obligations contained in the associated
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services agreement. Clean Harbors has accepted the tender of defense and indemnity, and Clean Harbors’ insurer has accepted the tender of defense and indemnity subject to a reservation of rights. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
In Varga, Sabrina, et al., v. CRU Railcar Services, LLC, et al., we and other of our entities were named as defendants along with CRU Railcar Services, LLC (“CRU”) in a lawsuit arising from a railcar explosion that occurred while CRU employees were cleaning a railcar owned by us. The initial lawsuit alleged that an employee of CRU was fatally injured as a result of the explosion. On July 5, 2019, a petition for intervention was filed alleging that another CRU employee was fatally injured in the same explosion. On October 7, 2019, a third CRU employee joined the lawsuit alleging severe injuries from the incident. We have issued a tender of defense and indemnity to CRU and its insurer pursuant to indemnity obligations contained in the associated services agreement which have not been accepted at this time. We cannot currently estimate the amount or the timing of the resolution of this matter. We presently believe the outcome will not have a material impact on our financial position, results of operations or cash flows.
We are subject to obligations to purchase RINs. On February 15, 2017, we received notification that EPA records indicated that PBF Holding used potentially invalid RINs that were in fact verified under EPA’s RIN Quality Assurance Program (“QAP”) by an independent auditor as QAP A RINs. Under the regulations use of potentially invalid QAP A RINs provided the user with an affirmative defense from civil penalties provided certain conditions are met. We have asserted the affirmative defense and if accepted by EPA will not be required to replace these RINs and will not be subject to civil penalties under the program. It is reasonably possible that EPA will not accept our defense and may assess penalties in these matters but any such amount is not expected to have a material impact on our financial position, results of operations or cash flows.
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), also known as “Superfund,” imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current or former owner or operator of the disposal site or sites where the release occurred and companies that disposed of or arranged for the disposal of the hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for investigation and the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. As discussed more fully above, certain of our sites are subject to these laws and we may be held liable for investigation and remediation costs or claims for natural resource damages. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. Analogous state laws impose similar responsibilities and liabilities on responsible parties. In our current normal operations, we have generated waste, some of which falls within the statutory definition of a “hazardous substance” and some of which may have been disposed of at sites that may require cleanup under Superfund.


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Item 1A. Risk Factors
The following risk factors supplement and/or update the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019:
Risks Relating to Our Business and Industry
The outbreak of the COVID-19 pandemic and certain developments in the global oil markets are significantly affecting our business, financial condition and results of operations and may continue to do so, and our liquidity could also be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time.
The outbreak of the COVID-19 pandemic and certain developments in the global oil markets are negatively impacting worldwide economic and commercial activity and financial markets, as well as global demand for petroleum and petrochemical products. The COVID-19 pandemic and related governmental responses have also resulted in significant business and operational disruptions, including business closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces. In addition, movements made by the world’s largest oil producers to increase market share in the current environment, combined with the impact of the COVID-19 pandemic, has created simultaneous shocks in oil supply and demand resulting in an economic challenge to our industry which has not occurred since our formation. This combination has resulted in significant demand reduction for our refined products and abnormal volatility in oil commodity prices, which may continue for the foreseeable future. The full impact of the COVID-19 pandemic and these market developments is unknown and is rapidly evolving. The full extent to which the COVID-19 pandemic and these market developments negatively impact our business and operations will depend on the severity, location and duration of the effects and spread of COVID-19, the actions undertaken by national, regional and local governments and health officials to contain the virus or treat its effects, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume.
We continue to work with federal, state and local health authorities to respond to COVID-19 cases in the regions we operate and are taking or supporting measures to try to limit the spread of the virus and to mitigate the burden on the healthcare system. Many of these measures will continue to have an adverse impact on our business and financial results that we are not currently able to fully quantify. For example, we are continuing to phase back employees to their respective work locations and we are carefully evaluating projects at our refineries and limiting or postponing projects and other non-essential work. Based on market conditions, our refineries are currently operating at reduced rates. We have significantly reduced our capital expenditures budget for 2020, while intending to satisfy and comply with all required safety, environmental and planned regulatory capital commitments and other regulatory requirements, although there are no assurances that we will be able to do so. Non-compliance with applicable environmental and safety requirements, including as a result of reduced staff due to an outbreak at one of our refineries, may subject us to fines or penalties assessed by governmental authorities or may result in an environmental or safety incident. We may also be subject to liability as a result of claims by impacted workers.
If we continue to experience low crude oil prices and deteriorating market conditions, our borrowing capacity under our Revolving Credit Facility may be reduced. As a result, we may require additional capital, and such additional financing may not be available on favorable terms or at all.
