The subsidiary guarantees of the 2023 Notes could be deemed fraudulent conveyances under certain circumstances, and a court may try to subordinate or void the subsidiary guarantees.
Under U.S. bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee can be voided, or claims under a guarantee may be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee:
In addition, any payment by that guarantor under a guarantee could be voided and required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a subsidiary guarantor would be considered insolvent if:
We cannot assure you as to what standard for measuring insolvency a court would apply or that a court would agree with our conclusions.
We may not be able to repurchase the 2023 Notes upon a change of control triggering event, and a change of control triggering event could result in us facing substantial repayment obligations under the Revolving Credit Facility and the 2023 Notes.
Upon occurrence of a change of control triggering event, the indenture governing the 2023 Notes provides that holders will have the right to require us to repurchase all or any part of their 2023 Notes with a cash payment equal to 101% of the aggregate principal amount of 2023 Notes repurchased, plus accrued and unpaid interest. Additionally, our ability to repurchase the 2023 Notes upon such a change of control triggering event would be limited by our access to funds at the time of the repurchase and the terms of our other debt agreements. In addition, the Revolving Credit Facility contains provisions relating to change of control of our general partner, our partnership and our operating subsidiaries. Upon a change of control triggering event, we may be required immediately to repay the outstanding principal, any accrued and unpaid interest on and any other amounts owed by us under the Revolving Credit Facility, the 2023 Notes and any other outstanding indebtedness. The source of funds for these repayments would be our available cash or cash generated from other sources. However, we cannot assure holders that we will have sufficient funds available or that we will be permitted by our other debt instruments to fulfill these obligations upon a change of control in the future, in which case the lenders under the Revolving Credit Facility would have the right to foreclose on our assets, which would have a material adverse effect on us. Furthermore, certain change of control events would constitute an event of default under the agreement governing the Revolving Credit Facility and we might not be able to obtain a waiver of such defaults. There is no restriction in our partnership agreement on the ability of our general partner to enter into a transaction which would trigger the change of control provisions of the Revolving Credit Facility or the indenture governing the 2023 Notes.
Many of the covenants in the indenture governing the 2023 Notes will terminate if the 2023 Notes are rated investment grade by Moody’s and Standard & Poor’s.
Many of the covenants in the indenture governing the 2023 Notes will terminate if the 2023 Notes are rated investment grade by Moody’s and Standard & Poor’s, provided at such time no default under the indenture has occurred and is continuing. These covenants restrict, among other things, our ability to pay distributions, incur debt and enter into certain other transactions. There can be no assurance that the 2023 Notes will ever be rated investment grade or that if they are rated investment grade, that the 2023 Notes will maintain these ratings. However, termination of these covenants would allow us to engage in certain transactions that would not be permitted while these covenants were in force.
Risks Inherent in an Investment in Us
Our general partner and its affiliates, including PBF Energy, have conflicts of interest with us and limited fiduciary duties to us and our unitholders, and they may favor their own interests to the detriment of us and our other common unitholders.
PBF Energy owns and controls our general partner and appoints all of the officers and directors of our general partner. All of the officers and certain of the directors of our general partner are also officers of PBF Energy. Although our general partner has a duty to manage us in a manner that is beneficial to us and our unitholders, the directors and officers of our general partner have a fiduciary duty to manage our general partner in a manner that is beneficial to PBF Energy. Conflicts of interest will arise between PBF Energy and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of PBF Energy over our interests and the interests of our unitholders. These conflicts include the following situations, among others:
•Neither our partnership agreement nor any other agreement requires PBF Energy to pursue a business strategy that favors us or utilizes our assets, including whether to increase or decrease refinery production, whether to shut down or reconfigure a refinery or what markets to pursue or grow. The directors and officers of PBF Energy have a fiduciary duty to make these decisions in the best interests of the stockholders of PBF Energy, which may be contrary to our interests. PBF Energy may choose to shift the focus of its investment and growth to areas not served by our assets.
•PBF Energy, as our primary customer, has an economic incentive to cause us not to seek higher service fees, even if such higher rates or fees would reflect rates and fees that could be obtained in arm’s-length, third-party transactions.
•Our general partner is allowed to take into account the interests of parties other than us, such as PBF Energy, in resolving conflicts of interest.
•All of the officers and certain of the directors of our general partner are also officers of PBF Energy and will owe fiduciary duties to it.PBF Energy. These officers will devote significant time to the business of PBF Energy and will be compensated by it accordingly.
•PBF Energy may be constrained by the terms of its debt instruments from taking actions, or refraining from taking actions, that may be in our best interests.interest.
•Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limits our general partner’s liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might constitute breaches of fiduciary duty.
•Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval.
•Disputes may arise under our commercial agreements with PBF Energy.
•Our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership units and the creation, reduction or increase of cash reserves, each of which can affect the amount of cash available for distribution to our unitholders.
•Our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion, investment or regulatory capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders.
•Our general partner determines which costs incurred by it are reimbursable by us.
•Our general partner may cause us to borrow funds in order to permit the payment of cash distributions.
•Our partnership agreement permits us to classify up to $20.0 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions to PBF LLC.
•Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf.
•Our general partner intends to limit its liability regarding our contractual and other obligations.
•PBF Energy and its controlled affiliates may exercise their right to call and purchase all of the common units not owned by them if they own more than 80% of the common units.
•Our general partner controls the enforcement of the obligations that it and its affiliates owe to us, including PBF Energy’s obligations under the Omnibus Agreement and its commercial agreements with us.
•Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
PBF Energy may compete with us.
PBF Energy may compete with us. Under the Omnibus Agreement, PBF Energy and its affiliates agree not to engage in, whether by acquisition or otherwise, the business of owning or operating any crude oil, refined products or natural gas pipelines, terminals or storage facilities in the U.S. that are not within, directly connected to, substantially dedicated to, or otherwise an integral part of, any refinery owned, acquired or constructed by PBF Energy. This restriction, however, does not apply to:
•any assets owned by PBF Energy at the closing of the IPO (including replacements or expansions of those assets);
•any assets acquired or constructed by PBF Energy that are within, substantially dedicated to, or an integral part of any refinery owned, acquired or constructed by PBF Energy;
•any asset or business that PBF Energy acquires or constructs that has a fair market value of less than $25$25.0 million;
•any asset or business that PBF Energy acquires or constructs that has a fair market value of $25$25.0 million or more if the Partnership has been offered the opportunity and has elected not to purchase such asset, group of assets or business;
•any logistics asset that PBF Energy acquires or constructs that has a fair market value of $25$25.0 million or more but comprises less than half of the fair market value (as determined in good faith by PBF Energy) of the total asset package acquired or constructed by PBF Energy;
•the purchase and ownership of a non-controlling interest in any publicly traded entity; and
•the ownership of the equity interests in us, our general partner and our affiliates.
As a result, PBF Energy has the ability to construct assets which directly compete with our assets. The limitations on the ability of PBF Energy to compete with us are terminable by either party if PBF Energy ceases to control our general partner.
Pursuant to the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or any of its affiliates, including PBF Energy and its executive officers and directors. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our common unitholders.
If you are not an Eligible Holder,eligible holder, your common units may be subject to redemption.
We have adopted certain requirements regarding those investors who may own our common units. Eligible Holdersholders are limited partners whose (i) federal income tax status is not reasonably likely to have a material adverse effect on the rates that can be charged by us on assets that are subject to regulation by the FERC or an analogous regulatory body and (ii) nationality, citizenship or other related status would not create a substantial risk of cancellation or forfeiture of any property in which we have an interest, in each case as determined by our general partner with the advice of counsel. If you are not an Eligible Holder,eligible holder, in certain circumstances as set forth in our partnership agreement, your units may be redeemed by us at the then current market price. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner.
It is our policy to distribute a significant portion of our cash available for distribution to our partners, which could limit our ability to grow and make acquisitions.
We distribute most of our cash available for distribution, which may cause our growth to proceed at a slower pace than that of businesses that reinvest their cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to our common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the cash that we have available to distribute to our unitholders or otherwise invest in or grow our business.
Our partnership agreement does not contain a requirement for us to pay distributions to our unitholders, and there is no guarantee that we will pay the minimum quarterly distribution, or any distribution, in any quarter.
The market price of our common units may fluctuate significantly, which could cause the value of your investment to decline.
The market price of our common units may decline and will likely continue to be influenced by many factors, some of which are beyond our control, including:
•the level of our quarterly distributions;
•our quarterly or annual earnings or those of other companies in our industry;
•announcements by us or our competitors of significant contracts or acquisitions;
•changes in accounting standards, policies, guidance, interpretations or principles;
•changes in tax laws and regulations;
•general economic conditions, including interest rates and governmental policies impacting interest rates;
•the failure of securities analysts to cover our common units or changes in financial estimates by analysts; and
•future sales of our common units.
These and other factors may cause the market price of our units to decrease significantly, which in turn would adversely affect the value of your investment.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which could significantly harm our profitability and reputation.
Our partnership agreement replaces our general partner’s fiduciary duties to holders of our common units with contractual standards governing its duties.
Our partnership agreement contains provisions that eliminate the fiduciary standards to which our general partner would otherwise be held by state fiduciary duty law and replaces those duties with several different contractual standards. For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, free of any duties to us and our unitholders other than the implied contractual covenant of good faith and fair dealing, which means that a court will enforce the reasonable expectations of the partners where the language in our partnership agreement does not provide for a clear course of action. This provision entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our general partner may make in its individual capacity include:
•how to allocate business opportunities among us and its other affiliates;
•whether to exercise its limited call right;
•whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the board of directors of our general partner; and
•whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement.
Our partnership agreement restricts the remedies available to holders of our common units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement provides that:
•whenever our general partner, the board of directors of our general partner or any committee thereof (including the conflicts committee) makes a determination or takes, or declines to take, any other action in their respective capacities, our general partner, the board of directors of our general partner and any committee thereof (including the conflicts committee), as applicable, is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the decision was in the best interests of our partnership, and, except as specifically provided by our partnership agreement, will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity;
•our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith;
•our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
•our general partner will not be in breach of its obligations under our partnership agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is:
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◦ | approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval; |
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◦ | approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; |
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◦ | determined by the board of directors of our general partner to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or |
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◦ | determined by the board of directors of our general partner to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. |
◦approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval;
◦approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates;
◦determined by the board of directors of our general partner to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
◦determined by the board of directors of our general partner to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our general partner or the conflicts committee must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee and the board of directors of our general partner determines that the resolution or course of action taken with respect to the affiliate transaction or conflict of interest satisfies either of the standards set forth in the third and fourth sub-bullets above, then it will be presumed that, in making its decision, the board of directors of our general partner acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership challenging such determination, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
The administrative services fee and reimbursements due to our general partner and its affiliates for services provided to us or on our behalf will reduce our cash available for distribution to our common unitholders. The amount and timing of such reimbursements will be determined by our general partner.
Prior to making any distribution on our common units, we will reimburse our general partner and its affiliates, including PBF Energy, for costs and expenses they incur and payments they make on our behalf. Prior to making distributions, we will pay our general partner and its affiliates an annual fee for the provision of centralized administrative services and employees and reimburse our general partner and its affiliates for direct or allocated costs and expenses incurred on our behalf pursuant to the Omnibus Agreement, which we currently estimate, as of January 1, 2020,2022, will total $8.3 million annually, inclusive of estimated obligations under the Omnibus Agreement to reimburse PBF LLC for certain compensation and benefit costs of employees who devote more than 50% of their time to us for the year ending December 31, 2020.2022. In addition, prior to making distributions, we expect to pay an annual fee of $8.6$8.7 million to PBF Holding for the provision of certain personnel and utilities and other infrastructure-related services with respect to our business pursuant to the Services Agreement. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us. The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates will reduce the amount of available cash to pay cash distributions to our common unitholders.
Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to elect our general partner or its board of directors. Rather, the board of directors of our general partner will be appointed by PBF Energy. Furthermore, if the unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. As a result of these limitations, the price at which our common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price. Our partnership agreement also contains
provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
Even if holders of our common units are dissatisfied, they cannot currently remove our general partner without its consent.
Unitholders currently are unable to remove our general partner without its consent because our general partner and its affiliates, including PBF Energy, own sufficient units to be able to prevent its removal. The vote of the holders of at least 66 2/3% of all outstanding common units voting together as a single class is required to remove our general partner. PBF Energy currently indirectly owns 48.2%47.9% of our outstanding common units.
Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.
Unitholders’ voting rights are further restricted by a provision of our partnership agreement providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.
Our general partner interest or the control of our general partner may be transferred to a third-party without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of any assets it may own without the consent of the unitholders. Furthermore, there is no restriction in our partnership agreement on the ability of PBF Energy to transfer its membership interest in our general partner to a third party. The new members of our general partner would then be in a position to replace the board of directors and officers of our general partner with their own choices and to control the decisions taken by the board of directors and officers.
We may issue additional units without unitholder approval, which would dilute unitholder interests.
Our partnership agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units that we may issue at any time without the approval of our unitholders. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:
•our existing unitholders’ proportionate ownership interest in us will decrease;
•the amount of cash available for distribution on each unit may decrease;
•the ratio of taxable income to distributions may increase;
•the relative voting strength of each previously outstanding unit may be diminished; and
•the market price of the common units may decline.
PBF Energy may sell units in the public or private markets, and such sales could have an adverse impact on the trading price of the common units.
As of December 31, 2019,2021, PBF Energy holdsheld 29,953,631 of our common units. In addition, we have agreed to provide PBF Energy with certain registration rights. The sale of these units in the public or private markets could have an adverse impact on the price of the common units or on any trading market that may develop.
Our general partner intends to limit its liability regarding our obligations.
Our general partner intends to limit its liability under contractual arrangements so that the counterparties to such arrangements have recourse only against our assets and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner. Our partnership agreement permits our general partner to limit its liability, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.
PBF Energy has a limited call right that may require you to sell your units at an undesirable time or price.
If at any time PBF Energy and its controlled affiliates own more than 80% of our common units, PBF Energy will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price that is not less than their then-current market price, as calculated pursuant to the terms of our partnership agreement. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your units. PBF Energy owns 48.2%47.9% of our outstanding common units as of December 31, 2019.2021.
Your liability may not be limited if a court finds that unitholder action constitutes control of our business.
A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law, and we conduct business in and outside of Delaware. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business. You could be liable for any and all of our obligations as if you were a general partner if a court or government agency were to determine that:
•we were conducting business in a state but had not complied with that particular state’s partnership statute; or
•your rights to act with other unitholders to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business.
Unitholders may have liability to repay distributions that were wrongfully distributed to them.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Transferees of common units are liable both for the obligations of the transferor to make contributions to the partnership that were known to the transferee at the time of transfer and for those obligations that were unknown if the liabilities could have been determined from our partnership agreement. Neither liabilities to partners on account of their partnership interest nor liabilities that are non-recourse to the partnership are counted for purposes of determining whether a distribution is permitted.
The NYSE does not require a publicly traded limited partnership like us to comply with certain of its corporate governance requirements.
We currently list our common units on the NYSE, under the symbol “PBFX.” Because we are a publicly traded limited partnership, the NYSE does not require us to have, and we do not intend to have, a majority of
independent directors on our general partner’s board of directors or to establish a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders do not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements.
Tax Risks to Common Unitholders
Our tax treatment depends on qualifying income requirements and our status as a partnership for U.S. federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the IRS were to treat us as a corporation for U.S. federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced.
The anticipated after-tax benefit of an investment in our units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement. Based on our current operations, we believe we satisfy the qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our income at the corporate tax rate and we would also likely be liable for additional state and local income taxes at varying rates. Distributions to our unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to our unitholders. Because taxes would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. Imposition of a material amount of any of these taxes in the jurisdictions in which we own assets or conduct business could substantially reduce the cash available for distribution to our unitholders.
If we were treated as a corporation or otherwise subjected to a material amount of entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.
The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, from time to time members of the U.S. Congress have proposed and considered substantive changes to the existing federal income tax laws, which would affect publicly traded partnerships, including elimination of partnership tax treatment of publicly traded partnerships.
In addition, the Treasury Department has issued, and in the future may issue, regulations interpreting those laws that affect publicly traded partnerships. We believe the income that we treat as qualifying satisfies the requirements under current regulations. However, there can be no assurance that there will not be further changes to U.S. federal income tax laws or the Treasury Department’s interpretation of the qualifying income rules in a manner that could impact our ability to qualify as a partnership for U.S. federal income tax purposes in the future.
We are unable to predict whether any legislation or other tax-related proposals will ultimately be enacted. Any modification to the U.S. federal income tax laws and interpretations thereof may or may not be applied retroactively and could make it more difficult or impossible for us to meet the exception to be treated as a partnership for U.S. federal income tax purposes. Any such changes could negatively impact the value of an investment in our common units.
If the IRS were to contest the U.S. federal income tax positions we take, it may adversely impact the market for our common units and our cash available for distribution to our unitholders might be substantially reduced.
The IRS may adopt positions that differ from the positions that we take, even positions taken with the advice of counsel. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the prices at which they trade. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders.
Pursuant to legislationpartnership audit rules applicable for partnership tax years beginning after 2017, if the IRS makes audit adjustments to our partnership tax returns, it may assess and collect any taxes (including applicable penalties and interest) resulting from such audit adjustments directly from us. To the extent possible under these new rules our general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS in the year in which the audit is completed or, if we are eligible, issue a revised information statement to each current and former unitholder with respect to an audited and adjusted partnership tax return. Although our general partner may elect to have our current and former unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances. If we make payments of taxes and any penalties and interest directly to the IRS in the year in which the audit is completed, our cash available for distribution to our unitholders might be substantially reduced, in which case our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if the unitholders did not own units in us during the tax year under audit.
Our unitholders’ share of our income is taxable to them for federal income tax purposes even if they do not receive any cash distributions from us.
Each unitholder is treated as a partner to whom we will allocate taxable income even if the unitholder does not receive any cash distributions from us. Unitholders are required to pay U.S. federal income taxes and, in some cases, state and local income taxes, on their share of our taxable income, whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due from them with respect to that income.
Tax gain or loss on the disposition of our units could be more or less than expected.
If our unitholders sell units, they will recognize a gain or loss for federal income tax purposes equal to the difference between the amount realized and their tax basis in those units. Because distributions in excess of their allocable share of our net taxable income decrease their tax basis in their units, the amount, if any, of such prior excess distributions with respect to the units a unitholder sells will, in effect, become taxable income to the unitholder if it sells such units at a price greater than its tax basis in those units, even if the price received is less than its original cost. Furthermore, a substantial portion of the amount realized on any sale of units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. In addition, because the amount realized includes a unitholder’s share of our non-recourse liabilities, a unitholder that sells units may incur a tax liability in excess of the amount of cash received from the sale.
Unitholders may be subject to limitations on their ability to deduct interest expense we incur.
Our ability to deduct business interest expense is limited for U.S. federal income tax purposes to an amount equal to the sum of our business interest income and 30%a specified percentage of our “adjusted taxable income” during the taxable year computed without regard to any business interest income or expense, and in the case of taxable years beginning before 2022, any deduction allowable for depreciation, amortization, or depletion.expense. Business interest expense that we are not entitled to fully deduct will be allocated to each unitholder as excess business interest and can be carried forward by the unitholder to successive taxable years and used to offset any excess taxable income allocated by us to the unitholder. Any excess business interest expense allocated to a unitholder will reduce the unitholder’s tax basis in its partnership interest in the year of the allocation even if the expense does not give rise to a deduction to the unitholder in that year.
Tax-exempt entities owning our units face unique tax issues that may result in substantially adverse tax consequences to them.
Investment in our units by tax-exempt entities, such as individual retirement accounts (known as “IRAs”), raises tax issues unique to them. For example, virtually all of our income allocated to entities exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them, despite their exempt status. Tax-exempt entities with multiple unrelated trades or businesses cannot aggregate losses from one unrelated trade or business to offset income from another to reduce total unrelated business taxable income. As a result, it may not be possible for tax-exempt entities to utilize losses from an investment in us to offset unrelated business taxable income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor before investing in our common units.
Non-U.S. unitholders will be subject to U.S. federal income taxes and withholding with respect to income and gain from owning our units.
Non-U.S. persons are generally taxed and subject to federal income tax filing requirements on income effectively connected with a U.S. trade or business. Income allocated to our unitholders and any gain from the sale of our common units will generally be considered to be “effectively connected” with a U.S. trade or business. As a result, distributions to a non-U.S. unitholder will be subject to withholding at the highest applicable effective tax rate and a non-U.S. unitholder who sells or otherwise disposes of a common unit will also be subject to U.S. federal income tax on the gain realized from the sale or disposition of that common unit.
The Tax Cuts and Jobs Act of 2017 imposesMoreover, a federal income tax withholding obligation of 10% of the amount realized is imposed upon a non-U.S. person’s sale or exchange of an interest in a partnership that is engaged in a U.S. trade or business. However, the U.S. Treasury and the IRS have suspended application of this withholding rule tofor dispositions of publicly traded partnership interests, has been suspended by the IRS until regulations or other guidance have been issued. It is not clear when or ifincluding transfers of our common units, that occur before January 1, 2023. Under applicable Treasury Regulations, such regulations or guidancewithholding will be issued.required on open market transactions, but in the case of a transfer made through a broker, (i) a partner’s share of liabilities will be excluded from the amount realized, and (ii) the obligation to withhold will be imposed on the broker instead of the transferee. These withholding obligations will apply to transfers of our common units occurring on or after January 1, 2023. Non-U.S. persons should consult a tax advisor before investing in our common units.
We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.
Because we cannot match transferors and transferees of common units, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to unitholders. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of common units and could have a negative impact on the value of our common units or result in tax return audit adjustments.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based on the ownership of our common units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based on the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. Although Treasury Regulations allow publicly traded partnerships to use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, these regulations do not specifically authorize all aspects of the proration method we have adopted. If the IRS were to successfully challenge our proration method or new Treasury Regulations were issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
A unitholder whose units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of units) may be considered to have disposed of those units. If so, such unitholders would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and could recognize gain or loss from the disposition.
Because there are no specific rules governing the U.S. federal income tax consequence of loaning a partnership interest, a unitholder whose units are the subject of a securities loan may be considered to have disposed of the loaned units. In that case, the unitholder may no longer be treated for U.S. federal income tax purposes as a partner with respect to those units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax adviser to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from loaning their units.
We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could adversely affect the value of our common units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, we must routinely determine the fair market value of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates ourselves using a methodology based on the market value of our common units as a means to determine the fair market value of our assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the timing, character or amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
As a result of investing in our common units, our unitholders may become subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties.
In addition to U.S. federal income taxes, our unitholders will likely be subject to other taxes, including state and local income taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the future, even if they do not live in those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be
subject to penalties for failure to comply with those requirements. As we make acquisitions or expand our business, we may control assets or conduct business in additional states that impose a personal income tax. It is our unitholders’ responsibility to file all federal, state and local tax returns.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Refer to “Item 1. Business” of this Form 10-K for a discussion of our properties.
ITEM 3. LEGAL PROCEEDINGS
Although we may, fromFrom time to time, we may be involved in litigation, legal or governmental proceedings and other claims arising out of or relating to our operations in the normal course of business,business. Except as set forth in our filings with the SEC or in this Form 10-K, we do not believe that we are a party to any litigationsuch matters that will have a material adverse impact on our financial condition, results of operations or statements of cash flows. Weflows, and we are not aware of any significant legal or governmental proceedings against us, orsuch matters contemplated to be brought against us, except as follows:us.
On December 28, 2016, DNREC issued an Ethanol PermitRefer to the Delaware City Refinery allowing the utilization of existing tanksNote 12 “Commitments 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 issuanceContingencies” of the Ethanol Permit was appealed by two environmental groups. On February 27, 2017, the Coastal Zone Industrial Board (the “Coastal Zone Board”) held a public hearingNotes to Consolidated Financial Statements included in “Item 8. Financial Statements and dismissed the appeal, determining that the appellants did not have standing. The appellants filed an appealSupplementary Data” 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 have filed a joint motion with the Coastal Zone Board, requesting that the Coastal Zone 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 scheduledthis Form 10-K for a hearing on the merits before the Coastal Zone Board. That joint motion remains pending before the Coastal Zone Board.
During 2018, EPA conducted certain evaluations of the ambient air in the vicinity of onediscussion of our terminals. We and EPA agreed to resolve EPA’s allegations through execution of an Administrative Consent Order (the “ACO”). The ACO, effective on November 13, 2019, provides for us to make a civil penalty payment of $0.2 million, and commit to certain injunctive relief, notably including the installation and operation of a thermal oxidizer to reduce the emissions to the atmosphere of volatile organic compound emissions collected from certain existing tanks. Pursuant to the terms of the ACO, we do not admit the factual or legal allegations, nor any liability for noncompliance as alleged by EPA.proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
UNIT PRICE AND CASH DISTRIBUTIONS
Our common units trade on the NYSE under the symbol “PBFX.” As of February 18, 2020,10, 2022, there were eightnine holders of record of our 32,176,56132,644,224 outstanding common units held by the public, including common units held in street name. Our common units represent limited partner interests in us that entitle the holders to the rights and privileges specified in our partnership agreement. In addition, as of February 18, 2020,10, 2022, PBF Energy owned 29,953,631 of our common units, which constitute a 48.2%47.9% ownership interest in us.
Distributions of Available Cash
General
Our partnership agreement requires that, on or about the last day of each of February, May, August and November, we distribute all of our available cash to unitholders of record on the applicable record date.
Definition of Available Cash
Available cash generally means, for any quarter, all cash on hand at the end of that quarter:
•less, the amount of cash reserves established by our general partner to:
◦provide for the proper conduct of our business (including cash reserves for our future capital expenditures and anticipated future debt service requirements subsequent to that quarter);
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◦ | provide for the proper conduct of our business (including cash reserves for our future capital expenditures and anticipated future debt service requirements subsequent to that quarter); |
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◦ | comply with applicable law, any of our debt instruments or other agreements; or |
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◦ | provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter); |
◦comply with applicable law, any of our debt instruments or other agreements; or
◦provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter);
•plus, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.
The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash from working capital borrowings made after the end of the quarter but on or before the date of determination of available cash for that quarter to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are generally borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used solely for working capital purposes or to pay distributions to unitholders, and with the intent of the borrower to repay such borrowings within twelve months with funds other than from additional working capital borrowings.
Intent to Distribute the Minimum Quarterly Distribution
We have made and intend to continue to make a minimum quarterly distribution to the holders of our common units of at least $0.30 per unit, or $1.20 per unit on an annualized basis, to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. However, we have no obligation to, and there is no guarantee that we will pay the minimum quarterly distribution or any amount on our units in any quarter. Even if our cash
distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement.
General Partner Interest
Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions. However, our general partner may, in the future, own common units or other equity securities in us and will be entitled to receive distributions on any such interests.
Incentive Distribution Rights
Prior to the IDR Restructuring, PBF LLC held IDRs that entitled it to receive increasing percentages, up to a maximum of 50.0%, of the cash we distributed from operating surplus in excess of $0.345 per unit per quarter. The maximum distribution of 50.0% included distributions paid to PBF LLC on its partner interest. The maximum distribution of 50.0% did not include any distributions that PBF LLC previously received on common units that it owns. On a quarterly basis, PBF LLC was entitled to receive distributions at the 50.0% level. Subsequent to the closing of the IDR Restructuring, the IDRs were canceled, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions. As such, PBF LLC did not receive any IDR payments from PBFX for the yearyears ended December 31, 2021, 2020 and 2019.
Subordinated Units
In connection with the IPO, we issued 15,886,553 subordinated units to PBF LLC. These units were deemed “subordinated” because for a period of time, referred to as the subordination period, the subordinated units were not entitled to receive any distributions from operating surplus until the common units had received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Furthermore, no arrearages were paid on the subordinated units. The practical effect of the subordinated units was to increase the likelihood that during the subordination period there was sufficient cash from operating surplus to pay the minimum quarterly distribution on the common units.
On June 1, 2017, the requirements under our partnership agreement for the conversion of all subordinated units into common units were satisfied and the subordination period ended. As a result, each of the 15,886,553 outstanding subordinated units converted on a one-for-one basis into common units and began participating pro rata with the other common units in distributions of available cash. The conversion did not impact the amount of the cash distribution paid or the total number of the outstanding units representing limited partner interests.
UNREGISTERED SALES OF EQUITY SECURITIES
None.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Refer to Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters” for information relating to compensation plans under which the Partnership’s securities are authorized for issuance.
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth certain selected financial data as of and for each of the five years in the period ended December 31, 2019. All financial information has been retrospectively adjusted for the Acquisitions from PBF as noted below.
We acquired from PBF LLC the Contributed Assets in connection with the Acquisitions from PBF during 2014 through 2019. The Acquisitions from PBF were considered transfers between entities under common control. Accordingly, our financial information contained herein has been retrospectively adjusted to include the historical results of the assets acquired in the Acquisitions from PBF prior to the effective date of each acquisition for all periods presented, with the exception of the Delaware Ethanol Storage Facility, which is considered an asset purchase. Net income (loss) attributable to the Acquisitions from PBF prior to their respective acquisition effective dates was allocated entirely to PBF GP as if only PBF GP had rights to that net income (loss); therefore, there is no retrospective adjustment to net income per unit.
With the exception of revenue generated by the DCR Products Pipeline and the Paulsboro Lube Oil Terminal, our Predecessor generally recognized only the costs and did not record revenue for transactions with PBF Energy prior to the Acquisitions from PBF. Affiliate revenue has been recorded for certain of our assets subsequent to the commencement of the commercial agreements with PBF Energy upon completion of certain of the Acquisitions from PBF. As a result, the information included in the following tables is not necessarily comparable on a year-over-year basis. Refer to “Factors Affecting the Comparability of Our Financial Results” included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the related notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information.[RESERVED]
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| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| | (In thousands, except unit and per unit amounts) |
Statements of operations data: | | | | | | | | | | |
Total revenue (a) | | $ | 340,212 |
| | $ | 283,440 |
| | $ | 257,588 |
| | $ | 189,006 |
| | $ | 142,696 |
|
Net income | | 108,169 |
| | 100,837 |
| | 110,016 |
| | 74,807 |
| | 69,008 |
|
Loss attributable to Predecessor | | — |
| | (2,443 | ) | | (4,986 | ) | | (11,832 | ) | | (4,840 | ) |
Income attributable to noncontrolling interest | | 7,881 |
| | 17,819 |
| | 14,565 |
| | 5,679 |
| | — |
|
Net income attributable to the partners | | 100,288 |
| | 85,461 |
| | 100,437 |
| | 80,960 |
| | 73,848 |
|
Income attributable to the IDR holder (b) | | — |
| | 10,011 |
| | 9,055 |
| | 4,031 |
| | — |
|
Net income attributable to PBF Logistics LP unitholders | | $ | 100,288 |
| | $ | 75,450 |
| | $ | 91,382 |
| | $ | 76,929 |
| | $ | 73,848 |
|
| | | | | | | | | | |
Net income per limited partner unit: | | | | | | | | | | |
Common units - basic | | $ | 1.71 |
| | $ | 1.73 |
| | $ | 2.17 |
| | $ | 2.01 |
| | $ | 2.18 |
|
Common units - diluted | | 1.71 |
| | 1.73 |
| | 2.17 |
| | 2.01 |
| | 2.18 |
|
Subordinated units - basic and diluted | | — |
| | — |
| | 2.15 |
| | 2.01 |
| | 2.18 |
|
| | | | | | | | | | |
Weighted-average limited partner units outstanding: | | | | | | |
Common units - basic | | 58,583,231 |
| | 43,646,997 |
| | 35,505,446 |
| | 22,288,118 |
| | 17,956,152 |
|
Common units - diluted | | 58,687,945 |
| | 43,731,299 |
| | 35,568,760 |
| | 22,338,784 |
| | 17,956,152 |
|
Subordinated units - basic and diluted | | — |
| | — |
| | 6,572,245 |
| | 15,886,553 |
| | 15,886,553 |
|
Cash distribution per unit | | $ | 2.0650 |
| | $ | 1.9900 |
| | $ | 1.8950 |
| | $ | 1.7400 |
| | $ | 1.5200 |
|
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| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| | (In thousands) |
Balance sheets data (at period end): | | | | | | |
Total assets | | $ | 973,002 |
| | $ | 956,353 |
| | $ | 748,215 |
| | $ | 767,380 |
| | $ | 434,136 |
|
Debt | | 802,104 |
| | 673,324 |
| | 548,793 |
| | 571,675 |
| | 599,635 |
|
| | | | | | | | | | |
Cash flows provided by (used in): | | | | | | | | | | |
Operating activities | | $ | 149,007 |
| | $ | 133,141 |
| | $ | 138,182 |
| | $ | 94,053 |
| | $ | 73,656 |
|
Investing activities | | (31,746 | ) | | (175,696 | ) | | (50,234 | ) | | 70,298 |
| | (9,308 | ) |
Financing activities | | (102,203 | ) | | 42,799 |
| | (132,505 | ) | | (118,808 | ) | | (59,835 | ) |
Net change in cash and cash equivalents | | $ | 15,058 |
| | $ | 244 |
| | $ | (44,557 | ) | | $ | 45,543 |
| | $ | 4,513 |
|
| | | | | | | | | | |
Capital expenditures (c): | | | | | | | | | | |
Expansion | | $ | 23,632 |
| | $ | 169,023 |
| | $ | 85,662 |
| | $ | 121,026 |
| | $ | 8,179 |
|
Maintenance | | 7,820 |
| | 6,168 |
| | 4,596 |
| | 2,920 |
| | 1,826 |
|
Regulatory | | 294 |
| | 505 |
| | — |
| | — |
| | — |
|
Total capital expenditures | | $ | 31,746 |
| | $ | 175,696 |
| | $ | 90,258 |
| | $ | 123,946 |
| | $ | 10,005 |
|
____________________
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(a) | We did not record revenue for the Contributed Assets (with the exception of the DCR Products Pipeline and the Paulsboro Lube Oil Terminal) prior to the effective dates of the Acquisitions from PBF. |
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(b) | Subsequent to the closing of the IDR Restructuring, the IDRs were canceled, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions. |
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(c) | Expansion capital expenditures include acquisitions or capital improvements that we expect will increase our operating income or operating capacity over the long term. Maintenance capital expenditures include expenditures required to maintain equipment reliability, integrity and safety. Regulatory capital expenditures include expenditures incurred to address environmental laws or regulations. |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Acquisitions from PBF were transfers between entities under common control. Accordingly, our financial information, and that of our Predecessor, contained herein has been retrospectively adjusted to include the historical results of the assets acquired in the Acquisitions from PBF prior to the effective date of each acquisition for all periods presented with the exception of the Delaware Ethanol Storage Facility, which is considered an asset purchase.
With the exception of revenue generated by the DCR Products Pipeline and the Paulsboro Lube Oil Terminal, our Predecessor generally recognized only the costs and did not record revenue for transactions with PBF Energy prior to the IPO and the Acquisitions from PBF. Affiliate revenue has been recorded for certain of our assets in the Transportation and Terminaling and Storage segments subsequent to the commencement of the commercial agreements with PBF Energy upon completion of the IPO and the Acquisitions from PBF. Refer to “Item 6. Selected Financial Data” and “Factors Affecting the Comparability of Our Financial Results” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information. Refer to “Overview” in “Item 1. Business” for further information regarding the Acquisitions from PBF.
The following information concerning our results of operations and financial condition should be read in conjunction with “Item 1. Business,” “Item 1A. Risk Factors,” “Item 2. Properties,” “Item 6. Selected Financial Data”Properties” and “Item 8. Financial Statements and Supplementary Data,” respectively, included in this Form 10-K.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K contains certain “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995, which involve riskrisks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time, make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time; 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 “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-K. All forward-looking information in this Form 10-K 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:
•changes in general economic conditions;conditions, including market and macro-economic disruptions resulting from pandemics, such as the ongoing COVID-19 pandemic, including resurgences and variants of the virus, and related governmental and consumer responses thereto;
•our ability to make, complete and integrate acquisitions from affiliates or third parties, and to realize the benefits from such acquisitions;
•our ability to have sufficient cash from operations to enable us to pay the minimum quarterly distribution;
•competitive conditions in our industry;
•political pressure and influence of environmental groups and other stakeholders on decisions and policies related to the refining, processing and storing of crude oil and refined products;
•actions taken by our customers and competitors;
•the supply of, and demand for, crude oil, refined products, natural gas and logistics services;
•our ability to successfully implement our business plan;
•our dependence on PBF Energy for a substantial majority of our revenue subjects us to the business risks of PBF Energy, which include the possibility that contracts will not be renewed because they are no longer beneficial for PBF Energy;
•a substantial majority of our revenue is generated at PBF Energy’s facilities, particularly atassociated with PBF Energy’s Delaware City, Toledo and Torrance refineries, and any adverse development at any of these facilities could have a material adverse effect on us;
•our ability to complete internal growth projects on time and on budget;
•the price and availability of debt and equity financing;
•operating hazards and other risks incidental to the processing of crude oil and the receiving, handling, storagestoring and transferring of crude oil, refined products, natural gas and intermediates;
•natural disasters, weather-related delays, casualty losses and other matters beyond our control;
•the threat of cyber-attacks;cyberattacks;
•our and PBF Energy’s increased dependence on technology;
•interest rates;
•labor relations;
•changes in the availability and cost of capital;
•the effects of existing and future laws and governmental regulations, including those related to the shipment of crude oil by rail;rail or in response to the potential impacts of climate change;
•changes in insurance markets impacting costs and the level and types of coverage available;
•the timing and extent of changes in commodity prices and demand for PBF Energy’s refined products and natural gas and the differential in the prices of differentvarious crude oils;
•the suspension, reduction or termination of PBF Energy’s obligations under our commercial agreements;
•disruptions due to equipment interruption or failure at our facilities, PBF Energy’s facilities or third-party facilities on which our business is dependent;
•our general partner and its affiliates, including PBF Energy, have conflicts of interest with us and limited duties to us and our unitholders, and they may favor their own interests to the detriment of us and our other common unitholders;
•our partnership agreement restricts the remedies available to holders of our common units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty;
•holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors;
•our tax treatment depends on qualifying income requirements and our status as a partnership for U.S. federal income tax purposes, as well as not being subject to a material amount of entity level taxation by individual states;
•changes at any time (including on a retroactive basis) in the tax treatment of publicly traded partnerships, including related impacts on potential dropdown transactions with PBF LLC, or an investment in our common units;
•our unitholders will be required to pay taxes on their share of our taxable income even if they do not receive any cash distributions from us;
•the effects of future litigation; and
•other factors discussed elsewhere in this Form 10-K.
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-
lookingforward-looking statements contained in this Form 10-K 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-K or as of the date which they are made. Except as required by applicable law, including the securities laws of the U.S., we undertake no obligation 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.
Overview
We are a fee-based, growth-oriented, Delaware master limited partnership formed in February 2013 by subsidiaries of PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBF GP is our general partner and is wholly-owned by PBF LLC. PBF Energy is the sole managing member of PBF LLC and, as of December 31, 2019,2021, owned 99%99.2% of the total economic interest in PBF LLC. As of December 31, 2019,2021, PBF LLC held a 48.2%47.9% limited partner interest in us, with the remaining 51.8%52.1% limited partner interest owned by public unitholders.
Our business includes the assets, liabilities and results of operations of certain crude oil, refined products, natural gas and intermediates terminaling, pipeline, storage and processing assets, including those previously operated and owned by PBF Holding’s subsidiaries and PBF Holding’s previously held subsidiaries. Refer to “Item 1. Business” inof this Form 10-K for more detailed information onregarding our business and assets.
Business Developments
Refer to “Business Developments” included in “Item 1. Business” of this Form 10-K for a discussion regarding our business developments during the fiscal year 2019.2021.
Principles of Combination and Consolidation and Basis of Presentation
OurIn general, our Predecessor did not historically operate its assets for the purpose of generating revenue independent of other PBF Energy businesses that we support, with the exception of the DCR Products Pipeline and the Paulsboro Lube Oil Terminal. In connection with the closing of the IPO and the Acquisitions from PBF, we entered into commercial and service agreements with subsidiaries of PBF Energy, under which we operate our assets for the purpose of generating fee-based revenue. We receive, handle and transfer crude oil, refined products and natural gas from sources located throughout the U.S. and Canada and store crude oil, refined products and intermediates for PBF Energy in support of its refineries located in Paulsboro, New Jersey; Delaware City, Delaware; Toledo, Ohio; Chalmette, Louisiana; Torrance, California; and Torrance,Martinez, California. In 2020, PBF Energy reconfigured its Delaware and Paulsboro refineries as part of the East Coast Refining Reconfiguration. We acquired various terminal, pipeline and storage assets from PBF Energy, which are integral components of the crude oil, refined products and natural gas delivery and storage operations at PBF Energy’s refineries. In addition, we generate third-party revenue from certain of our assets.
The consolidated financial statements presented in this Form 10-K include our consolidated financial results as of and for the period ending December 31, 2019. We have retrospectively adjusted our financial information contained herein to include the historical results of the Acquisitions from PBF prior to the effective date of each transaction including the Development Assets, with the exception of the Delaware Ethanol Storage Facility as it is considered an asset purchase, prior to the acquisition of the Development Assets.2021.
Business Strategies
We continue to focus on the following strategic areas:
|
| | | | |
Maintain Safe, Reliable and Efficient Operations. | • Maintain, emphasize and improve the safety, reliability, environmental compliance and efficiency of our operations
• Improve operating performance through preventive maintenance programs, employee training and development programs |
Generate Stable, Fee-Based Cash Flows. | • Utilize long-term, fee-based logistics contracts that provide stable, predictable cash flows
• Leverage PBF Energy for a substantial majority of our revenue and continue to seek commercial agreements which include minimum commitmentsMVCs
• Generate third-party revenue from certain of our assets and seek future third-party growth opportunities |
Grow Through Acquisitions and Organic Projects. | • Pursue strategic acquisitions independently and jointly with PBF Energy that complement and grow our asset base
• Pursue strategic organic projects that enhance our existing assets and increase our revenues
• Take advantage ofCapitalize on opportunistic dropdown transactions with our parent sponsor that may arise |
Seek to Optimize Our Existing Assets and Pursue Third-Party Volumes. | • Enhance profitability by increasing throughput volumes from PBF Energy, attracting third-party volumes, improving operating efficiencies and managing costs |
How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our business and segment performance. These metrics are significant factors in assessing our operating results and profitability and include, but are not limited to, volumes, including terminal and pipeline throughput and storage capacity; operating and maintenance expenses; and EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow. We define EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow below.