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Broad economic factors resulting from the current COVID-19 pandemic, including increasing unemployment rates, substantially reduced travel and reduced business and consumer spending, also affect our business. Business closings and layoffs in the markets we operate may adversely affect demand for our refined products. Sustained deterioration of general economic conditions or weak demand levels persisting longer than currently anticipated could require additional actions on our part to lower our operating costs, including temporarily or permanently ceasing to operate units at our facilities. There may be significant incremental costs associated with such actions. Continued or further deterioration of economic conditions may harm our liquidity and ability to repay our outstanding debt and the trading price of PBF Energy’s Class A common stock, which has already significantly declined in recent months, could decline further.
As a result of the significant decrease in PBF Energy’s stock price in 2020, enduring throughput reductions across our refineries and noticeable decrease in demand for our products, we determined that an impairment triggering event had occurred. Therefore, we performed an interim impairment assessment on certain long-lived assets as of September 30, 2020. As a result of the interim impairment test, we determined that our long-lived assets were not impaired when comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from use of the assets over their remaining estimated useful life. If adverse market conditions persist or there is further deterioration in the general economic environment due to the COVID-19 pandemic, there could be additional indicators that our assets are impaired requiring evaluation that may result in future impairment charges to earnings.
In addition, our results and financial condition may be adversely affected by federal or state laws, regulations, orders, or other governmental or regulatory actions addressing the current COVID-19 pandemic or the U.S. refining industry, which, if adopted, could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow.
Furthermore, the current COVID-19 pandemic has caused disruption in the financial markets and the businesses of financial institutions. These factors have caused a slowdown in the decision-making of these institutions, which may affect the timing on which we may obtain any additional funding. There can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.
The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic could result in a material adverse effect on our business, result of operations, financial condition, cash flows and our ability to service our indebtedness and other obligations.
To the extent the COVID-19 pandemic adversely affects our business, financial condition, results of operations and liquidity, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2019 and in this Form 10-Q, as those risk factors are amended or supplemented by reports and documents we file with the SEC after the date of this Form 10-Q.
Our working capital, cash flows and liquidity can be significantly impacted by volatility in commodity prices and refined product demand.
Payment terms for our crude oil purchases are typically longer than those terms we extend to our customers for sales of refined products. Additionally, reductions in crude oil purchases tend to lag demand decreases for our refined products. As a result of this timing differential, the payables for our crude oil purchases are generally proportionally larger than the receivables for our refined product sales. As we are normally in a net payables position, a decrease in commodity prices generally results in a use of working capital. Given we process a significant volume of crude oil, the impact can materially affect our working capital, cash flows and liquidity.
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PBF Energy has suspended its quarterly dividend and cannot assure you that it will declare dividends in the future or have the available cash to make any future dividend payments.
On March 30, 2020, PBF Energy announced that it has suspended its quarterly dividend of $0.30 per share on its Class A common stock as part of its strategic plan to respond to the impact of the COVID-19 outbreak and related market activity. PBF Energy is not obligated under any applicable laws, its governing documents or any contractual agreements with its existing and prior owners or otherwise to declare or pay any dividends or other distributions (other than the obligations of PBF LLC to make tax distributions to its members). Any future declaration, amount and payment of any dividends will be at the sole discretion of our board of directors, however, because the impact of the COVID-19 outbreak and related market activity is difficult to predict, no assurance can be made when or whether our board of directors will determine to declare a dividend in the future. Our board of directors may take into account, among other things, general economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, plans for expansion, including acquisitions, tax, legal, regulatory and contractual restrictions and implications, including under our subsidiaries’ outstanding debt documents, and such other factors as our board of directors may deem relevant in determining whether to declare or pay any dividend. Because PBF Energy is a holding company with no material assets (other than the equity interests of its direct subsidiary), its cash flow and ability to pay dividends is dependent upon the financial results and cash flows of its indirect subsidiaries PBF Holding and PBFX and their respective operating subsidiaries and the distribution or other payment of cash to it in the form of dividends or otherwise. The direct and indirect subsidiaries of PBF Energy are separate and distinct legal entities and have no obligation to make any funds available to it other than in the case of certain intercompany transactions. As a result, if PBF Energy does not declare or pay dividends you may not receive any return on an investment in PBF Energy Class A common stock unless you sell PBF Energy Class A common stock for a price greater than that which you paid for it.
Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.