Volumes. The amount of revenue we generate primarily depends on the volumes of crude oil, refined products and natural gas that we throughput at our terminaling and pipeline operations and our available and utilized storage capacity. These volumes are primarily affected by the supply of and demand for crude oil, refined products and natural gas in the markets served directly or indirectly by our assets. Although PBF Energy has committed to minimum volumesMVCs under certain commercial agreements, our results of operations will be impacted by:
•PBF Energy’s utilization of our assets in excess of MVCs;
•our ability to identifyidentification and executeexecution of accretive acquisitions and organic expansion projects and capture of incremental PBF Energy or third-party volumes; and
•our ability to increase of throughput or storage volumes at our facilities and provide additional ancillary services at those terminals and pipelines.
Operating and Maintenance Expenses.Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of labor expenses,and outside contractor expenses, utility costs, utilities, insurance premiums, repairs and maintenance expensescharges and related property taxes. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We will seek to manage our maintenance expenditures on our assets by scheduling
maintenance over time to avoid significant variability in our maintenance expenditures and to minimize their impact on our cash flow.
EBITDA, EBITDA Attributable to PBFX, Adjusted EBITDA and Distributable Cash Flow. We define EBITDA as net income (loss) before net interest expense (including amortization of loan fees and debt premium and accretion on discounted liabilities), income tax expense, depreciation, amortization, impairment expense and change in contingent consideration. We define EBITDA attributable to PBFX as net income (loss) attributable to PBFX before net interest expense (including amortization of loan fees and debt premium and accretion on discounted liabilities), income tax expense, depreciation, amortization, impairment expense and change in contingent consideration attributable to PBFX, which excludes the results of Acquisitions from PBF prior to the effective dates of such transactions and earnings attributable to the CPI earn-out.Operations LLC (“CPI”) earn-out (the portion of earnings associated with an earn-out provision related to the purchase of CPI). We define Adjusted EBITDA as EBITDA attributable to PBFX excluding acquisition and transaction costs, non-cash unit-based compensation expense and items that meet the conditions of unusual, infrequent and/or non-recurring charges. We define distributable cash flow as EBITDA attributable to PBFX plus non-cash unit-based compensation expense, less cash interest, maintenance capital expenditures attributable to PBFX and income taxes. Distributable cash flow will not reflect changes in working capital balances. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow are not presentations made in accordance with GAAP.
EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:
•our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
•the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
•our ability to incur and service debt and fund capital expenditures; and
•the viability of acquisitions and other capital expenditure projects and the economic returns on various investment opportunities.
We believe that the presentation of EBITDA, EBITDA attributable to PBFX and Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations.operations and assists in evaluating our ongoing operating performance for current and comparative periods. We believe that the presentation of distributable cash flow will provide useful information to investors as it is a widely accepted financial indicator used by investors to compare partnership performance and provides investors with another perspective on the operating performance of our assets and the cash our business is generating. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow should not be considered alternatives to net income, income from operations, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of such measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow are reconciled to net income and net cash provided by operating activities in this Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”
Factors Affecting the Comparability of Our Financial Results
Our results of operations may not be comparable to our historical results of operations due to certain debt transactions and annual inflation adjustments related to certain of our recent acquisition activity, which is discussed in Note 4 “Acquisitions”commercial agreements. Additionally, our results may not be comparable to prior periods due to the impact of the Notes to Consolidated Financial Statements included in “Item 8. Financial StatementsCOVID-19 pandemic on our business, including lower throughput volumes at our terminals, as the industry contends with the related economic downturn and Supplementary Data”volatile commodity market.
Furthermore, our results of this Form 10-K, the IDR Restructuring, recent debt and equity transactions and our annual inflation adjustmentoperations may not be comparable to our historical results of operations due to the termination of the CPI Processing Agreement (as defined below). In connection with our acquisition of CPI from Crown Point International LLC (“Crown Point”) in October 2018, the purchase and sale agreement included an earn-out provision (the “CPI earn-out”) related to an existing commercial agreements.
As a resultagreement (the “CPI Processing Agreement”), based on the future results of our recent acquisitions, we incurred additional revenue, operating and maintenance expenses and general and administrative expenses.certain acquired idled assets, which recommenced operations in October 2019. In the third quarter of 2020, pursuant to the terms of the CPI Processing Agreement, the counterparty exercised its right to terminate the contract at the conclusion of the initial contract year, effective in the fourth quarter of 2020 (the “CPI Contract Termination”). As a result of the IDR Restructuring, whichCPI Contract Termination, we recorded an impairment charge of $7.0 million in the third quarter of 2020 to write-down the related processing unit assets and customer contract intangible asset. While the counterparty and the Partnership subsequently agreed to extensions of certain of the originally contracted services under the CPI Processing Agreement, the limited nature of these services affected the comparability of our results of operations, specifically within our Storage segment, on a year-over-year basis. Refer to “Results of Operations” below for further discussion.
On December 30, 2021, we closed on February 28, 2019, IDRs held by PBF LLC were canceled and converted into 10,000,000 newly issued PBFX common units, no distributions were made to PBF LLC with respect toa third-party sale of real property at the IDRs andEast Coast Terminals. We recognized a gain of $2.8 million on the newly issued PBFX common units are entitled to normal distributions.sale, which is included within “Gain on sale of assets” in our Consolidated Statements of Operations. As a result of the TVPC Acquisition, we no longer record a noncontrolling interest relatedsale, our results of operations may not be comparable to TVPC on either the consolidated balance sheets or the consolidated statementsour historical results of operations.
Other Factors That Will Significantly Affect Our Results
Supply and Demand for Crude Oil, Refined Products and Natural Gas. We generate revenue by charging fees for receiving, handling, transferring, storing, throughputting and processing crude oil, refined products and natural gas. A majority of our revenue is derived from MVC, fee-based commercial agreements with subsidiaries of PBF Energy with initial terms ranging from one to fifteen years, which enhance the stability of our cash flows. The volume of crude oil, refined products and natural gas that is throughput depends substantially on PBF Energy’s operational needs which are largely impacted by refining margins. Refining margins are greatly dependent upon the price of crude oil or other refinery feedstocks, refined products and natural gas.
Factors driving the prices of petroleum-based commodities include supply and demand infor crude oil, gasoline and other refined products. Supply and demand for these products depend on numerous factors outside of our control, including changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, logistics constraints, availability of imports, marketing of competitive fuels, crude oil price differentials and government regulation. The impact of the unprecedented global health and economic crisis sparked by the COVID-19 pandemic was amplified late in the first quarter of 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. These factors have resulted in significant demand destruction for refined products and atypical volatility in oil commodity prices. Although the effects may be mitigated by MVC provisions in certain of our commercial contracts, this overall demand destruction and market environment could lead to lower storageor throughput volumes processed at our assets, which could negatively impact our results of operations and cash flows. Demand has continued to improve in 2021 but remains below pre-pandemic levels. While it is impossible to estimate the duration or complete financial impact of the COVID-19 pandemic, a significant portion of the negative impacts and risk to us may be mitigated through our MVCs within the commercial agreements with PBF Holding. Refer to “Item 1A. Risk Factors” inof this Form 10-K for more information on factors affecting margins and commodity pricing.
Acquisition and Organic Growth Opportunities. We may acquire additional logistics assets from PBF Energy or third parties. Under our Omnibus Agreement, subject to certain exceptions, we have a right of first offer on certain logistics assets owned by PBF Energy to the extent PBF Energy decides to sell, transfer or otherwise dispose of any of those assets. We also have a right of first offer to acquire additional logistics assets that PBF Energy may construct or acquire in the future. Our commercial agreements provide us with options to purchase certain assets at PBF Holding’s refineries related to our business in the event PBF Energy permanently shuts down PBF Holding’s refineries. In addition, our commercial agreements provide us with the right to use certain assets at PBF Holding’s refineries in the event of a temporary shutdown. Furthermore, we may pursue strategic asset acquisitions from third parties or organic growth projects to the extent such acquisitions or projects complement our or PBF Energy’s existing asset base or provide attractive potential returns. Identifying and executing acquisitions and organic growth projects is a key part of our strategy, and we believe that we are well-positioned to acquire logistics assets from PBF Energy and third parties should such opportunities arise. However, there is no guarantee that we will be able to identify attractive organic growth projects or acquisitions in the future, or be able to consummate any such opportunities identified. Additionally, if we do not complete acquisitions or organic growth projects on economically acceptable terms, our future growth will be limited, and the acquisitions or projects we do complete may reduce, rather than increase, our cash available for distribution. These acquisitions and organic growth projects could also affect the comparability of our results from period to period. We expect to fund future growth capital expenditures primarily from a combination of cash-on-hand, borrowings under the Revolving Credit Facility and the issuance of additional equity or debt securities. To the extent we issue additional units to fund future acquisitions or expansion capital expenditures, the payments of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level.
Third-Party Business. As of December 31, 2019,2021, PBF Holding accounts for a substantial majority of our revenue, and we continue to expect that a majority of our revenue for the foreseeable future will be derived from operations supporting PBF Holding’s refineries. We are examiningcontinue to explore further diversification of our customer base by potentially developing additional third-party throughput volumes in our existing system and continuing to expandexplore expanding our asset portfolio to service third-party customers. Unless we are successful in attracting additional third-party customers, our ability to increase volumes will be dependent on PBF Holding, which has no obligation under our commercial agreements to supply our facilities with additional volumes in excess of its MVCs. If we are unable to increase throughput or storage volumes, future growth may be limited.
Results of Operations
A discussion and analysis of the factors contributing to our results of operations areis presented below. The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations but should not serve as the only criteria for predicting our future performance.
Combined Overview. The following tables summarize our results of operations and financial data for the years ended December 31, 2019, 20182021, 2020 and 2017.2019. The following data should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Revenue: | | | | | | |
Affiliate | | $ | 304,100 | | | $ | 289,406 | | | $ | 300,877 | |
Third-Party | | 51,435 | | | 70,849 | | | 39,335 | |
Total revenue | | 355,535 | | | 360,255 | | | 340,212 | |
| | | | | | |
Costs and expenses: | | | | | | |
Operating and maintenance expenses | | 103,438 | | | 99,852 | | | 118,614 | |
General and administrative expenses | | 18,735 | | | 18,748 | | | 24,515 | |
Depreciation and amortization | | 37,805 | | | 53,707 | | | 38,601 | |
Impairment expense | | — | | | 7,000 | | | — | |
Gain on sale of assets | | (2,795) | | | — | | | — | |
Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Total costs and expenses | | 160,171 | | | 164,917 | | | 180,940 | |
| | | | | | |
Income from operations | | 195,364 | | | 195,338 | | | 159,272 | |
| | | | | | |
Other expense: | | | | | | |
Interest expense, net | | (40,355) | | | (44,377) | | | (46,555) | |
Amortization of loan fees and debt premium | | (1,699) | | | (1,741) | | | (1,780) | |
Accretion on discounted liabilities | | (23) | | | (1,788) | | | (2,768) | |
| | | | | | |
Net income | | 153,287 | | | 147,432 | | | 108,169 | |
| | | | | | |
Less: Net income attributable to noncontrolling interest | | — | | | — | | | 7,881 | |
| | | | | | |
| | | | | | |
Net income attributable to PBF Logistics LP unitholders | | $ | 153,287 | | | $ | 147,432 | | | $ | 100,288 | |
| | | | | | |
Other data: | | | | | | |
EBITDA attributable to PBFX | | $ | 234,456 | | | $ | 229,995 | | | $ | 184,807 | |
Adjusted EBITDA | | 237,676 | | | 237,010 | | | 200,988 | |
Distributable cash flow | | 195,833 | | | 181,740 | | | 137,050 | |
Capital expenditures | | 8,622 | | | 12,308 | | | 31,746 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Revenue: | | | | | | |
Affiliate | | $ | 300,877 |
| | $ | 259,426 |
| | $ | 240,654 |
|
Third-Party | | 39,335 |
| | 24,014 |
| | 16,934 |
|
Total revenue | | 340,212 |
| | 283,440 |
| | 257,588 |
|
| | | | | | |
Costs and expenses: | | | | | | |
Operating and maintenance expenses | | 118,614 |
| | 88,390 |
| | 73,521 |
|
General and administrative expenses | | 24,515 |
| | 21,371 |
| | 16,284 |
|
Depreciation and amortization | | 38,601 |
| | 29,809 |
| | 24,404 |
|
Change in contingent consideration | | (790 | ) | | — |
| | — |
|
Total costs and expenses | | 180,940 |
| | 139,570 |
| | 114,209 |
|
| | | | | | |
Income from operations | | 159,272 |
| | 143,870 |
| | 143,379 |
|
| | | | | | |
Other expense: | | | | | | |
Interest expense, net | | (46,555 | ) | | (40,541 | ) | | (31,875 | ) |
Amortization of loan fees and debt premium | | (1,780 | ) | | (1,717 | ) | | (1,488 | ) |
Accretion on discounted liabilities | | (2,768 | ) | | (775 | ) | | — |
|
Net income | | 108,169 |
| | 100,837 |
| | 110,016 |
|
Less: Net loss attributable to Predecessor | | — |
| | (2,443 | ) | | (4,986 | ) |
Less: Net income attributable to noncontrolling interest | | 7,881 |
| | 17,819 |
| | 14,565 |
|
Net income attributable to the partners | | 100,288 |
| | 85,461 |
| | 100,437 |
|
Less: Net income attributable to the IDR holder | | — |
| | 10,011 |
| | 9,055 |
|
Net income attributable to PBF Logistics LP unitholders | | $ | 100,288 |
| | $ | 75,450 |
| | $ | 91,382 |
|
| | | | | | |
Other data: | | | | | | |
EBITDA attributable to PBFX | | $ | 184,807 |
| | $ | 152,428 |
| | $ | 152,084 |
|
Adjusted EBITDA | | 200,988 |
| | 161,081 |
| | 157,962 |
|
Distributable cash flow | | 137,050 |
| | 111,586 |
| | 120,038 |
|
Capital expenditures, including acquisitions | | 31,746 |
| | 175,696 |
| | 90,258 |
|
Reconciliation of Non-GAAP Financial Measures.As described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Evaluate Our Operations,” our management uses EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow to analyze our
performance. The following table presents a reconciliation of EBITDA, EBITDA attributable to PBFX and distributable cash flow to net income, which is the most directly comparable GAAP financial measure of operating performance on a historical basis, for the periods indicated.
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Net income | | $ | 153,287 | | | $ | 147,432 | | | $ | 108,169 | |
Interest expense, net | | 40,355 | | | 44,377 | | | 46,555 | |
Amortization of loan fees and debt premium | | 1,699 | | | 1,741 | | | 1,780 | |
Accretion on discounted liabilities | | 23 | | | 1,788 | | | 2,768 | |
Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Impairment expense | | — | | | 7,000 | | | — | |
Depreciation and amortization | | 37,805 | | | 53,707 | | | 38,601 | |
EBITDA | | 236,157 | | | 241,655 | | | 197,083 | |
| | | | | | |
Less: Noncontrolling interest EBITDA | | — | | | — | | | 10,180 | |
Less: Earnings attributable to the CPI earn-out | | 1,701 | | | 11,660 | | | 2,096 | |
EBITDA attributable to PBFX | | 234,456 | | | 229,995 | | | 184,807 | |
Non-cash unit-based compensation expense | | 5,320 | | | 4,939 | | | 6,765 | |
Cash interest | | (40,542) | | | (45,088) | | | (47,081) | |
Maintenance capital expenditures attributable to PBFX | | (3,401) | | | (8,106) | | | (7,441) | |
Distributable cash flow | | $ | 195,833 | | | $ | 181,740 | | | $ | 137,050 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Net income | | $ | 108,169 |
| | $ | 100,837 |
| | $ | 110,016 |
|
Interest expense, net | | 46,555 |
| | 40,541 |
| | 31,875 |
|
Amortization of loan fees and debt premium | | 1,780 |
| | 1,717 |
| | 1,488 |
|
Accretion on discounted liabilities | | 2,768 |
| | 775 |
| | — |
|
Change in contingent consideration | | (790 | ) | | — |
| | — |
|
Depreciation and amortization | | 38,601 |
| | 29,809 |
| | 24,404 |
|
EBITDA | | 197,083 |
| | 173,679 |
| | 167,783 |
|
Less: Predecessor EBITDA | | — |
| | (2,051 | ) | | (4,303 | ) |
Less: Noncontrolling interest EBITDA | | 10,180 |
| | 23,302 |
| | 20,002 |
|
Less: Earnings attributable to the CPI earn-out | | 2,096 |
| | — |
| | — |
|
EBITDA attributable to PBFX | | 184,807 |
| | 152,428 |
| | 152,084 |
|
Non-cash unit-based compensation expense | | 6,765 |
| | 5,757 |
| | 5,345 |
|
Cash interest | | (47,081 | ) | | (40,685 | ) | | (33,050 | ) |
Maintenance capital expenditures attributable to PBFX | | (7,441 | ) | | (5,914 | ) | | (4,341 | ) |
Distributable cash flow | | $ | 137,050 |
| | $ | 111,586 |
| | $ | 120,038 |
|
The following table presents a reconciliation of EBITDA, EBITDA attributable to PBFX and distributable cash flow to net cash provided by operating activities, which is the most directly comparable GAAP financial measure of liquidity on a historical basis, for the periods indicated.
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Net cash provided by operating activities | | $ | 187,770 | | | $ | 186,642 | | | $ | 149,007 | |
Change in operating assets and liabilities | | 10,557 | | | 15,575 | | | 8,286 | |
Interest expense, net | | 40,355 | | | 44,377 | | | 46,555 | |
Gain on sale of assets | | 2,795 | | | — | | | — | |
Non-cash unit-based compensation expense | | (5,320) | | | (4,939) | | | (6,765) | |
EBITDA | | 236,157 | | | 241,655 | | | 197,083 | |
| | | | | | |
Less: Noncontrolling interest EBITDA | | — | | | — | | | 10,180 | |
Less: Earnings attributable to the CPI earn-out | | 1,701 | | | 11,660 | | | 2,096 | |
EBITDA attributable to PBFX | | 234,456 | | | 229,995 | | | 184,807 | |
Non-cash unit-based compensation expense | | 5,320 | | | 4,939 | | | 6,765 | |
Cash interest | | (40,542) | | | (45,088) | | | (47,081) | |
Maintenance capital expenditures attributable to PBFX | | (3,401) | | | (8,106) | | | (7,441) | |
Distributable cash flow | | $ | 195,833 | | | $ | 181,740 | | | $ | 137,050 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Net cash provided by operating activities | | $ | 149,007 |
| | $ | 133,141 |
| | $ | 138,182 |
|
Change in operating assets and liabilities | | 8,286 |
| | 5,754 |
| | 3,071 |
|
Interest expense, net | | 46,555 |
| | 40,541 |
| | 31,875 |
|
Non-cash unit-based compensation expense | | (6,765 | ) | | (5,757 | ) | | (5,345 | ) |
EBITDA | | 197,083 |
| | 173,679 |
| | 167,783 |
|
Less: Predecessor EBITDA | | — |
| | (2,051 | ) | | (4,303 | ) |
Less: Noncontrolling interest EBITDA | | 10,180 |
| | 23,302 |
| | 20,002 |
|
Less: Earnings attributable to the CPI earn-out | | 2,096 |
| | — |
| | — |
|
EBITDA attributable to PBFX | | 184,807 |
| | 152,428 |
| | 152,084 |
|
Non-cash unit-based compensation expense | | 6,765 |
| | 5,757 |
| | 5,345 |
|
Cash interest | | (47,081 | ) | | (40,685 | ) | | (33,050 | ) |
Maintenance capital expenditures attributable to PBFX | | (7,441 | ) | | (5,914 | ) | | (4,341 | ) |
Distributable cash flow | | $ | 137,050 |
| | $ | 111,586 |
| | $ | 120,038 |
|
The following table presents a reconciliation of EBITDA, EBITDA attributable to PBFX and Adjusted EBITDA to net income, which is the most directly comparable GAAP financial measure of operating performance on a historical basis, for the periods indicated.
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Net income | | $ | 153,287 | | | $ | 147,432 | | | $ | 108,169 | |
Interest expense, net | | 40,355 | | | 44,377 | | | 46,555 | |
Amortization of loan fees and debt premium | | 1,699 | | | 1,741 | | | 1,780 | |
Accretion on discounted liabilities | | 23 | | | 1,788 | | | 2,768 | |
Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Impairment expense | | — | | | 7,000 | | | — | |
Depreciation and amortization | | 37,805 | | | 53,707 | | | 38,601 | |
EBITDA | | 236,157 | | | 241,655 | | | 197,083 | |
| | | | | | |
Less: Noncontrolling interest EBITDA | | — | | | — | | | 10,180 | |
Less: Earnings attributable to the CPI earn-out | | 1,701 | | | 11,660 | | | 2,096 | |
EBITDA attributable to PBFX | | 234,456 | | | 229,995 | | | 184,807 | |
Acquisition and transaction costs | | — | | | 1,382 | | | 3,842 | |
Non-cash unit-based compensation expense | | 5,320 | | | 4,939 | | | 6,765 | |
East Coast Terminals environmental remediation costs | | 695 | | | 694 | | | 4,692 | |
Gain on sale of assets | | (2,795) | | | — | | | — | |
PNGPC tariff true-up adjustment | | — | | | — | | | 882 | |
Adjusted EBITDA | | $ | 237,676 | | | $ | 237,010 | | | $ | 200,988 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Net income | | $ | 108,169 |
| | $ | 100,837 |
| | $ | 110,016 |
|
Interest expense, net | | 46,555 |
| | 40,541 |
| | 31,875 |
|
Amortization of loan fees and debt premium | | 1,780 |
| | 1,717 |
| | 1,488 |
|
Accretion on discounted liabilities | | 2,768 |
| | 775 |
| | — |
|
Change in contingent consideration | | (790 | ) | | — |
| | — |
|
Depreciation and amortization | | 38,601 |
| | 29,809 |
| | 24,404 |
|
EBITDA | | 197,083 |
| | 173,679 |
| | 167,783 |
|
Less: Predecessor EBITDA | | — |
| | (2,051 | ) | | (4,303 | ) |
Less: Noncontrolling interest EBITDA | | 10,180 |
| | 23,302 |
| | 20,002 |
|
Less: Earnings attributable to the CPI earn-out | | 2,096 |
| | — |
| | — |
|
EBITDA attributable to PBFX | | 184,807 |
| | 152,428 |
| | 152,084 |
|
Acquisition and transaction costs | | 3,842 |
| | 2,896 |
| | 533 |
|
Non-cash unit-based compensation expense | | 6,765 |
| | 5,757 |
| | 5,345 |
|
East Coast Terminals environmental remediation costs | | 4,692 |
| | — |
| | — |
|
PNGPC tariff true-up adjustment | | 882 |
| | — |
| | — |
|
Adjusted EBITDA | | $ | 200,988 |
| | $ | 161,081 |
| | $ | 157,962 |
|
The following table presents a reconciliation of net income attributable to noncontrolling interest and noncontrolling interest EBITDA, for informational purposes, for the periods indicated.
| | | | Year Ended December 31, | | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | | 2021 | | 2020 | | 2019 |
| | (In thousands) | | | (in thousands) |
Net income attributable to noncontrolling interest | | $ | 7,881 |
| | $ | 17,819 |
| | $ | 14,565 |
| Net income attributable to noncontrolling interest | | $ | — | | | $ | — | | | $ | 7,881 | |
Depreciation and amortization related to noncontrolling interest (a) | | 2,299 |
| | 5,483 |
| | 5,437 |
| Depreciation and amortization related to noncontrolling interest (a) | | — | | | — | | | 2,299 | |
Noncontrolling interest EBITDA | | $ | 10,180 |
| | $ | 23,302 |
| | $ | 20,002 |
| Noncontrolling interest EBITDA | | $ | — | | | $ | — | | | $ | 10,180 | |
____________
| |
(a) | Represents 50% of depreciation and amortization for TVPC for the five months ended May 31, 2019 and the years ended December 31, 2018 and 2017. Subsequent to the closing of the TVPC Acquisition on May 31, 2019, we own 100% of the equity interest in TVPC and no longer record a noncontrolling interest. |
(a)Represents 50% of depreciation and amortization for Torrance Valley Pipeline Company LLC (“TVPC”) for the five months ended May 31, 2019. Subsequent to acquiring the remaining 50% equity interest in TVPC on May 31, 2019, we own 100% of the equity interest in TVPC and no longer record a noncontrolling interest.
Summary.
Summary.
Our net income for the year ended December 31, 20192021 increased by approximately $7.3$5.9 million, or 7.3%4.0%, to $108.2$153.3 million from $100.8$147.4 million for the year ended December 31, 2018, details of which are shown in the following graph and further described below.
2020. The increase in net income was primarily due to the following:
•a decrease in depreciation and amortization of approximately $15.9 million, or 29.6%, resulting from the accelerated depreciation and amortization of certain CPI tangible and intangible assets, which were subject to the CPI Contract Termination in 2020;
•a decrease in impairment expense of $7.0 million, or 100.0%, resulting from an impairment charge to write-down the processing unit assets and customer contract intangible asset in connection with the CPI Contract Termination in 2020;
•a decrease in other expenses of approximately $5.8 million, or 12.2%, related to:
◦a decrease in interest expense of approximately $4.0 million, or 9.1%, as a result of lower borrowings under the Revolving Credit Facility; and
◦a decrease in accretion on discounted liabilities of approximately $1.8 million, or 98.7%, due to lower outstanding applicable liabilities; and
•an increase in gain on sale of assets of $2.8 million as a result of a third-party sale of real property at the East Coast Terminals in the fourth quarter of 2021;
offset by the following:
•an increase in change in contingent consideration of approximately $17.4 million due to the extension of certain services subject to the CPI earn-out at our East Coast storage facility during the current year, coupled with the reduction of the prior year projected future earn-out liability at the time of the CPI Contract Termination;
•an increase in operating and maintenance expenses of approximately $3.6 million, or 3.6%, as a result of higher utilities expenses due to increased energy usage and increased maintenance activity; and
•a decrease in total revenue of approximately $56.8$4.7 million, or 20.0%1.3%, primarily attributable to operations of recently acquired or constructed assets, including the recommencement of certain of the idled assets acquired in the East Coast Storage Assets Acquisition,CPI Contract Termination, offset by inflation rate adjustments implemented in accordance with certain of our commercial agreements (the “Inflation Rate Increase”) in 2019 and higher2021, increased throughput at certain of our assets offset by a decrease in revenue at the Paulsboro Natural Gas Pipeline due to a reduction in its pipeline tariff based on the lower than budget Paulsboro Natural Gas Pipeline project costs, which were finalized during the first quarter of 2019 (the “PNGPC Rate Adjustment”);and affiliate product sales.
an increase in change in contingent consideration of approximately $0.8 million, or 100.0%, as a result of the change in estimated future payouts associated with the Contingent Consideration;
offset by the following:
an increase in operating and maintenance expenses of approximately $30.2 million, or 34.2%, as a result of expenses related to the operations of recently acquired assets, higher environmental clean-up remediation costs, increased maintenance activity, increased utility expenses coinciding with higher throughput at certain of our assets, increased regulatory costs and remediation of product contamination costs at one of our terminals;
an increase in general and administrative expenses of approximately $3.1 million, or 14.7%, as a result of transaction costs related to the IDR Restructuring, higher unit-based compensation expense and higher annual expense associated with the Omnibus Agreement, offset by lower acquisition related costs:
an increase in depreciation and amortization of approximately $8.8 million, or 29.5%, related to the timing of acquisitions and new assets being placed in service;
an increase in other expense of approximately $8.1 million, or 18.8%, related to:
| |
◦ | an increase in interest expense, net of approximately $6.0 million, or 14.8%, attributable to higher borrowings under our Revolving Credit Facility; |
| |
◦ | an increase in amortization of loan fees and debt premium of approximately $0.1 million, or 3.7%; |
| |
◦ | an increase in accretion on discounted liabilities of approximately $2.0 million, or 257.2%, attributable to a full year of accretion on the discounted liabilities recorded in connection with the acquisition of the East Coast Storage Assets; |
EBITDA attributable to PBFX for the year ended December 31, 20192021 increased by approximately $32.4$4.5 million to $184.8$234.5 million from $152.4$230.0 million for the year ended December 31, 20182020 due to the factors noted above, excluding the impact of depreciation and amortization, impairment expense, interest expense, net, amortization of loan fees and debt premium, accretion on discounted liabilities, change in contingent consideration, noncontrolling interest and earnings attributable to the CPI earn-out.
Adjusted EBITDA for the year ended December 31, 20192021 increased by approximately $39.9$0.7 million to $201.0$237.7 million from $161.1$237.0 million for the year ended December 31, 20182020 due to the factors noted above, excluding the impact of acquisition and transaction costs, unit-based compensation, certain environmental remediation costs and the PNGPC Rate Adjustment.gain on sale of assets.
Our net income for the year ended December 31, 2018 decreased2020 increased by approximately $9.2$39.3 million, or 8.3%36.3%, to $100.8$147.4 million from $110.0$108.2 million for the year ended December 31, 2017, details of which are shown in the following graph and further described below.
2019. The decreaseincrease in net income was primarily due to the following:
•an increase in total revenue of approximately $20.0 million, or 5.9%, primarily attributable to the recommencement of operations of certain assets at our East Coast storage facility, operations of recently constructed assets and the 2020 Inflation Rate Increase, offset by lower revenue attributable to certain assets not subject to MVC shortfall payments due to a reduction in throughput volumes as a result of the COVID-19 pandemic, as well as lower pass-through utilities fees;
•a decrease in operating and maintenance expenses of approximately $14.9$18.8 million, or 20.2%15.8%, as a result of increased utilities expenses within our Transportation and Terminaling segment, higherdecreased discretionary spending, including maintenance and materialsoutside service costs, in response to the COVID-19 pandemic, as well as lower environmental clean-up remediation costs, lower utility expenses due to reduced energy usage and no remediation of product contamination costs in 2020 compared to costs incurred in 2019 for product contamination remediation at one of our terminals, offset by expenses related to the recommencement of operations of recently acquired or constructedcertain assets offset by at our East Coast storage facility;
•a decrease in outside services expenses within our Transportation and Terminaling segment;
an increase in general and administrative expenses of approximately $5.1$5.8 million, or 31.2%23.5%, as a result of higherdecreased acquisition and transaction costs and unit-based compensation expense;
•a decrease in change in contingent consideration of approximately $13.6 million due to the CPI Contract Termination in 2020 and the resulting reduction of the projected earn-out liability for future periods; and
•a decrease in other expenses of approximately $3.2 million, or 6.3%, related costs, higher auditto:
◦a decrease in interest expense of approximately $2.2 million, or 4.7%, as a result of lower borrowings under the Revolving Credit Facility; and tax-related fees and higher outside services expenses;
◦a decrease in accretion on discounted liabilities of approximately $1.0 million, or 35.4%, due to lower outstanding applicable liabilities;
offset by the following:
•an increase in depreciation and amortization of approximately $5.4$15.1 million, or 22.1%39.1%, relatedresulting from the accelerated depreciation and amortization of certain CPI tangible and intangible assets, which were subject to the CPI Contract Termination in 2020, as well as the timing of acquisitions and new assets being placed in service; and
•an increase in otherimpairment expense of approximately $9.7$7.0 million or 29.0%, related to:
| |
◦ | an increase in interest expense, net of approximately $8.7 million, or 27.2%, attributable to the interest costs associated with the issuance of additional 2023 Notes, offset by lower borrowings under the Revolving Credit Facility for a majority of the year; |
| |
◦ | an increase in amortization of loan fees and debt premium of approximately $0.2 million, or 15.4%, attributable to the increase in loans fees and debt premium associated with the issuance of additional 2023 Notes and the Revolving Credit Facility;
|
| |
◦ | an increase in accretion on discounted liabilities of approximately $0.8 million, or 100.0%, attributable to the accretion on the discounted liabilities recorded in connection with the acquisition of the East Coast Storage Assets; |
offset byresulting from an impairment charge to write-down the following:
an increase in total revenue of approximately $25.9 million, or 10.0%, primarily attributable to operations of recently acquired or constructedprocessing unit assets and customer contract intangible asset in connection with the 2018 Inflation Rate Increase, offset by decreasesCPI Contract Termination in throughput fees resulting from the amendments to the Delaware City Rail Terminaling Services Agreement and the Delaware West Ladder Rack Terminaling Services Agreement, each between DCTC and PBF Holding, effective January 1, 2018 (together, the “Amended and Restated Rail Agreements”).2020.
EBITDA attributable to PBFX for the year ended December 31, 20182020 increased by approximately $0.3$45.2 million to $152.4$230.0 million from $152.1$184.8 million for the year ended December 31, 20172019 due to the factors noted above, excluding the impact of depreciation and amortization, impairment expense, interest expense, net, amortization of loan fees and debt premium, accretion on discounted liabilities, change in contingent consideration, noncontrolling interest and noncontrolling interest.earnings attributable to the CPI earn-out.
Adjusted EBITDA for the year ended December 31, 20182020 increased by approximately $3.1$36.0 million to $161.1$237.0 million from $158.0$201.0 million for the year ended December 31, 20172019 due to the factors noted above, excluding the impact of acquisition and transaction costs, unit-based compensation, certain environmental remediation costs and unit-based compensation.certain tariff true-up adjustments.
Segment Information
Our operations are comprised of operating segments, which are strategic business units that offer different services in various geographical locations. We review operations in two reportable segments: (i) Transportation and Terminaling and (ii) Storage. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of our reportable segments based on the segment operating income. Segment operating income is defined as net revenue less operating expenses, and depreciation and amortization.amortization, impairment expense, gain on sale of assets and change in contingent consideration. General and administrative expenses and interest expenses not included in the Transportation and Terminaling and Storage segments are included in Corporate. Segment reporting is further discussed in Note 1314 “Segment Information” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Transportation and Terminaling Segment
The following table and discussion provide an explanation of our results of operations of the Transportation and Terminaling segment for the years ended December 31, 2019, 20182021, 2020 and 2017:2019:
| | | | Year Ended December 31, | | | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | | 2021 | | 2020 | | 2019 |
(in thousands, except for total throughput and lease tank capacity) | (in thousands, except for total throughput and lease tank capacity) | (in thousands, except for total throughput and lease tank capacity) |
Revenue: | | | | | | | Revenue: | |
Affiliate | | $ | 261,847 |
| | $ | 232,316 |
| | $ | 217,404 |
| Affiliate | | $ | 260,813 | | | $ | 248,134 | | | $ | 261,847 | |
Third-party | | 20,898 |
| | 18,096 |
| | 16,934 |
| Third-party | | 24,006 | | | 22,889 | | | 20,898 | |
Total revenue | | 282,745 |
| | 250,412 |
| | 234,338 |
| Total revenue | | 284,819 | | | 271,023 | | | 282,745 | |
| | | | | | | |
Costs and expenses: | | |
| | | | | Costs and expenses: | | | | | |
Operating and maintenance expenses | | 91,883 |
| | 76,176 |
| | 65,885 |
| Operating and maintenance expenses | | 73,241 | | | 73,451 | | | 91,883 | |
| Depreciation and amortization | | 27,826 |
| | 24,899 |
| | 21,650 |
| Depreciation and amortization | | 29,241 | | | 28,308 | | | 27,826 | |
Gain on sale of assets | | Gain on sale of assets | | (2,795) | | | — | | | — | |
Total costs and expenses | | 119,709 |
| | 101,075 |
| | 87,535 |
| Total costs and expenses | | 99,687 | | | 101,759 | | | 119,709 | |
Transportation and Terminaling Segment Operating Income | | $ | 163,036 |
| | $ | 149,337 |
| | $ | 146,803 |
| Transportation and Terminaling Segment Operating Income | | $ | 185,132 | | | $ | 169,264 | | | $ | 163,036 | |
| | | | | | | | | | | | |
Key Operating Information | | | | | | | Key Operating Information | |
Transportation and Terminaling Segment | | | | | | | Transportation and Terminaling Segment | |
Terminals | | | | | | | Terminals | |
Total throughput (bpd)* | | 293,504 |
| | 291,655 |
| | 204,833 |
| Total throughput (bpd)* | | 244,969 | | | 230,167 | | | 293,504 | |
Lease tank capacity (average lease capacity barrels per month)** | | 2,194,328 |
| | 2,067,660 |
| | 2,089,529 |
| Lease tank capacity (average lease capacity barrels per month)** | | 2,224,084 | | | 2,396,478 | | | 2,194,328 | |
Pipelines | | | | | | | Pipelines | |
Total throughput (bpd)* | | 163,608 |
| | 164,787 |
| | 140,900 |
| Total throughput (bpd)* | | 156,949 | | | 149,049 | | | 163,608 | |
Lease tank capacity (average lease capacity barrels per month)** | | 1,377,544 |
| | 1,583,294 |
| | 1,250,930 |
| Lease tank capacity (average lease capacity barrels per month)** | | 1,103,331 | | | 1,136,222 | | | 1,377,544 | |
____________
(*) Calculated as the sum of the average throughput per day for each asset group for the period presented.
| |
(**) | Lease capacity is based on tanks in service and average lease capacity available during the period. |
(**)Lease capacity is based on tanks in service and average lease capacity available during the period.
Year Ended December 31, 20192021 Compared to Year Ended December 31, 20182020
Our Transportation and Terminaling operating income for the year ended December 31, 20192021 increased by approximately $13.7$15.9 million, or 9.2%9.4%, to $163.0$185.1 million from $149.3$169.3 million for the year ended December 31, 2018, details of which are shown in the following graph and further described below.
2020. The increase in operating income was primarily due to the following:
•an increase in revenue of approximately $32.3$13.8 million, or 12.9%5.1%, primarily attributable to operations of recently acquired or constructed assets, higherthe 2021 Inflation Rate Increase, increased throughput at certain of our assets and the 2019 Inflation Rate Increase, offset byaffiliate product sales; and
•an increase in gain on sale of assets of $2.8 million as a decrease in revenueresult of a third-party sale of real property at the Paulsboro Natural Gas Pipeline due toEast Coast Terminals in the PNGPC Rate Adjustment;fourth quarter of 2021;
offset by the following:
an increase in operating and maintenance expenses of approximately $15.7 million, or 20.6%, due to expenses related to the operations of recently acquired assets, higher environmental clean-up remediation costs, increased maintenance activity, increased utility expenses coinciding with higher throughput at certain of our assets, remediation of product contamination costs at one of our terminals and increased regulatory costs;
•an increase in depreciation and amortization of approximately $2.9$0.9 million, or 11.8%3.3%, related to the timing of new assets being placed in service.
Operating and maintenance expenses were relatively consistent during the comparative periods with no significant fluctuation activity.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Our Transportation and Terminaling operating income for the year ended December 31, 2020 increased by approximately $6.2 million, or 3.8%, to $169.3 million from $163.0 million for the year ended December 31, 2019. The increase in operating income was primarily due to the following:
•a decrease in operating and maintenance expenses of approximately $18.4 million, or 20.1%, as a result of decreased 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 and no remediation of product contamination costs in 2020 compared to costs incurred in 2019 for product contamination remediation at one of our terminals;
offset by the following:
•a decrease in revenue of approximately $11.7 million, or 4.1%, primarily attributable to a reduction in throughput volumes as a result of the COVID-19 pandemic, as well as lower pass-through utilities fees, offset by the 2020 Inflation Rate Increase; and
•an increase in depreciation and amortization of approximately $0.5 million, or 1.7%, related to the timing of acquisitions and new assets being placed in service.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Our Transportation and Terminaling operating income for the year ended December 31, 2018 increased by approximately $2.5 million, or 1.7%, to $149.3 million from $146.8 million for the year ended December 31, 2017, details of which are shown in the following graph and further described below.
The increase in operating income was primarily due to the following:
an increase in revenue of approximately $16.1 million, or 6.9%, primarily attributable to operations of recently acquired or constructed assets, increased throughput in excess of MVC levels at certain of our assets and the 2018 Inflation Rate Increase, offset by decreases in throughput fees resulting from the Amended and Restated Rail Agreements;
offset by the following:
an increase in operating and maintenance expenses of approximately $10.3 million, or 15.6%, due to operations of recently acquired or constructed assets, higher utilities expenses related to increased throughput volumes on our pipeline assets and higher maintenance and materials expenses, offset by a decrease in outside services expenses;
an increase in depreciation and amortization of approximately $3.2 million, or 15.0%, related to the timing of acquisitions and new assets being placed in service.