Our indebtedness may significantly affect our financial flexibility in the future. As of September 30, 2020, we have total debt of $4,460.6 million, excluding unamortized deferred debt issuance costs of $49.5 million and our PBF LLC Affiliate note payable with PBF Energy that eliminates in consolidation at the PBF Energy level, and we could incur additional borrowing under our credit facilities. As disclosed in this Form 10-Q, on May 13, 2020, we issued $1.0 billion in aggregate principal amount of 2025 Senior Secured Notes and on January 24, 2020, we issued $1.0 billion in aggregate principal amount of 2028 Senior Notes (the proceeds of which were used primarily to fully redeem the 2023 Senior Notes and to fund a portion of the cash consideration for the Martinez Acquisition). Additionally, during the nine months ended September 30, 2020, we used advances under our Revolving Credit Facility to fund a portion of the Martinez Acquisition and for other general corporate purposes. The amounts set forth above do not include any post-closing payments in connection with the Martinez Acquisition to the seller if certain conditions are met, including earn-out payments based on certain earnings thresholds of the Martinez refinery (as set forth in the sale and purchase agreement, for a period of up to four years following the closing date). We may incur additional indebtedness in the future, subject to the satisfaction of any debt incurrence limitation covenants in our existing financing agreements. Although we were in compliance with incurrence covenants during the quarter ended September 30, 2020 to the extent that any of our activities triggered these covenants, there are no assurances that conditions could not change significantly, and that such changes could adversely impact our ability to meet some of these incurrence covenants at the time that we needed to. Failure to meet the incurrence covenants could impose certain incremental restrictions on, among other matters, our ability to incur new debt and also may limit the extent to which we may pay future dividends, make new investments, repurchase our stock or incur new liens.
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Regulation of emissions of greenhouse gases, including restrictions on vehicles that use our products, could have a material adverse effect on our results of operations and financial condition.
Both houses of Congress have actively considered legislation to reduce emissions of greenhouse gases (“GHGs”), such as carbon dioxide and methane, including proposals to: (i) establish a cap and trade system, (ii) create a federal renewable energy or “clean” energy standard requiring electric utilities to provide a certain percentage of power from such sources and (iii) create enhanced incentives for use of renewable energy and increased efficiency in energy supply and use. In addition, EPA is taking steps to regulate GHGs under the existing federal Clean Air Act. EPA has already adopted regulations limiting emissions of GHGs from motor vehicles, addressing the permitting of GHG emissions from stationary sources, and requiring the reporting of GHG emissions from specified large GHG emission sources, including refineries. These and similar regulations could require us to incur costs to monitor and report GHG emissions or reduce emissions of GHGs associated with our operations. In addition, various states, individually as well as in some cases on a regional basis, have taken steps to control GHG emissions, including adoption of GHG reporting requirements, cap and trade systems and renewable portfolio standards (such as AB32). On September 23, 2020 the governor of California issued an executive order effectively banning the sale of new gasoline-powered passenger cars and trucks by 2035 and requiring zero-emission medium to heavy duty vehicles by 2045 everywhere feasible. The executive order requires state agencies to build out sufficient electric vehicle charging infrastructure. It is not possible at this time to predict the ultimate form, timing or extent of federal or state regulation. In addition, it is currently uncertain how the current presidential administration or future administrations will address GHG emissions. In the event we do incur increased costs as a result of increased efforts to control GHG emissions, we may not be able to pass on any of these costs to our customers. Regulatory requirements also could adversely affect demand for the refined petroleum products that we produce. Any increased costs or reduced demand could materially and adversely affect our business and results of operations.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Exchange of PBF LLC Series A Units to PBF Energy Class A Common Stock
In the three months ended September 30, 2020, there were 4,978 PBF LLC Series A Units exchanged for 4,978 shares of PBF Energy Class A common stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act. We received no other consideration in connection with any exchanges. No exchanges were made by any of our directors or current executive officers.



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Item 6. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report and such Exhibit Index is incorporated herein by reference.
EXHIBIT INDEX
Exhibit
Number
Description
Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Energy Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Erik Young, Chief Financial Officer of PBF Energy Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Energy Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Erik Young, Chief Financial Officer of PBF Energy Company LLC pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* (1)
Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Energy Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* (1)
Certification of Erik Young, Chief Financial Officer of PBF Energy Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3* (1)
Certification of Thomas J. Nimbley, Chief Executive Officer of PBF Energy Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4* (1)
Certification of Erik Young, Chief Financial Officer of PBF Energy Company LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
———————
*
Filed herewith.
(1)
This exhibit should not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
PBF Energy Inc.
Date:October 29, 2020By:/s/ Erik Young
Erik Young
Senior Vice President, Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

PBF Energy Company LLC
Date:October 29, 2020By:/s/ Erik Young
Erik Young
Senior Vice President, Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

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