Storage Segment
The following table and discussion provide an explanation of our results of operations of the Storage segment for the years ended December 31, 2019, 20182021, 2020 and 2017:2019:
| | | | Year Ended December 31, | | | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 | | | 2021 | | 2020 | | 2019 |
(in thousands, except for storage capacity reserved and total throughput) | (in thousands, except for storage capacity reserved and total throughput) | (in thousands, except for storage capacity reserved and total throughput) |
| Revenue: | | | | | | | Revenue: | |
Affiliate | | $ | 39,030 |
| | $ | 27,110 |
| | $ | 23,250 |
| Affiliate | | $ | 43,287 | | | $ | 41,272 | | | $ | 39,030 | |
Third-party | | 18,437 |
| | 5,918 |
| | — |
| Third-party | | 27,429 | | | 47,960 | | | 18,437 | |
Total revenue | | 57,467 |
| | 33,028 |
| | 23,250 |
| Total revenue | | 70,716 | | | 89,232 | | | 57,467 | |
| | | | | | | |
Costs and expenses: | | | | | | | Costs and expenses: | | | | | |
Operating and maintenance expenses | | 26,731 |
| | 12,214 |
| | 7,636 |
| Operating and maintenance expenses | | 30,197 | | | 26,401 | | | 26,731 | |
| Depreciation and amortization | | 10,775 |
| | 4,910 |
| | 2,754 |
| Depreciation and amortization | | 8,564 | | | 25,399 | | | 10,775 | |
Impairment expense | | Impairment expense | | — | | | 7,000 | | | — | |
Change in contingent consideration | | (790 | ) | | — |
| | — |
| Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Total costs and expenses | | 36,716 |
| | 17,124 |
| | 10,390 |
| Total costs and expenses | | 41,749 | | | 44,410 | | | 36,716 | |
Storage Segment Operating Income | | $ | 20,751 |
| | $ | 15,904 |
| | $ | 12,860 |
| Storage Segment Operating Income | | $ | 28,967 | | | $ | 44,822 | | | $ | 20,751 | |
| | | | | | | | | | | | |
Key Operating Information | | | | | | | Key Operating Information | |
Storage Segment | | | | | | | Storage Segment | |
Storage capacity reserved (average shell capacity barrels per month)* | | 7,891,670 |
| | 7,550,292 |
| | 4,363,630 |
| Storage capacity reserved (average shell capacity barrels per month)* | | 7,682,733 | | | 7,630,699 | | | 7,891,670 | |
Total throughput (bpd)** | | 29,056 |
| | — |
| | — |
| Total throughput (bpd)** | | 14,140 | | | 22,958 | | | 29,056 | |
Year Ended December 31, 20192021 Compared to Year Ended December 31, 20182020
Our Storage operating income for the year ended December 31, 2019 increased2021 decreased by approximately $4.8$15.9 million, or 30.5%35.4%, to $20.8$29.0 million from $15.9$44.8 million for the year ended December 31, 2018, details2020. The decrease in operating income was primarily due to the following:
•a decrease in revenue of which are shownapproximately $18.5 million, or 20.8%, primarily attributable to the CPI Contract Termination;
•an increase in change in contingent consideration of approximately $17.4 million due to the extension of certain services subject to the CPI earn-out at our East Coast storage facility during the current year, coupled with the reduction of the prior year projected future earn-out liability at the time of the CPI Contract Termination; and
•an increase in operating and maintenance expenses of approximately $3.8 million, or 14.4%, due to higher utilities expenses as a result of increased energy usage and increased maintenance activity;
offset by the following:
•a decrease in depreciation and amortization of approximately $16.8 million, or 66.3%, due to certain CPI assets being fully depreciated and amortized in the following graphfourth quarter of 2020 as a result of the CPI Contract Termination; and further described below.
•a decrease in impairment expense of $7.0 million or 100.0%, resulting from an impairment charge to write-down the processing unit assets and customer contract intangible asset in connection with the CPI Contract Termination in 2020.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Our Storage operating income for the year ended December 31, 2020 increased by approximately $24.1 million, or 116.0%, to $44.8 million from $20.8 million for the year ended December 31, 2019. The increase in operating income was primarily due to the following:
•an increase in revenue of approximately $24.4$31.8 million, or 74.0%55.3%, primarily attributable to the recommencement of operations of certain assets at our East Coast Storage Assets operations, including the recommencement of certain of the idled assets acquired in the East Coast Storage Assets Acquisition,storage facility and the 20192020 Inflation Rate Increase;
an increase•a decrease in change in contingent consideration of approximately $0.8$13.6 million, or 100.0%, as a result due to the CPI Contract Termination in 2020 and the resulting reduction of the change in estimatedprojected earn-out liability for future payouts associated with the Contingent Consideration;
periods; andoffset by the following:
an increase•a decrease in operating and maintenance expenses of approximately $14.5$0.3 million, or 118.9%1.2%, as a result of decreased spending at our facilities due to cost cutting measures taken as a result of the COVID-19 pandemic, including lower maintenance activity, offset by expenses associated withrelated to the recommencement of operations of certain assets at our East Coast Storage Assets, as well as increased regulatory costs;storage facility;
offset by the following:
•an increase in depreciation and amortization of approximately $5.9$14.6 million, or 119.5%135.7%, relatedresulting from the accelerated depreciation and amortization of certain CPI tangible and intangible assets, which were subject to the CPI Contract Termination in 2020, as well as the timing of acquisitions and new assets being placed in service.service; and
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Our Storage operating income for the year ended December 31, 2018 increased by approximately $3.0 million, or 23.7%, to $15.9 million from $12.9 million for the year ended December 31, 2017, details of which are shown in the following graph and further described below.
The increase in operating income was primarily due to the following:
•an increase in revenueimpairment expense of approximately $9.8$7.0 million or 42.1%, primarily attributableresulting from an impairment charge to operations of recently acquiredwrite-down the processing unit assets higher available storage capacity and customer contract intangible asset in connection with the 2018 Inflation Rate Increase;CPI Contract Termination in 2020.
an increase in operating and maintenance expenses of approximately $4.6 million, or 60.0%, due to higher maintenance activity, as well as expenses associated with recently acquired assets;
an increase in depreciation and amortization of approximately $2.2 million, or 78.3%, related to the timing of acquisitions and new assets being placed in service.
Liquidity and Capital Resources
During 2019, we incurred net borrowingsDue to the COVID-19 pandemic and the current challenging and volatile market conditions, starting in the first quarter of $127.0 million including borrowings to fund the TVPC Acquisition, the remaining East Coast Storage Assets Acquisition payment, other capital expenditures2020, our business and working capital requirements.
Refer to Notes 4 “Acquisitions” and 7 “Debt”operating results have been impacted by demand destruction for refined products as a result of the Notesworldwide economic slowdown and governmental and consumer responses, including travel restrictions and stay-at-home orders. Such conditions have improved in 2021 but continue to Consolidated Financial Statements includedaffect our operations and financial condition due to changes in “Item 8. Financial Statementsthe usage and Supplementary Data”level of this Form 10-Kdemand for additional information.
At December 31, 2019, we had $283.0 million of borrowingsour services, including a reduction in third-party and $4.8 million of letters of credit outstanding under the Revolving Credit Facility and $525.0 million in aggregate principal amount of outstanding 2023 Notes.
incremental affiliate revenue. We expect our ongoing sources of liquidity to include cash generated from operations (including proceeds from(a significant portion of which are supported by MVCs in our commercial agreements with PBF Holding)agreements), borrowings under the Revolving Credit Facility and issuances of additional debt and equity securities as appropriate given market conditions. We expect that these sourcesAdditionally, we remain focused on opportunities to support our financial position in the current environment, including limiting capital expenditures, reducing discretionary activities and third-party services and continually assessing our quarterly distribution level. While it is impossible to estimate the duration or complete financial impact of fundsthe COVID-19 pandemic and volatile market conditions, we believe our balances of cash, cash equivalents, cash generated from operations, borrowings under the Revolving Credit Facility and potential issuances of debt and equity securities will be adequatesufficient to provide for our short-termsatisfy cash requirements over the next twelve months and long-term liquidity needs. Our ability to meetbeyond, including our debt service, obligations and other capital requirements, including capital expenditures and distributions on our units,units. We may also pursue other strategic initiatives to strengthen our financial position, including debt and/or equity securities repurchases, to the extent such initiatives can be funded without impairing our liquidity. Refer to “Item 1A. Risk Factors” of this Form 10-K for further information.
Our largest customer is our affiliate, PBF Holding, a subsidiary of our parent sponsor. PBF Energy has initiated several steps as well as make future acquisitions, will depend on our future operating performance, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which
are beyond our control. As a normal part of a strategic plan to navigate current volatile markets and preserve or enhance its liquidity, including asset sales, new debt issuances, temporarily idling various units at certain refineries to optimize production, reductions in capital and operating expenditures, suspension of its dividend and exploring other potential opportunistic financing activities. We believe such actions will allow PBF Energy to continue to honor its commercial agreements with us.
In response to the impacts of the COVID-19 pandemic, we reduced our quarterly distribution to our minimum quarterly distribution of $0.30 per unit effective with the distribution for the first quarter of 2020. This reduction represents a strategic shift to build our cash flow coverage, de-lever our business depending on market conditions,and increase our financial resources as we will from timecontinue to time consider opportunities to repay, redeem, repurchasepursue potential organic growth projects or refinance our indebtedness.
We have paid, andstrategic acquisition opportunities. However, we intend to continue to pay at least the minimum quarterly distribution of $0.30per unit per quarter, or $1.20 per unit on an annualized basis, which aggregates to approximately $18.9$19.0 million per quarter and approximately $75.6$76.0 million on an annualized basis based on the number of common units outstanding as of December 31, 2019.2021.
As of December 31, 2021, we had approximately $430.4 million of liquidity, including approximately $33.9 million in cash and cash equivalents, and access to approximately $396.5 million under the Revolving Credit Facility.
The tables below summarize our 20192021 and 20182020 quarterly distributions related to our quarterly financial results:
|
| | | | | | | | | | | | | | |
Quarter Ended | | Declaration Date | | Quarterly Distribution per Common Unit | | Quarterly Distribution per Common Unit, Annualized | | Total Cash Distributions (in thousands) (a) |
December 31, 2019 | | February 13, 2020 | | $ | 0.5200 |
| | $ | 2.0800 |
| | $ | 32,308 |
|
September 30, 2019 | | October 31, 2019 | | 0.5200 |
| | 2.0800 |
| | 32,298 |
|
June 30, 2019 | | August 1, 2019 | | 0.5150 |
| | 2.0600 |
| | 31,986 |
|
March 31, 2019 | | May 1, 2019 | | 0.5100 |
| | 2.0400 |
| | 31,674 |
|
December 31, 2018 | | February 14, 2019 | | 0.5050 |
| | 2.0200 |
| | 27,951 |
|
September 30, 2018 | | October 31, 2018 | | 0.5000 |
| | 2.0000 |
| | 26,315 |
|
June 30, 2018 | | August 2, 2018 | | 0.4950 |
| | 1.9800 |
| | 25,860 |
|
March 31, 2018 | | May 3, 2018 | | 0.4900 |
| | 1.9600 |
| | 23,553 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended | | Declaration Date | | Quarterly Distribution per Common Unit | | Quarterly Distribution per Common Unit, Annualized | | Total Cash Distributions (in thousands) (a) |
December 31, 2021 | | February 10, 2022 | | $ | 0.30 | | | $ | 1.20 | | | $ | 18,772 | |
September 30, 2021 | | October 28, 2021 | | 0.30 | | | 1.20 | | | 18,770 | |
June 30, 2021 | | July 29, 2021 | | 0.30 | | | 1.20 | | | 18,755 | |
March 31, 2021 | | April 29, 2021 | | 0.30 | | | 1.20 | | | 18,752 | |
December 31, 2020 | | February 11, 2021 | | 0.30 | | | 1.20 | | | 18,709 | |
September 30, 2020 | | October 29, 2020 | | 0.30 | | | 1.20 | | | 18,708 | |
June 30, 2020 | | July 31, 2020 | | 0.30 | | | 1.20 | | | 18,706 | |
March 31, 2020 | | May 15, 2020 | | 0.30 | | | 1.20 | | | 18,705 | |
____________
| |
(a) | Cash distributions are paid in the quarter subsequent to the period in which the distributions are earned. For the quarter ended December 31, 2019, total cash distribution was estimated based on vested shares anticipated to be outstanding as of the record date. We do not expect the actual distribution to be materially different. |
(a)Cash distributions are paid in the quarter subsequent to the period in which the distributions are earned. For the quarter ended December 31, 2021, the total cash distribution was estimated based on vested shares anticipated to be outstanding as of the record date. We do not expect the actual distribution to be materially different.
Credit Facilities
Revolving Credit Facility
The maximum amount ofavailable under the Revolving Credit Facility was increased to $500.0 million in July 2018. We have the ability to further increase the maximum amount of the Revolving Credit Facility by an additional $250.0 million, to a total facility size of $750.0 million, subject to receiving increased commitments from its lenders or other financial institutions and satisfaction of certain conditions. Refer to Note 78 “Debt” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for further information regarding the Revolving Credit Facility, as well as information pertaining to corresponding financial and other covenants. We are in compliance with the financial and other covenants as of December 31, 2019.2021.
During the year ended December 31, 2021, we made net repayments of $100.0 million under the Revolving Credit Facility.
Senior Notes
During 2015 and 2017, we and our wholly-owned subsidiary, PBF Finance, issued a combined $525.0 million aggregate principal amount of the 2023 Notes. The 2023 Notes are guaranteed on a senior unsecured basis by all of our subsidiaries. In addition, PBF LLC provides a limited guarantee of collection of the principal amount of the 2023 Notes, but is not otherwise subject to the covenants of the indenture governing the 2023 Notes. We have the option to repurchase all or a portion of the 2023 Notes at varying prices no less than 100% of the principal amounts of the notes plus accrued and unpaid interest. The holders of the 2023 Notes have the option to require that we repurchase the principal amounts of the 2023 Notes together with any accrued and unpaid interest to the date of redemption only upon a change in control, certain asset sale transactions, or in the event of a default as defined in
the indenture governing the 2023 Notes. In addition, the 2023 Notes contain covenants limiting our and our restricted subsidiaries’ ability to make certain types of investments, incur additional debt, issue preferred equity, create liens, make certain payments, sell assets, merge or consolidate with other entities, and enter into transactions with affiliates. We are in compliance with the covenants as of December 31, 2019.2021.
Other
In addition to the Revolving Credit Facility and the 2023 Notes, we also have outstanding letters of credit totaling approximately $3.5 million. These letters of credit result in off-balance sheet liabilities.
Cash Flows
The following table sets forth our cash flows for the periods indicated:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Net cash provided by operating activities | | $ | 187,770 | | | $ | 186,642 | | | $ | 149,007 | |
Net cash used in investing activities | | (1,407) | | | (12,308) | | | (31,746) | |
Net cash used in financing activities | | (188,743) | | | (173,016) | | | (102,203) | |
Net change in cash and cash equivalents | | $ | (2,380) | | | $ | 1,318 | | | $ | 15,058 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Net cash provided by operating activities | | $ | 149,007 |
| | $ | 133,141 |
| | $ | 138,182 |
|
Net cash used in investing activities | | (31,746 | ) | | (175,696 | ) | | (50,234 | ) |
Net cash (used in) provided by financing activities | | (102,203 | ) | | 42,799 |
| | (132,505 | ) |
Net change in cash and cash equivalents | | $ | 15,058 |
| | $ | 244 |
| | $ | (44,557 | ) |
Cash Flows from Operating Activities
Net cash provided by operating activities increased by approximately $15.9$1.1 million to $149.0$187.8 million for the year ended December 31, 20192021 compared to $133.1$186.6 million for the year ended December 31, 2018.2020. The increase in net cash provided by operating activities was the result of an increase in net income of approximately $5.9 million and an increase in the net changes in operating assets and liabilities of approximately $5.0 million primarily driven by the timing of collection of accounts receivables and liability payments, offset by a net increasedecrease in non-cash charges relating to depreciation and amortization, impairment expense, amortization of loan fees and debt premium, accretion on discounted liabilities, unit-based compensation and change in contingent consideration of approximately $11.1$7.0 million and a gain on sale of assets of approximately $2.8 million in 2021.
Net cash provided by operating activities increased by approximately $37.6 million to $186.6 million for the year ended December 31, 2020 compared to $149.0 million for the year ended December 31, 2019. The increase in net cash provided by operating activities was the result of an increase in net income of approximately $7.3$39.3 million and a net increase in non-cash charges relating to depreciation and amortization, impairment expense, amortization of loan fees and debt premium, accretion on discounted liabilities, unit-based compensation and change in contingent consideration of approximately $5.7 million, offset by a decrease in the net changes in operating assets and liabilities of approximately $2.5$7.3 million primarily driven by the timing of collection of accounts receivables and liability payments.
Net cash provided by operating activities decreased by approximately $5.0 million to $133.1 million for the year ended December 31, 2018 compared to $138.2 million for the year ended December 31, 2017. The decrease in net cash provided by operating activities was the result of a decrease in net income of approximately $9.2 million and a decrease in the net changes in operating assets and liabilities of approximately $2.7 million primarily driven by the timing of collection of accounts receivables and liability payments, offset by a net increase in non-cash charges relating to depreciation and amortization, amortization of loan fees and debt premium, accretion on discounted liabilities and unit-based compensation of approximately $6.8 million.
Cash Flows from Investing Activities
Net cash used in investing activities decreased by approximately $144.0$10.9 million to $31.7$1.4 million for the year ended December 31, 20192021 compared to $175.7$12.3 million for the year ended December 31, 2018.2020. The decrease in net cash used in investing activities was due to proceeds from the acquisitionssale of the East Coast Storage Assets for $75.0assets of approximately $7.2 million and the Knoxville Terminals for $58.4 million, both of which occurred in 2018,2021 and a decrease in capital expenditures of approximately $10.6$3.7 million primarily related to higherlower maintenance capital spend on organic growth projectsspending in 2018 compared to 2019.the current year.
Net cash used in investing activities increaseddecreased by approximately $125.5$19.4 million to $175.7$12.3 million for the year ended December 31, 20182020 compared to $50.2$31.7 million for the year ended December 31, 2017.2019. The increasedecrease in net cash used in investing activities was due to the acquisitions of the East Coast Storage Assets for $75.0 million and the Knoxville Terminals for $58.4 million, both of which occurred in 2018, and a decrease in net sales and maturities of marketable securities of approximately $40.0 million, offset by a decrease in capital expenditures of approximately $37.8$19.4 million primarily related to a reduction in capital spending in 2020 in response to the construction of assetsCOVID-19 pandemic and higher capital spend on organic growth projects in 2017 and the acquisition of the Toledo Products Terminal for $10.1 million in April 2017.2019 compared to 2020.
Cash Flows from Financing Activities
Net cash used in financing activities changedincreased by approximately $145.0$15.7 million to $188.7 million for the year ended December 31, 2021 compared to $173.0 million for the year ended December 31, 2020. Net cash used in financing activities for the year ended December 31, 2021 consisted of net repayments of $100.0 million under the Revolving Credit Facility, distributions to unitholders of $75.0 million, a $12.2 million earn-out payment under the CPI Processing Agreement and deferred financing costs and other of $1.6 million. Net cash used in financing activities for the year ended December 31, 2020 consisted of distributions to unitholders of $88.4 million, net repayments of $83.0 million under the Revolving Credit Facility and deferred financing costs and other of $1.6 million.
Net cash used in financing activities increased by approximately $70.8 million to $173.0 million for the year ended December 31, 2020 compared to $102.2 million for the year ended December 31, 2019 compared to net2019. Net cash provided byused in financing activities of $42.8 million for the year ended December 31, 2018.2020 consisted of distributions to unitholders of $88.4 million, net repayments of $83.0 million under the Revolving Credit Facility and deferred financing costs and other of $1.6 million. Net cash used in financing activities for the year ended December 31, 2019 consisted of the acquisition of the TVPC noncontrolling interest for $200.0 million, distributions to unitholders of $123.9 million, the deferred payment for the East Coast Storage Assets Acquisition of $32.0 million and distributions to TVPC members of $8.5 million, offset by proceeds from issuance of common units of $132.5 million, net borrowings under the Revolving Credit Facility of $127.0 million and deferred financing costs and other of $2.7 million. Net cash provided by financing activities for the year ended December 31, 2018 consisted of net borrowings under the Revolving Credit Facility of $126.3 million, proceeds from issuance of common units of $34.8 million and a contribution from PBF LLC of $4.2 million related to the 2018 pre-acquisition activities of the Development Assets, offset by distributions to unitholders of $98.8 million, distributions to TVPC members of $20.3 million and deferred financing costs and other of $3.5 million.
Net cash provided by financing activities changed by approximately $175.3 million to $42.8 million for the year ended December 31, 2018 compared to net cash used in financing activities of $132.5 million for the year ended December 31, 2017. Net cash provided by financing activities for the year ended December 31, 2018 consisted of net borrowings under the Revolving Credit Facility of $126.3 million, proceeds from issuance of common units of $34.8 million and a contribution from PBF LLC of $4.2 million related to the 2018 pre-acquisition activities of the Development Assets, offset by distributions to unitholders of $98.8 million, distributions to TVPC members of $20.3 million and deferred financing costs and other of $3.5 million. Net cash used in financing activities for the year ended December 31, 2017 consisted of net repayments on the Revolving Credit Facility of $159.5 million, distributions to unitholders of $85.4 million, repayment of the term loan of $39.7 million, distributions to TVPC members of $21.5 million, repayment of our Affiliate Note Payable of $11.6 million and deferred financing costs and other of $3.7 million, offset by proceeds from the issuance of the additional 2023 notes of $178.5 million and a contribution from PBF LLC of $10.4 million related to the 2017 pre-acquisition activities of the Paulsboro Natural Gas Pipeline and the Development Assets.
Capital Expenditures
Our capital requirements have consisted of, and are expected to continue to consist of: expansion, maintenance and regulatory capital expenditures. Expansion capital expenditures are expenditures incurred for acquisitions or capital improvements that we expect will increase our operating income or operating capacity over the long term. Examples of expansion capital expenditures include the acquisition of assets, the construction, development or acquisition of equipment at our facilities or projects that provide additional throughput or storage capacity to the extent such capital expenditures are expected to expand our operating capacity or increase our operating income. Maintenance capital expenditures are expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity. Examples of maintenance capital expenditures are expenditures for the refurbishment and replacement of our transportation, terminaling, storage and processing assets and to maintain equipment reliability, integrity and safety. Regulatory capital expenditures are expenditures made to attain or maintain compliance with regulatory standards.standards (including in response to the potential impacts of climate change). Examples of regulatory capital expenditures are expenditures incurred to address environmental laws or regulations.
Capital expenditures for the periods presented were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | (in thousands) |
Expansion | | $ | 4,313 | | | $ | 2,756 | | | $ | 23,632 | |
Maintenance | | 3,401 | | | 8,106 | | | 7,820 | |
Regulatory | | 908 | | | 1,446 | | | 294 | |
Total capital expenditures | | $ | 8,622 | | | $ | 12,308 | | | $ | 31,746 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (In thousands) |
Expansion* | | $ | 23,632 |
| | $ | 169,023 |
| | $ | 85,662 |
|
Maintenance | | 7,820 |
| | 6,168 |
| | 4,596 |
|
Regulatory | | 294 |
| | 505 |
| | — |
|
Total capital expenditures | | $ | 31,746 |
| | $ | 175,696 |
| | $ | 90,258 |
|
____________
| |
(*) | Expansion capital expenditures include our acquisitions for the periods presented. |
For the year ended December 31, 2021, our capital expenditures were primarily incurred for growth projects associated with the East Coast Storage Assets and maintenance of the East Coast Terminals, the Torrance Valley Pipeline and the Toledo Storage Facility. For the year ended December 31, 2020, our capital expenditures were primarily incurred for maintenance of the East Coast Terminals, the Toledo Storage Facility and the Torrance Valley Pipeline, as well as growth projects associated with the East Coast Storage Assets. For the year ended December 31, 2019, our capital expenditures were primarily incurred for growth projects associated with the East Coast Storage Assets and the Development Assets and maintenance of the Toledo Storage Facility, the East Coast Terminals and the Torrance Valley Pipeline. For the year ended December 31, 2018, our capital expenditures were primarily incurred for the acquisition of the East Coast Storage Assets and the Knoxville Terminals, organic growth projects associated with the Development Assets and maintenance of the Toledo Storage Facility, the East Coast Terminals and the Torrance Valley Pipeline. For the year ended December 31, 2017, our capital expenditures were primarily incurred for the construction of the Paulsboro Natural Gas Pipeline and the Chalmette Storage Tank, the acquisition of the Paulsboro Natural Gas Pipeline and the Toledo Products Terminal and maintenance of the Toledo Storage Facility, the East Coast Terminals and the Torrance Valley Pipeline.
We currently expect to spend an aggregate of between approximately $22.0$20.0 million and $34.0$25.0 million during 20202022 for capital expenditures, of which between approximately $14.0$10.0 million and $18.0$14.0 million relate to maintenance capital expenditures. We anticipate the forecasted maintenance capital expenditures will be funded primarily with cash from operations and through borrowings under the Revolving Credit Facility as needed. We currently have not included any potential future acquisitions in our budgeted capital expenditures for the twelve months ending December 31, 2020.2022. We may rely on external sources including other borrowings under the Revolving Credit Facility, and issuances of equity and debt securities to fund any significant future expansion.
Contractual ObligationsMaterial Cash Requirements
Information regarding ourOur material cash requirements include the following known contractual and other obligations as of December 31, 2019, is set forth in the following table:2021:
| | | Payments Due by Period | | Payments Due by Period |
| Totals | | 2020 | | 2021 and 2022 | | 2023 and 2024 | | 2025 and Beyond | | Totals | | 2022 | | 2023 and 2024 | | 2025 and 2026 | | 2027 and Beyond |
| (In thousands) | | (in thousands) |
| | | | | | | | | | |
Long-term debt obligations (1) | $ | 808,000 |
| | $ | — |
| | $ | — |
| | $ | 808,000 |
| | $ | — |
| Long-term debt obligations (1) | $ | 625,000 | | | $ | — | | | $ | 625,000 | | | $ | — | | | $ | — | |
Interest (2) | 177,161 |
| | 50,280 |
| | 100,559 |
| | 26,322 |
| | — |
| Interest (2) | 54,477 | | | 39,189 | | | 15,288 | | | — | | | — | |
Affiliate - services agreements (3) | 212,180 |
| | 16,862 |
| | 33,724 |
| | 33,724 |
| | 127,870 |
| Affiliate - services agreements (3) | 179,472 | | | 16,958 | | | 33,916 | | | 33,916 | | | 94,682 | |
Environmental obligations (4) | 2,444 |
| | 550 |
| | 800 |
| | 800 |
| | 294 |
| Environmental obligations (4) | 1,695 | | | 717 | | | 615 | | | 250 | | | 113 | |
Construction obligations | 1,193 |
| | 1,193 |
| | — |
| | — |
| | — |
| Construction obligations | 834 | | | 834 | | | — | | | — | | | — | |
Contingent Consideration (5) | 30,596 |
| | 10,680 |
| | 19,916 |
| | — |
| | — |
| |
Contingent consideration (5) | | Contingent consideration (5) | 2,932 | | | 2,932 | | | — | | | — | | | — | |
Operating leases and other (6) | 10,121 |
| | 2,069 |
| | 1,368 |
| | 1,067 |
| | 5,617 |
| Operating leases and other (6) | 12,374 | | | 2,176 | | | 1,801 | | | 1,804 | | | 6,593 | |
Total obligations | $ | 1,241,695 |
| | $ | 81,634 |
| | $ | 156,367 |
| | $ | 869,913 |
| | $ | 133,781 |
| |
Total cash requirements | | Total cash requirements | $ | 876,784 | | | $ | 62,806 | | | $ | 676,620 | | | $ | 35,970 | | | $ | 101,388 | |
____________________
| |
(1) | No principal amounts are due under our 2023 Notes and Revolving Credit Facility until May 2023 and July 2023, respectively. |
| |
(2) | Includes interest on our 2023 Notes and Revolving Credit Facility based on outstanding indebtedness as of December 31, 2019. Includes commitment fees on the Revolving Credit Facility through July 2023 using rates in effect at December 31, 2019. |
(1)No principal amounts are due under the 2023 Notes and Revolving Credit Facility until May 2023 and July 2023, respectively.
| |
(3) | Includes annual fixed payments under the Omnibus Agreement and the Services Agreement, as well as estimated obligations under the Omnibus Agreement to reimburse PBF LLC for certain compensation and benefit costs of employees who devote more than 50% of their time to us. Obligations under these agreements are expected to continue through the terms of our existing commercial agreements. |
| |
(4) | Includes environmental liabilities associated with the East Coast Terminals, the Torrance Valley Pipeline and the East Coast Storage Assets. In accordance with the Contribution Agreement for TVPC, PBF Holding has indemnified us for any and all costs associated with environmental remediation for obligations that existed on or before August 31, 2016, including all known or unknown events. |
| |
(5) | Includes the estimated undiscounted Contingent Consideration amounts payable to Crown Point International, LLC related to the acquisition of the East Coast Storage Assets and related annual earn-out payments through 2022. |
| |
(6) | Includes operating leases and rental and franchise payments to secure right of way access across certain East Coast Terminals and Torrance Valley Pipeline assets with various terms and tenures.
|
(2)Includes interest on the 2023 Notes and Revolving Credit Facility based on outstanding indebtedness as of December 31, 2021. Includes commitment fees on the Revolving Credit Facility through July 2023 using rates in effect at December 31, 2021.
(3)Includes annual fixed payments under the Omnibus Agreement and the Services Agreement, as well as estimated obligations under the Omnibus Agreement to reimburse PBF LLC for certain compensation and benefit costs of employees who devote more than 50% of their time to us. Obligations under these agreements are expected to continue through the terms of our existing commercial agreements.
(4)Includes environmental liabilities associated with the East Coast Terminals, the Torrance Valley Pipeline and the East Coast Storage Assets. In accordance with the Contribution Agreement for TVPC, PBF Holding has indemnified us for any and all costs associated with environmental remediation for obligations that existed on or before August 31, 2016, including all known or unknown events.
(5)Includes the estimated contingent consideration amount payable to Crown Point related to the CPI earn-out.
(6)Includes operating leases and rental and franchise payments to secure right of way access across certain East Coast Terminals and Torrance Valley Pipeline assets with various terms and tenures.
Effects of Inflation
Inflation in the U.S. has been relatively low in recent years and didCertain of our commercial agreements feature annual inflation adjustments, which, historically, have not havehad a material impact on our results of operations, including our results of operations for the years ended December 31, 2021, 2020 and 2019, 2018 and 2017, respectively, except as noted above forrespectively. Given the recent rise in inflation, we anticipate the Inflation Rate Increases.Increase for the upcoming year to be higher than that of past years. Despite this anticipated increase, we do not anticipate the Inflation Rate Increase for 2022 to have a material impact on our results of operations.
Off-Balance Sheet Arrangements
We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities, other than outstanding letters of credit in the amount of $4.8 million.
Environmental and Other Matters
Environmental Regulations
Our operations are subject to extensive and frequently changing federal, state and local laws, regulations and ordinances relating to the protection of the environment. Among other things, these laws and regulations govern the emission or discharge of pollutants into or onto the land, air and water, the handling and disposal of solid and hazardous wastes and the remediation of contamination. As with the industry generally, compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to develop, maintain, operate and upgrade equipment and facilities. While these laws and regulations affect our maintenance and regulatory capital expenditures and net income, we believe they do not necessarily affect our competitive position, as the operations of our competitors are similarly affected. We believe our facilities are in substantial compliance with applicable environmental laws and regulations. However, these laws and regulations, as well as the interpretation of such laws and regulations, are subject to changes by regulatory authorities, and continued and future compliance with such laws and regulations may require us to incur significant expenditures. Additionally, violation of environmental laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions limiting our operations, investigatory or remedial liabilities or construction bans or delays in the development of additional facilities or equipment. Furthermore, a release of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expenses, including costs to comply with applicable laws and regulations and to resolve claims by third parties for personal injury or property damage or by the U.S. federal government or state governments for natural resources damages. These impacts could directly and indirectly affect our business and have an adverse impact on our financial position, results of operations and liquidity. We cannot currently determine the amounts of such future impacts.
Environmental Liabilities
Contaminations resulting from spills of crude oil or petroleum products are not unusual within the petroleum terminaling or transportation industries. Historicindustries, and, historically, spills at truck and rail racks and terminals have resulted in contamination of the environment, including soils and groundwater.
Pursuant to the Contribution Agreements entered into in connection with the IPO and the Acquisitions from PBF, PBF Energy has agreed to indemnify us for certain known and unknown environmental liabilities that are based on conditions in existence at our Predecessor’s properties and associated with the ownership or operation of the Contributed Assets and arising from the conditions that existed prior to the closings of the IPO and the Acquisitions from PBF. In addition, we have agreed to indemnify PBF Energy for (i) certain events and conditions associated with the ownership or operation of our assets that occur, as applicable, after the closing of the each Acquisition from PBF (including the IPO) and (ii) environmental liabilities related to our assets if the environmental liability is the result of the negligence, willful misconduct or criminal conduct of us or our employees, including those seconded to us. As a result, we may incur environmental expenses in the future, which may be substantial.
As of December 31, 2019,2021, we have recorded a total liability related to environmental remediation costs of $2.3$1.7 million related to existing environmental liabilities. Refer to Note 1112 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional information.
Critical Accounting Policies and Estimates
Our significant accounting policies are described in Note 2 “Summary of Accounting Policies” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. We prepare our Consolidated Financial Statements in conformity with GAAP, and, in the process of applying these principles, we must make judgments, assumptions and estimates based on the best available information at the time. To aid a reader’s understanding, management has identified our critical accounting policies. These policies are considered critical because they are both most important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments. Often they require judgments and estimation about matters which are inherently uncertain and involve measuring, at a specific point in time, events which are continuous in nature. Actual results may differ based on the accuracy of the information utilized and subsequent events, some of which we may have little or no control over. The following accounting policies involve 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. Unless otherwise noted, estimates of the sensitivity to earnings that would result from changes in the assumptions used in determining our estimates is not practicable due to the number of assumptions and contingencies involved and the wide range of possible outcomes.
Business Combinations
We use the acquisition method of accounting for third-party acquisitions for the recognition of assets acquired and liabilities assumed in business combinations at their estimated fair values as of the date of acquisition. Any excess consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired. As a result, in the case of significant acquisitions, we obtain the assistance of third-party valuation specialists in estimating fair values of tangible and intangible assets based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants. While our management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Certain of our acquisitions may include earn-out provisions or other forms of contingent consideration. As of the acquisition date, we record contingent consideration, as applicable, at the estimated fair value of expected future payments associated with the earn-out. Any changes to the recorded fair value of contingent consideration, subsequent to the measurement period, will be recognized as earnings in the period in which it occurs. Such contingent consideration liabilities are based on best estimates of future expected payment obligations, which are subject to change due to many factors outside of our control. Changes to the estimate of expected future payments
may occur, from time to time, due to various reasons, including actual results differing from estimates and adjustments to the revenue or earnings assumptions used as the basis for the liability based on historical experience. While we believe that our current estimate of the fair value of our contingent consideration liability is reasonable, it is possible that the actual future settlement of our earn-out obligation could materially differ.
The Acquisitions from PBF were transfers between entities under common control. Accordingly, we record the net assets that were acquired from PBF Energy on its consolidated balance sheets at PBF Energy’s historical carrying value rather than fair value.
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remediation efforts are probable and the costs can be reasonably estimated. Other than for periodic assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action. Environmental liabilities are based on best estimates of probable future costs using currently available technology and the impact that current regulations may have on our remediation plans. The actual settlement of our liability for environmental matters could materially differ from our estimates due to a number of uncertainties such as the extent of contamination, changes in environmental laws and regulations, potential improvements in remediation technologies and the participation of other responsible parties.
Supplemental Guarantor Financial Information
The following consolidated subsidiaries serve as guarantors of the obligations under the 2023 Notes:
•Delaware City Logistics Company LLC;
•Delaware Pipeline Company LLC;
•Delaware City Terminaling Company LLC;
•Toledo Terminaling Company LLC;
•PBF Logistics Products Terminals LLC;
•PBFX Operating Company LLC;
•Torrance Valley Pipeline Company LLC;
•Paulsboro Natural Gas Pipeline Company LLC;
•Toledo Rail Logistics Company LLC;
•Chalmette Logistics Company LLC;
•Paulsboro Terminaling Company LLC;
•DCR Storage and Loading Company LLC;
•CPI Operations LLC; and
•PBFX Ace Holdings LLC.
These guarantees are full and unconditional and joint and several.
PBF Logistics LP serves as “Issuer,” with PBF Finance as “Co-Issuer.” The indenture dated May 12, 2015, as supplemented, among us, PBF Finance, the guarantors party thereto and Deutsche Bank Trust Company Americas, as Trustee, governs subsidiaries designated as “Guarantor Subsidiaries.”
In addition, PBF LLC provides a limited guarantee of collection of the principal amount of the 2023 Notes but is not otherwise subject to restrictions included in the indenture. Refer to PBF LLC’s consolidated financial statements, which are included in its Annual Report on Form 10-K for the period ended December 31, 2021.
The Co-Issuer has no independent assets or operations and we do not have any subsidiaries designated as “Non-Guarantor Subsidiaries.” As such, the consolidated results of the Issuer and Guarantor Subsidiaries are reflected in our Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Recently Issued Accounting PronouncementPronouncements
In June 2016,March 2020, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses2020-04, “Reference Rate Reform (Topic 326); Measurement848): Facilitation of Credit Lossesthe Effects of Reference Rate Reform on Financial Instruments”Reporting” (“ASU 2016-13”2020-04”). ThisThe amendments in ASU 2020-04 provide optional guidance amendsto alleviate the guidance on measuring credit losses on financial assets held at amortized cost.burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions affected by the expected market transition from the London Interbank Offering Rate (“LIBOR”) and other interbank rates if certain criteria are met. The amendments in 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 is2020-04 are effective for fiscal yearsall entities at any time beginning afteron March 12, 2020 through December 15, 2019, including31, 2022 and may be applied from the beginning of an interim periods within those fiscal years.period that includes the issuance date of ASU 2020-04. We adopted ASU 2016-13 effective January 1, 2020. The impactdo not expect that the adoption of adoptionthis guidance will require additional disclosures commencing with our March 31, 2020 Quarterly Report on Form 10-Q, however, there was nohave a material impact on our consolidated financial statements.statements and related disclosures.
Refer to Note 2 “Summary of Accounting Policies” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K for additional Recently Adopted Accounting Guidance and Recently Issued Accounting Pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices. BecauseWe have minimal direct exposure to risks associated with fluctuating commodity prices because we do not generally own the crude oil, or refined products or natural gas that areis distributed through our facilities, and because all of our commercial agreements with PBF Energy require PBF Energy to bear the risk of any material volume loss relating to the services we provide,provide.
We experience modest volume gains and losses, which we have minimal direct exposuresometimes refer to risks associated with fluctuating commodityas imbalances, through the operations of our assets as a result of variances in tank storage meter readings and volume fluctuations within certain of our terminals. We use a year-to-date weighted-average market price to value our assets and liabilities related to product imbalances. For the year ended December 31, 2021, the impact from our imbalances was not material to our results. In practice, we expect to settle positive refined product imbalances at the end of each year by selling excess volumes at current market prices. We may be required to purchase refined product volumes in the open market to make up negative imbalances or settle through cash payments.
Debt that we incur under the Revolving Credit Facility bears interest at a variable rate and exposes us to interest rate risk. At December 31, 2019,2021, we had $283.0$100.0 million outstanding in variable interest debt. A 1.0% change in the interest rate associated with the borrowings outstanding under this facility would result in a $4.3$4.0 million change in our interest expense, assuming we were to borrow all $500.0 million available under the Revolving Credit Facility.
We continually monitor our market risk exposure, including the impact and developments related to the COVID-19 pandemic, which has introduced significant volatility in the financial markets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of PBF Logistics GP LLC and
Unitholders of PBF Logistics LP and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PBF Logistics LP and subsidiaries (the “Partnership”) as of December 31, 20192021 and 2018,2020, the related consolidated statements of operations, partners’ equity, and cash flows, for each of the three years in the period ended December 31, 2019,2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2021, in conformity withaccounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2020,17, 2022, expressed an unqualified opinion on the Partnership’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Presentation and Disclosure of Related Party Transactions – refer to Note 13 to the Consolidated Financial Statements
Critical Audit Matter Description
As described in Note 13 to the consolidated financial statements, the Partnership currently derives a majority of its revenue from long term, fee-based related party agreements with PBF Holding, which generally includes minimum volume commitments (MVCs), contractual fee escalations for inflation adjustments and certain increases in operating costs. The Partnership believes that the terms and conditions of these agreements are no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services.
Auditing the presentation and disclosure of these related party transactions, including the completeness thereof, was challenging due to PBF’s involvement in many aspects of the Partnership’s business, including the revenue earned from providing transportation, terminaling and storage services and lease revenues under long-term contracts with PBF, the direct and allocated expenses charged from PBF for services provided under operating and administrative management agreements, fees charged for centralized general and administrative services provided by PBF, and reimbursements received under the Omnibus and other service agreements.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the presentation and disclosure of related party transactions included the following, among others:
•We obtained sufficient understanding of internal controls of the Partnership associated with related party transactions through our control testing in conjunction with the integrated audit of the Partnership.
•We obtained a listing of all related party relationships and compared the listing to the PBF legal structure and evidence obtained from other audit procedures, including inquiries of Management and the Audit Committee.
•We inspected audit confirmation responses received during our audit, company filings, articles, Board of Director meeting minutes and other committee meeting minutes.
•We read contracts and agreements and tested revenue and expense transactions.
•We evaluated the aggregation and presentation of related party financial statement line items.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 20, 202017, 2022
We have served as the Partnership’s auditor since 2013.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of PBF Logistics GP LLC and Unitholders of PBF Logistics LP and subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of PBF Logistics LP and subsidiaries (the “Partnership”) as of December 31, 2019,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019,2021, of the Partnership and our report dated February 20, 2020,17, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 20, 2020
17, 2022
PBF LOGISTICS LP
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
| | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| | | | |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 33,904 | | | $ | 36,284 | |
| | | | |
Accounts receivable - affiliates | | 61,724 | | | 53,220 | |
Accounts receivable | | 5,549 | | | 11,382 | |
Prepaids and other current assets | | 3,476 | | | 2,590 | |
Total current assets | | 104,653 | | | 103,476 | |
Property, plant and equipment, net | | 787,338 | | | 820,174 | |
Goodwill | | 6,332 | | | 6,332 | |
Other non-current assets | | 2,974 | | | 3,570 | |
Total assets | | $ | 901,297 | | | $ | 933,552 | |
LIABILITIES AND EQUITY | | | | |
Current liabilities: | | | | |
Accounts payable - affiliates | | $ | 4,096 | | | $ | 4,940 | |
Accounts payable | | 5,394 | | | 4,602 | |
Accrued liabilities | | 16,812 | | | 32,224 | |
| | | | |
Deferred revenue | | 2,372 | | | 2,117 | |
Total current liabilities | | 28,674 | | | 43,883 | |
Long-term debt | | 622,544 | | | 720,845 | |
Other long-term liabilities | | 1,383 | | | 1,607 | |
Total liabilities | | 652,601 | | | 766,335 | |
| | | | |
Commitments and contingencies (Note 12) | | 0 | | 0 |
| | | | |
Equity: | | | | |
| | | | |
Common unitholders (62,574,644 and 62,364,838 units issued and outstanding, as of December 31, 2021 and 2020, respectively) | | 248,696 | | | 167,217 | |
| | | | |
| | | | |
| | | | |
| | | | |
Total equity | | 248,696 | | | 167,217 | |
Total liabilities and equity | | $ | 901,297 | | | $ | 933,552 | |
|
| | | | | | | | |
| | December 31, 2019 | | December 31, 2018 |
| | | | |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 34,966 |
| | $ | 19,908 |
|
Accounts receivable - affiliates | | 48,056 |
| | 37,052 |
|
Accounts receivable | | 7,351 |
| | 7,511 |
|
Prepaids and other current assets | | 3,828 |
| | 4,598 |
|
Total current assets | | 94,201 |
| | 69,069 |
|
Property, plant and equipment, net | | 854,610 |
| | 862,117 |
|
Goodwill | | 6,332 |
| | 6,332 |
|
Other non-current assets | | 17,859 |
| | 18,835 |
|
Total assets | | $ | 973,002 |
| | $ | 956,353 |
|
LIABILITIES AND EQUITY | | | | |
Current liabilities: | | | | |
Accounts payable - affiliates | | $ | 6,454 |
| | $ | 12,047 |
|
Accounts payable | | 10,224 |
| | 4,660 |
|
Accrued liabilities | | 27,839 |
| | 46,312 |
|
Deferred revenue | | 3,189 |
| | 2,960 |
|
Total current liabilities | | 47,706 |
| | 65,979 |
|
Long-term debt | | 802,104 |
| | 673,324 |
|
Other long-term liabilities | | 18,109 |
| | 23,860 |
|
Total liabilities | | 867,919 |
| | 763,163 |
|
| | | | |
Commitments and contingencies (Note 11) | |
| |
|
| | | | |
Equity: | | | | |
Common unitholders (62,130,035 and 45,348,663 units issued and outstanding, as of December 31, 2019 and 2018, respectively) | | 105,083 |
| | 23,718 |
|
Total PBF Logistics LP equity | | 105,083 |
| | 23,718 |
|
Noncontrolling interest | | — |
| | 169,472 |
|
Total equity | | 105,083 |
| | 193,190 |
|
Total liabilities and equity | | $ | 973,002 |
| | $ | 956,353 |
|
See accompanying notes to consolidated financial statements.
7986
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit and per unit data)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | | |
Revenue: | | | | | | |
Affiliate | | $ | 304,100 | | | $ | 289,406 | | | $ | 300,877 | |
Third-party | | 51,435 | | | 70,849 | | | 39,335 | |
Total revenue | | 355,535 | | | 360,255 | | | 340,212 | |
| | | | | | |
Costs and expenses: | | | | | | |
Operating and maintenance expenses | | 103,438 | | | 99,852 | | | 118,614 | |
General and administrative expenses | | 18,735 | | | 18,748 | | | 24,515 | |
Depreciation and amortization | | 37,805 | | | 53,707 | | | 38,601 | |
Impairment expense | | — | | | 7,000 | | | — | |
Gain on sale of assets | | (2,795) | | | — | | | — | |
Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Total costs and expenses | | 160,171 | | | 164,917 | | | 180,940 | |
| | | | | | |
Income from operations | | 195,364 | | | 195,338 | | | 159,272 | |
| | | | | | |
Other expense: | | | | | | |
Interest expense, net | | (40,355) | | | (44,377) | | | (46,555) | |
Amortization of loan fees and debt premium | | (1,699) | | | (1,741) | | | (1,780) | |
| | | | | | |
Accretion on discounted liabilities | | (23) | | | (1,788) | | | (2,768) | |
Net income | | 153,287 | | | 147,432 | | | 108,169 | |
| | | | | | |
Less: Net income attributable to noncontrolling interest | | — | | | — | | | 7,881 | |
| | | | | | |
| | | | | | |
Net income attributable to PBF Logistics LP unitholders | | $ | 153,287 | | | $ | 147,432 | | | $ | 100,288 | |
| | | | | | |
Net income per limited partner unit: | | | | | | |
Common units - basic | | $ | 2.44 | | | $ | 2.36 | | | $ | 1.71 | |
Common units - diluted | | 2.44 | | | 2.36 | | | 1.71 | |
| | | | | | |
| | | | | | |
Weighted-average limited partner units outstanding: | | | | | | |
Common units - basic | | 62,810,703 | | | 62,535,964 | | | 58,583,231 | |
Common units - diluted | | 62,906,080 | | | 62,543,700 | | | 58,687,945 | |
| | | | | | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | | | | |
|
Revenue: | | | | | | |
Affiliate | | $ | 300,877 |
| | $ | 259,426 |
| | $ | 240,654 |
|
Third-party | | 39,335 |
| | 24,014 |
| | 16,934 |
|
Total revenue | | 340,212 |
| | 283,440 |
| | 257,588 |
|
| | | | | | |
Costs and expenses: | | | | | | |
Operating and maintenance expenses | | 118,614 |
| | 88,390 |
| | 73,521 |
|
General and administrative expenses | | 24,515 |
| | 21,371 |
| | 16,284 |
|
Depreciation and amortization | | 38,601 |
| | 29,809 |
| | 24,404 |
|
Change in contingent consideration | | (790 | ) | | — |
| | — |
|
Total costs and expenses | | 180,940 |
| | 139,570 |
| | 114,209 |
|
| | | | | | |
Income from operations | | 159,272 |
| | 143,870 |
| | 143,379 |
|
| | | | | | |
Other expense: | | | | | | |
Interest expense, net | | (46,555 | ) | | (40,541 | ) | | (31,875 | ) |
Amortization of loan fees and debt premium | | (1,780 | ) | | (1,717 | ) | | (1,488 | ) |
Accretion on discounted liabilities | | (2,768 | ) | | (775 | ) | | — |
|
Net income | | 108,169 |
| | 100,837 |
| | 110,016 |
|
Less: Net loss attributable to Predecessor | | — |
| | (2,443 | ) | | (4,986 | ) |
Less: Net income attributable to noncontrolling interest | | 7,881 |
| | 17,819 |
| | 14,565 |
|
Net income attributable to the partners | | 100,288 |
| | 85,461 |
| | 100,437 |
|
Less: Net income attributable to the IDR holder | | — |
| | 10,011 |
| | 9,055 |
|
Net income attributable to PBF Logistics LP unitholders | | $ | 100,288 |
| | $ | 75,450 |
| | $ | 91,382 |
|
| | | | | | |
Net income per limited partner unit: | | | | | | |
Common units - basic | | $ | 1.71 |
| | $ | 1.73 |
| | $ | 2.17 |
|
Common units - diluted | | 1.71 |
| | 1.73 |
| | 2.17 |
|
Subordinated units - basic and diluted | | — |
| | — |
| | 2.15 |
|
| | | | | | |
Weighted-average limited partner units outstanding: | | | | | | |
Common units - basic | | 58,583,231 |
| | 43,646,997 |
| | 35,505,446 |
|
Common units - diluted | | 58,687,945 |
| | 43,731,299 |
| | 35,568,760 |
|
Subordinated units - basic and diluted | | — |
| | — |
| | 6,572,245 |
|
See accompanying notes to consolidated financial statements.
8087
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Units | | | | | | | | Noncontrolling Interest | | Total |
Balance at January 1, 2019 | | | | $ | 23,718 | | | | | | | | | $ | 169,472 | | | $ | 193,190 | |
Quarterly distributions to unitholders | | | | (125,483) | | | | | | | | | — | | | (125,483) | |
Distributions to TVPC members | | | | — | | | | | | | | | (8,500) | | | (8,500) | |
Net income attributable to the partners | | | | 100,288 | | | | | | | | | 7,881 | | | 108,169 | |
Unit-based compensation expense | | | | 6,765 | | | | | | | | | — | | | 6,765 | |
Acquisition of TVPC noncontrolling interest | | | | (31,147) | | | | | | | | | (168,853) | | | (200,000) | |
Issuance of common units, net of expenses | | | | 132,483 | | | | | | | | | — | | | 132,483 | |
Other | | | | (1,541) | | | | | | | | | — | | | (1,541) | |
Balance at December 31, 2019 | | | | 105,083 | | | | | | | | | — | | | 105,083 | |
Quarterly distributions to unitholders | | | | (89,338) | | | | | | | | | — | | | (89,338) | |
Net income attributable to the partners | | | | 147,432 | | | | | | | | | — | | | 147,432 | |
Unit-based compensation expense | | | | 4,939 | | | | | | | | | — | | | 4,939 | |
Other | | | | (899) | | | | | | | | | — | | | (899) | |
Balance at December 31, 2020 | | | | 167,217 | | | | | | | | | — | | | 167,217 | |
Quarterly distributions to unitholders | | | | (75,958) | | | | | | | | | — | | | (75,958) | |
Net income attributable to the partners | | | | 153,287 | | | | | | | | | — | | | 153,287 | |
Unit-based compensation expense | | | | 5,320 | | | | | | | | | — | | | 5,320 | |
Other | | | | (1,170) | | | | | | | | | — | | | (1,170) | |
Balance at December 31, 2021 | | | | $ | 248,696 | | | | | | | | | $ | — | | | $ | 248,696 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Investment | | Common Units | | Subordinated Units - PBF LLC | | IDR | | Noncontrolling Interest | | Total |
Balance at January 1, 2017 | | $ | 16,750 |
| | $ | 241,275 |
| | $ | (276,083 | ) | | $ | 1,266 |
| | $ | 179,882 |
| | $ | 163,090 |
|
Net loss attributable to Development Assets | | (4,836 | ) | | — |
| | — |
| | — |
| | — |
| | (4,836 | ) |
Net loss attributable to PNGPC | | (150 | ) | | — |
| | — |
| | — |
| | — |
| | (150 | ) |
Sponsor contributions | | 10,439 |
| | — |
| | — |
| | — |
| | — |
| | 10,439 |
|
Allocation of PNGPC assets acquired to unitholders | | (11,538 | ) | | 11,592 |
| | (54 | ) | | — |
| | — |
| | — |
|
Distributions to PBF LLC related to the PNGPC Acquisition | | — |
| | (11,600 | ) | | — |
| | — |
| | — |
| | (11,600 | ) |
Quarterly distributions to unitholders (including IDRs) | | — |
| | (64,515 | ) | | (14,457 | ) | | (7,584 | ) | | — |
| | (86,556 | ) |
Distributions to TVPC members | | — |
| | — |
| | — |
| | — |
| | (21,544 | ) | | (21,544 | ) |
Net income attributable to the partners | | — |
| | 77,219 |
| | 14,163 |
| | 9,055 |
| | 14,565 |
| | 115,002 |
|
Unit-based compensation expense | | — |
| | 5,345 |
| | — |
| | — |
| | — |
| | 5,345 |
|
Contributions from PBF LLC | | — |
| | 527 |
| | — |
| | — |
| | — |
| | 527 |
|
Subordinated units conversion to common units | | — |
| | (276,433 | ) | | 276,433 |
| | — |
| | — |
| | — |
|
Other | | — |
| | (954 | ) | | (2 | ) | | (1 | ) | | (1,000 | ) | | (1,957 | ) |
Balance at December 31, 2017 | | $ | 10,665 |
| | $ | (17,544 | ) | | $ | — |
| | $ | 2,736 |
| | $ | 171,903 |
| | $ | 167,760 |
|
See accompanying notes to consolidated financial statements.
8188
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY (continued)
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Investment | | Common Units | | Subordinated Units - PBF LLC | | IDR | | Noncontrolling Interest | | Total |
Balance at January 1, 2018 | | $ | 10,665 |
| | $ | (17,544 | ) | | $ | — |
| | $ | 2,736 |
| | $ | 171,903 |
| | $ | 167,760 |
|
Net loss attributable to Development Assets | | (2,443 | ) | | — |
| | — |
| | — |
| | — |
| | (2,443 | ) |
Sponsor contributions | | 4,455 |
| | — |
| | — |
| | — |
| | — |
| | 4,455 |
|
Allocation of Development Assets acquired to unitholders | | (12,677 | ) | | 12,677 |
| | — |
| | — |
| | — |
| | — |
|
Quarterly distributions to unitholders (including IDRs) | | — |
| | (87,384 | ) | | — |
| | (12,747 | ) | | — |
| | (100,131 | ) |
Distributions to TVPC members | | — |
| | — |
| | — |
| | — |
| | (20,250 | ) | | (20,250 | ) |
Net income attributable to the partners | | — |
| | 75,450 |
| | — |
| | 10,011 |
| | 17,819 |
| | 103,280 |
|
Unit-based compensation expense | | — |
| | 5,757 |
| | — |
| | — |
| | — |
| | 5,757 |
|
Contributions from PBF LLC | | — |
| | 1,056 |
| | — |
| | — |
| | — |
| | 1,056 |
|
Issuance of common units, net of expenses | | — |
| | 34,820 |
| | — |
| | — |
| | — |
| | 34,820 |
|
Other | | — |
| | (1,114 | ) | | — |
| | — |
| | — |
| | (1,114 | ) |
Balance at December 31, 2018 | | $ | — |
| | $ | 23,718 |
| | $ | — |
| | $ | — |
| | $ | 169,472 |
| | $ | 193,190 |
|
See accompanying notes to consolidated financial statements.
82
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY (continued)
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Investment | | Common Units | | Subordinated Units - PBF LLC | | IDR | | Noncontrolling Interest | | Total |
Balance at January 1, 2019 | | $ | — |
| | $ | 23,718 |
| | $ | — |
| | $ | — |
| | $ | 169,472 |
| | $ | 193,190 |
|
Quarterly distributions to unitholders | | — |
| | (125,483 | ) | | — |
| | — |
| | — |
| | (125,483 | ) |
Distributions to TVPC members | | — |
| | — |
| | — |
| | — |
| | (8,500 | ) | | (8,500 | ) |
Net income attributable to the partners | | — |
| | 100,288 |
| | — |
| | — |
| | 7,881 |
| | 108,169 |
|
Unit-based compensation expense | | — |
| | 6,765 |
| | — |
| | — |
| | — |
| | 6,765 |
|
Acquisition of TVPC noncontrolling interest | | — |
| | (31,147 | ) | | — |
| | — |
| | (168,853 | ) | | (200,000 | ) |
Issuance of common units, net of expenses | | — |
| | 132,483 |
| | — |
| | — |
| | — |
| | 132,483 |
|
Other | | — |
| | (1,541 | ) | | — |
| | — |
| | — |
| | (1,541 | ) |
Balance at December 31, 2019 | | $ | — |
| | $ | 105,083 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 105,083 |
|
See accompanying notes to consolidated financial statements.
83
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Cash flows from operating activities: | | | | | | |
Net income | | $ | 153,287 | | | $ | 147,432 | | | $ | 108,169 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | 37,805 | | | 53,707 | | | 38,601 | |
Impairment expense | | — | | | 7,000 | | | — | |
Amortization of loan fees and debt premium | | 1,699 | | | 1,741 | | | 1,780 | |
Accretion on discounted liabilities | | 23 | | | 1,788 | | | 2,768 | |
Unit-based compensation expense | | 5,320 | | | 4,939 | | | 6,765 | |
Change in contingent consideration | | 2,988 | | | (14,390) | | | (790) | |
Gain on sale of assets | | (2,795) | | | — | | | — | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable - affiliates | | (8,504) | | | (5,164) | | | (11,004) | |
Accounts receivable | | 5,833 | | | (4,031) | | | 810 | |
Prepaids and other current assets | | (886) | | | 1,238 | | | (472) | |
| | | | | | |
Accounts payable - affiliates | | (844) | | | (1,514) | | | (1,645) | |
Accounts payable | | 621 | | | (6,050) | | | 5,564 | |
Accrued liabilities | | (6,814) | | | 3,478 | | | 509 | |
Deferred revenue | | 255 | | | (1,072) | | | 229 | |
Other assets and liabilities | | (218) | | | (2,460) | | | (2,277) | |
Net cash provided by operating activities | | 187,770 | | | 186,642 | | | 149,007 | |
| | | | | | |
Cash flows from investing activities: | | | | | | |
| | | | | | |
Expenditures for property, plant and equipment | | (8,622) | | | (12,308) | | | (31,746) | |
Proceeds from sale of assets | | 7,215 | | | — | | | — | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net cash used in investing activities | | $ | (1,407) | | | $ | (12,308) | | | $ | (31,746) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Cash flows from operating activities: | | | | | | |
Net income | | $ | 108,169 |
| | $ | 100,837 |
| | $ | 110,016 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | 38,601 |
| | 29,809 |
| | 24,404 |
|
Amortization of loan fees and debt premium | | 1,780 |
| | 1,717 |
| | 1,488 |
|
Accretion on discounted liabilities | | 2,768 |
| | 775 |
| | — |
|
Unit-based compensation expense | | 6,765 |
| | 5,757 |
| | 5,345 |
|
Change in contingent consideration | | (790 | ) | | — |
| | — |
|
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable - affiliates | | (11,004 | ) | | 3,765 |
| | (3,954 | ) |
Accounts receivable | | 810 |
| | (6,088 | ) | | 2,871 |
|
Prepaids and other current assets | | (472 | ) | | (679 | ) | | (39 | ) |
Accounts payable - affiliates | | (1,645 | ) | | (253 | ) | | 721 |
|
Accounts payable | | 5,564 |
| | (964 | ) | | 126 |
|
Accrued liabilities | | 509 |
| | (1,372 | ) | | (2,212 | ) |
Deferred revenue | | 229 |
| | 1,522 |
| | 486 |
|
Other assets and liabilities | | (2,277 | ) | | (1,685 | ) | | (1,070 | ) |
Net cash provided by operating activities | | 149,007 |
| | 133,141 |
| | 138,182 |
|
| | | | | | |
Cash flows from investing activities: | | | | | | |
Expenditures for property, plant and equipment | | (31,746 | ) | | (42,351 | ) | | (80,161 | ) |
Knoxville Terminals Purchase | | — |
| | (58,356 | ) | | — |
|
East Coast Storage Assets Acquisition | | — |
| | (74,989 | ) | | — |
|
Toledo Products Terminal Acquisition | | — |
| | — |
| | (10,097 | ) |
Purchases of marketable securities | | — |
| | — |
| | (75,036 | ) |
Maturities of marketable securities | | — |
| | — |
| | 115,060 |
|
Net cash used in investing activities | | $ | (31,746 | ) | | $ | (175,696 | ) | | $ | (50,234 | ) |
See accompanying notes to consolidated financial statements.
8489
PBF LOGISTICS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds from issuance of common units | | $ | — | | | $ | — | | | $ | 132,483 | |
| | | | | | |
| | | | | | |
Acquisition of TVPC noncontrolling interest | | — | | | — | | | (200,000) | |
Distributions to unitholders | | (74,986) | | | (88,426) | | | (123,910) | |
Distributions to TVPC members | | — | | | — | | | (8,500) | |
| | | | | | |
Deferred payment for the East Coast Storage Assets Acquisition | | — | | | — | | | (32,000) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Proceeds from revolving credit facility | | — | | | 100,000 | | | 228,000 | |
Repayment of revolving credit facility | | (100,000) | | | (183,000) | | | (101,000) | |
| | | | | | |
| | | | | | |
Payment of contingent consideration | | (12,176) | | | — | | | — | |
Deferred financing costs and other | | (1,581) | | | (1,590) | | | 2,724 | |
| | | | | | |
Net cash used in financing activities | | (188,743) | | | (173,016) | | | (102,203) | |
| | | | | | |
Net change in cash and cash equivalents | | (2,380) | | | 1,318 | | | 15,058 | |
Cash and cash equivalents, beginning of period | | 36,284 | | | 34,966 | | | 19,908 | |
Cash and cash equivalents, end of period | | $ | 33,904 | | | $ | 36,284 | | | $ | 34,966 | |
| | | | | | |
Supplemental cash flow disclosures: | | | | | | |
Non-cash activities: | | | | | | |
Contribution of net assets from PBF LLC | | $ | 396 | | | $ | — | | | $ | 242 | |
Accrued and unpaid capital expenditures | | 834 | | | 962 | | | 1,193 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Units issued in connection with the IDR Restructuring | | — | | | — | | | 215,300 | |
Assets acquired under operating leases | | — | | | — | | | 482 | |
Cash paid during year for: | | | | | | |
Interest, net of capitalized interest of $187, $710 and $526 in 2021, 2020 and 2019, respectively | | $ | 41,366 | | | $ | 43,840 | | | $ | 46,539 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Cash flows from financing activities: | | | | | | |
Proceeds from issuance of common units | | $ | 132,483 |
| | $ | 34,820 |
| | $ | — |
|
Acquisition of TVPC noncontrolling interest | | (200,000 | ) | | — |
| | — |
|
Distributions to unitholders | | (123,910 | ) | | (98,786 | ) | | (85,430 | ) |
Distributions to TVPC members | | (8,500 | ) | | (20,250 | ) | | (21,544 | ) |
Deferred payment for the East Coast Storage Assets Acquisition | | (32,000 | ) | | — |
| | — |
|
Contribution from parent | | — |
| | 4,201 |
| | 10,439 |
|
Proceeds from issuance of senior notes | | — |
| | — |
| | 178,500 |
|
Repayment of term loan | | — |
| | — |
| | (39,664 | ) |
Proceeds from revolving credit facility | | 228,000 |
| | 170,000 |
| | 20,000 |
|
Repayment of revolving credit facility | | (101,000 | ) | | (43,700 | ) | | (179,500 | ) |
Repayment of Affiliate Note Payable | | — |
| | — |
| | (11,600 | ) |
Deferred financing costs and other | | 2,724 |
| | (3,486 | ) | | (3,706 | ) |
Net cash (used in) provided by financing activities | | (102,203 | ) | | 42,799 |
| | (132,505 | ) |
| | | | | | |
Net change in cash and cash equivalents | | 15,058 |
| | 244 |
| | (44,557 | ) |
Cash and cash equivalents, beginning of period | | 19,908 |
| | 19,664 |
| | 64,221 |
|
Cash and cash equivalents, end of period | | $ | 34,966 |
| | $ | 19,908 |
| | $ | 19,664 |
|
| | | | | | |
Supplemental cash flow disclosures: | | | | | | |
Non-cash activities: | | | | | | |
Contribution of net assets from PBF LLC | | $ | 242 |
| | $ | 1,056 |
| | $ | 527 |
|
Accrued capital expenditures | | 1,193 |
| | 4,632 |
| | 1,423 |
|
Issuance of Affiliate Note Payable | | — |
| | — |
| | 11,600 |
|
Deferred payment for East Coast Storage Assets Acquisition | | — |
| | 30,900 |
| | — |
|
East Coast Storage Assets contingent consideration | | — |
| | 21,100 |
| | — |
|
Units issued as consideration for acquisitions | | — |
| | 31,586 |
| | — |
|
Units issued in connection with the IDR Restructuring | | 215,300 |
| | — |
| | — |
|
Assets acquired under operating leases | | 482 |
| | — |
| | — |
|
Cash paid during year for: | | | | | | |
Interest, net of capitalized interest of $526, $143, and $1,219 in 2019, 2018 and 2017, respectively | | $ | 46,539 |
| | $ | 39,716 |
| | $ | 29,231 |
|
See accompanying notes to consolidated financial statements.
8590
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
PBF Logistics LP (“PBFX” or the “Partnership”) is a Delaware master limited partnership (“MLP”) formed in February 2013. PBF Logistics GP LLC (“PBF GP” or “our general partner”) serves as the general partner of PBFX. PBF GP is wholly-owned by PBF Energy Company LLC (“PBF LLC”). PBF Energy Inc. (“PBF Energy”) is the sole managing member of PBF LLC and, as of December 31, 2019,2021, owned 99%99.2% of the total economic interest in PBF LLC. In addition, PBF LLC is the sole managing member of PBF Holding Company LLC (“PBF Holding”), a Delaware limited liability company and affiliate of PBFX. On May 14, 2014, PBFX completed its initial public offering (“IPO”). As of December 31, 2019,2021, PBF LLC held a 48.2%47.9% limited partner interest in PBFX, with the remaining 51.8%52.1% limited partner interest owned by public unit holders.
In connection with the IPO, PBF LLC contributed the assets, liabilities and results of operations of certain crude oil terminaling assets to the Partnership. The assets were owned and operated by PBF Holding’s subsidiaries, Delaware City Refining Company LLC (“DCR”) and Toledo Refining Company LLC, and were contributed to PBF LLC in connection with the IPO. PBF Holding, together with its subsidiaries, owns and operates five6 oil refineries (two of which are operated as a single unit) and related facilities in North America. PBF Energy, through its ownership in PBF LLC, controls all of the business affairs of PBFX and PBF Holding.
PBFX’s initial assets consisted of a double loop track with ancillary pumping and unloading equipment (the “DCR Rail Terminal”) and a crude truck unloading terminal consisting of lease automatic custody transfer units (the “Toledo Truck Terminal”), which, together with the DCR Rail Terminal, are referred to as the “IPO Assets.”Assets”). Subsequent to the IPO, the Partnership acquired from PBF LLC a heavy crude oil rail unloading facility at the Delaware City Refinery (the “DCR West Rack,” together with the DCR Rail Terminal, the “DCR Rail Facility”),; a tank farm and related facilities, which included a propane storage and loading facility (the “Toledo Storage Facility”),; an interstate petroleum products pipeline (the “DCR Products Pipeline”) and truck loading rack (the “DCR Truck Rack”), which are collectively referred to as the “DCR Products Pipeline and Truck Rack,”Rack”; the San Joaquin Valley pipeline system, which consists of the M55, M1 and M70 crude pipeline systems including pipeline stations with storage capacity and truck unloading capacity (the “Torrance Valley Pipeline”),; the interstate natural gas pipeline at PBF Holding’s Paulsboro Refinery (the “Paulsboro Natural Gas Pipeline”); a loading and unloading rail facility located at PBF Holding’s Toledo Refinery (the “Toledo Rail Products Facility”); a truck loading rack facility located at PBF Holding’s Chalmette Refinery (the “Chalmette Truck Rack”); a rail yard facility located at PBF Holding’s Chalmette Refinery (the “Chalmette Rosin Yard”); a lube oil terminal facility located at PBF Holding’s Paulsboro Refinery (the “Paulsboro Lube Oil Terminal”); and an ethanol storage facility located at PBF Holding’s Delaware City Refinery (the “Delaware Ethanol Storage Facility” and, collectively with the Toledo Rail Products Facility, the Chalmette Truck Rack, the Chalmette Rosin Yard and the Paulsboro Natural Gas Pipeline (as defined in Note 4 “Acquisitions” ofLube Oil Terminal, the Notes to Consolidated Financial Statements) and the Development Assets (as defined in Note 4 “Acquisitions” of the Notes to Consolidated Financial Statements)“Development Assets”).
The transactions entered into with PBF LLC after the IPO are collectively referred to as “Acquisitions from PBF.” Subsequent to the Acquisitions from PBF, the DCR Rail Terminal, Toledo Truck Terminal, DCR West Rack,
Toledo Storage Facility, the DCR Products Pipeline and Truck Rack, the Torrance Valley Pipeline, the Paulsboro Natural Gas Pipeline and the Development Assets are collectively referred to as the “Contributed Assets.”
2. SUMMARY OF ACCOUNTING POLICIES
The preparation of financial statements in conformity with United States of America (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The Partnership uses the acquisition method of accounting for third-party acquisitions for the recognition of assets acquired and liabilities assumed in business combinations at their estimated fair values as of the date of acquisition. Any excess consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is required in estimating the fair value of assets acquired. As a result, in the case of significant acquisitions, the Partnership obtains the assistance of third-party valuation specialists in estimating fair values of tangible and intangible assets based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants. While the Partnership’s management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Certain of the Partnership’s acquisitions may include earn-out provisions or other forms of contingent consideration. As of the acquisition date, the Partnership records contingent consideration, as applicable, at the estimated fair value of expected future payments associated with the earn-out. Any changes to the recorded fair value of contingent consideration, subsequent to the measurement period, will be recognized as earnings in the period in which it occurs.
The Acquisitions from PBF were transfers between entities under common control. Accordingly, the Partnership records the net assets that were acquired from PBF Energy on its consolidated balance sheets at PBF Energy’s historical carrying value rather than fair value.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Reclassifications
Certain amounts previously reported in the Partnership’s consolidated financial statements for prior periods have been reclassified to conform to the presentation within this Annual Report on Form 10-K. These reclassifications include the separation of “Accounts payable” and “Accrued liabilities” into two line items within the Partnership’s consolidated balance sheets and statements of cash flows, as well as the corresponding statements within Note 15 “Consolidating Financial Statements of PBF Logistics” of the Notes to Consolidated Financial Statements.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with original maturities of three months or less, but exclude debt or equity securities classified as U.S. Treasury Securities (“marketable securities”).Securities.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. PBFX capitalizes costs associated with the preliminary, pre-acquisition and development/construction stages of a major construction project. PBFX capitalizes the interest cost associated with major construction projects based on the effective interest rate of its total borrowings. Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the lives of the assets, are capitalized.
PBFX’s depreciable property, plant and equipment are comprised of storage, pipelines, terminals and equipment which are depreciated using the straight-line method over estimated useful lives of 3-25 years.
Goodwill
Goodwill related to an acquisition, is calculated as the excess of the purchase price over the fair value of the identifiable net assets and is carried at cost. Goodwill is not amortized for financial reporting purposes; however, it is subject to annual assessment to determine if an impairment of goodwill has occurred. The Partnership performs this impairment review annually as of July 1 or in any period prior to the annual assessment in which the Partnership experiences any circumstances that would indicate an impairment exists, such as disruptions in its business or other significant declines in results. An impairment loss is recorded if the implied fair value of the reporting unit is less than the carrying value. Reporting units are based on a component of the business with discrete financial information that management reviews on a regular basis. The Partnership reviews its reporting units on an annual basis.
Intangibles
The Partnership’s intangibles are comprised of customer relationships and customer contracts, which were acquired in connection with certain acquisitions, all of which were recorded at their estimated fair value at the date of acquisition.
Intangibles with definite lives are amortized using the straight-line method over their relative estimated useful life, or the period of which they provide an economic benefit. The customer relationships estimated useful life was determined to be 10 years and the customer contracts estimated useful lives werelife was determined to be 3-13 years, based on the specific contract intangible.13 years. Intangible assets are included in “Other non-current assets” within the Partnership’s consolidated balance sheets.
Intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible may not be recoverable. If the sum of the expected undiscounted future cash flows related to an intangible asset is less than the carrying amount of that asset, an impairment loss is recognized based on the fair value of the asset.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Impairment Assessment of Long-Lived Assets
PBFX reviewsevaluates property, plant and equipment and other long-lived assets for impairment on a continual basis and reassesses the reasonableness of these assets’ useful lives whenever events or changes in circumstances warrant assessment. Possible triggering events of impairment may include, among other things, significant adverse changes in the business climate, market conditions, environmental regulations or a determination that it is more likely than not that an asset or an asset group will be sold or retired before the end of its estimated useful life. These possible triggering events of impairment may impact the Partnership’s assumptions related to future throughput levels, revenues, expenses, capital expenditures and remaining useful life. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the net book valuescarrying value of the assets may not be recoverable. ImpairmentA long-lived asset is evaluateddeemed not recoverable if its carrying value exceeds the sum of the undiscounted cash flows expected to result from the asset’s use, early retirement or disposition. Cash flows for long-lived assets or assets groups are determined at the lowest level for which identifiable cash flows exist. If the carrying value of a long-lived asset is deemed not recoverable, an impairment loss is recognized for the amount by comparingwhich the carrying value of the long-lived assets to theasset exceeds its fair value, with fair value determined based on discounted estimated undiscounted futurenet cash flows expectedor other appropriate methods. The Partnership’s assumptions incorporate inherent uncertainties that are, at times, difficult to predict and could result in impairment charges or accelerated depreciation in future periods if actual results materially differ from use of the assets and their ultimate disposition. If such analysis indicates that the carrying value of the long-lived assets is not considered to be recoverable, the carrying value is reduced to the fair value. Impairment assessments inherently involve judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Although management would utilize assumptions that it believes are reasonable, future events and changing market conditions may impact management’s assumptions, which could produce different results.used.
Asset Retirement Obligations
PBFX records an asset retirement obligation at fair value for the estimated cost to retire a tangible long-lived asset at the time PBFX incurs that liability, which is generally when the asset is purchased, constructed or leased. PBFX records the liability when it has a legal or contractual obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a reasonable estimate cannot be made at the time the liability is incurred, PBFX will record the liability when sufficient information is available to estimate the liability’s fair value. Certain of PBFX’s asset retirement obligations are based on its legal obligation to perform remedial activity when it permanently ceases operations of the long-lived assets. PBFX therefore considers the settlement date of these obligations to be indeterminable. Accordingly, PBFX cannot calculate an associated asset retirement liability for these obligations at this time. PBFX will measure and recognize the fair value of these asset retirement obligations when the settlement date is determinable. As of and for the periods ended December 31, 20192021 and 2018,2020, the Partnership had no asset retirement obligations.
Product Imbalances
The Partnership incurs product imbalances as a result of tank storage volume fluctuations at certain of its terminals. Fluctuations are due to differences in the measurements of actual product stored as compared to total consigned volumes per the customer. The Partnership uses a year-to-date weighted average market price to value our assets and liabilities related to product imbalances. Product imbalance liabilities are included in “Accrued liabilities” and product imbalance assets are included in “Prepaids and other current assets” in the Partnership’s consolidated balance sheets. As of and for the periods ended December 31, 20192021 and 2018,2020, the imbalance amounts were immaterial.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for periodic assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action. Environmental liabilities are based on best estimates of probable future costs using currently available technology and the impact that current regulations may have on our remediation plans. The measurement of environmental remediation liabilities may be discounted to reflect the time value of money if the aggregate amount and timing of cash payments of the liabilities are fixed or reliably determinable. The actual settlement of PBFX’s liability for environmental matters could materially differ from its estimates due to a number of uncertainties such as the extent of contamination, changes in environmental laws and regulations, potential improvements in remediation technologies and the participation of other responsible parties.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Revenue Recognition
PBFX recognizes revenue by charging fees for crude oil and refined products terminaling, pipeline, storage and processing services based on the greater of the contractual minimum volume commitment (“MVC”), as applicable, or the delivery of actual volumes transferred based on contractual rates applied to throughput volumes. Prior to the IPO and effective date of the Acquisitions from PBF, a majority of PBFX’s assets were part of the integrated operations of PBF Energy. With the exception of the DCR Products Pipeline and the Paulsboro Lube Oil Terminal, (as defined in Note 4 “Acquisitions” of the Notes to Consolidated Financial Statements), PBF Energy generally recognized only the costs associated with these assets. Following the closing of the IPO and Acquisitions from PBF, PBFX’s revenue wasis generated by commercial agreements with subsidiaries of PBF Energy. In addition, PBFX generates third-party revenue from certain of its assets. Billings to PBFX’s third-party customers for throughput services are billed monthly for actual totals shipped through the terminals. A portion of the fee-based agreements provide for fixed demand charges, which are recognized as revenue pursuant to the contract terms. Billings to third-party customers for tank lease obligations occur in the prior month and are recorded as deferred revenue, which is recognized in the period in which the customer receives such storage services.
Unit-Based Compensation
PBF GP provides unit-based compensation to certain officers, non-employee directors and seconded employees of ourPBFX’s general partner or its affiliates, consisting of phantom units. The fair value of PBFX’s phantom units are measured based on the fair market value of the underlying common units on the date of the grant based on the common unit closing price on the grant date. The estimated fair value of PBFX’s phantom units is amortized over the vesting period using the straight-line method. Awards typically vest over a four-year service period, subject to acceleration if certain conditions are met. The phantom unit awards may be settled in common units, cash or a combination of both. Expenses related to unit-based compensation are included in “General and administrative expenses” within the Partnership’s consolidated statements of operations.
Net Income Per Unit
In addition to the common and subordinated units, (prior to the June 1, 2017 subordinated units conversion into common units), PBFX has identified the general partner interest and incentive distribution rights (prior to the IDR Restructuring, as defined below) as participating securities and uses the two-class method when calculating the net income per unit applicable to limited partners. Net income per unit applicable to limited partners (including common and subordinated unitholders, prior to the subordinated units conversion to common units)unitholders) is computed by dividing limited partners’ interest in net income, after deducting any incentive distributions, by the weighted-average number of outstanding common and subordinated units (prior to the subordinated units conversion to common units).units.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
On February 28, 2019, the Partnership closed on an Equity Restructuring Agreement (the “IDR Restructuring Agreement”) with PBF LLC and PBF GP, pursuant to which PBFX’s incentive distribution rights (“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.
Net income (loss) attributable to the Acquisitions from PBF prior to the effective date of each transaction was allocated entirely to PBF GP as if only PBF GP had rights to that net income (loss); therefore, there is no retrospective adjustment to previously reported net income per unit.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Fair Value of Financial Instruments
The estimated fair value of cash, accounts receivable, certain other current assets, accounts payable, certain accrued expenses and other current liabilities approximates their carrying value reflected in the Consolidated Financial Statements because of the short-term maturity of the instruments.
Fair Value Measurement
A fair value hierarchy (Level 1, Level 2, or Level 3) is used to categorize fair value amounts based on the quality of inputs used to measure fair value. Accordingly, fair values derived from Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities. Fair values derived from Level 2 inputs are based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are either directly or indirectly observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
PBFX uses appropriate valuation techniques based on the available inputs to measure the fair values of its applicable assets and liabilities. When available, PBFX measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. In some valuations, the inputs may fall into different levels in the hierarchy. In these cases, the asset or liability level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurements.
Income Taxes
PBFX is not a taxable entity for federal income tax purposes or the income taxes of those states that follow the federal income tax treatment of partnerships. Instead, for purposes of these income taxes, each partner of the Partnership is required to take into account their share of items of income, gain, loss and deduction in computing their federal and state income tax liabilities, regardless of whether cash distributions are made to such partner by the Partnership. The taxable income reportable to each partner takes into account differences between the tax basis and fair market value of PBFX’s assets, the acquisition price of such partner’s units and the taxable income allocation requirements under the Third Amended and Restated Agreement of Limited Partnership of PBF Logistics LP (as amended, the “partnership agreement”). We are unable to readily determine the net difference in the bases of our assets and liabilities for financial and tax reporting purposes because individual unitholders have different investment bases depending upon the timing and price of acquisition of their partnership units.
As PBFX is a limited partnership treated as a “flow-through” entity for income tax purposes, there is no benefit or provision for U.S. federal or state income tax in the accompanying financial statements.
Recently Adopted Accounting Guidance96
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASC 842”) to increase the transparency and comparability of leases among entities. ASC 842 supersedes the lease accounting guidance in “Leases (Topic 840)” and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Partnership adopted ASC 842 effective January 1, 2019, using a modified retrospective approach. The adoption of ASC 842 resulted in the inclusion of less than $1,000 of operating leases recorded on the Partnership’s balance sheets, with operating lease right of use assets recorded in “Other non-current assets” and operating lease liabilities recorded in “Accrued liabilities” or “Other long-term liabilities” based on the future timing of lease payments. The adoption of ASC 842 did not materially impact the Partnership’s statements of operations or statements of cash flows. The Partnership’s consolidated financial statements for the periods prior to the adoption of ASC 842 are not adjusted and are reported in accordance with the Partnership’s historical accounting policy. Refer to Note 3 “Revenue” of the Notes to Consolidated Financial Statements for additional information about the impact of ASC 842 to the Partnership as a lessor.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Recently Issued Accounting Pronouncements
In January 2017,March 2020, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) to provide updated guidance on goodwill impairment testing. Under ASU 2017-04, Step 22020-04, “Reference Rate Reform (Topic 848): Facilitation of the goodwill impairment analysis wouldEffects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions affected by the expected market transition from the London Interbank Offering Rate (“LIBOR”) and other interbank rates if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities at any time beginning on March 12, 2020 through December 31, 2022 and may be eliminated. This step required a comparisonapplied from the beginning of an interim period that includes the implied fair value to the carrying value of goodwill of the reporting unit. Subsequent to the effectiveissuance date of ASU 2017-04, during the annual, or if applicable, interim goodwill impairment assessment, entities would perform the test by comparing the fair value of the reporting unit with the carrying value of the reporting unit. The impairment charge would be the excess amount of which carrying value is greater than fair value, with the total amount limited to the carrying value of goodwill. ASU 2017-04 is effective for goodwill impairment assessments beginning after December 15, 2019.2020-04. The Partnership early adopted the new standard effective January 1, 2019, anddoes not expect that the adoption did notof this guidance will have a material impact on its consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncement
In June 2016, the FASB issued ASU No. 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 Partnership has adopted ASU 2016-13 effective January 1, 2020. The impact of adoption will require additional disclosures, however, there was no impact on the Partnership’s consolidated financial statements.
3. REVENUE
Adoption of ASCRevenue Recognition
In accordance with FASB Accounting Standards Codification Topic 606
Prior to January 1, 2018, the Partnership recognized revenue from customers when all of the following criteria were met: (i) persuasive evidence of an exchange arrangement existed, (ii) delivery had occurred or services had been rendered, (iii) the buyer’s price was fixed or determinable and (iv) collectability was reasonably assured. Amounts billed in advance of the period in which the service was rendered or product delivered were recorded as deferred revenue.
Effective January 1, 2018, the Partnership adopted ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers” (“ASC 606”). As a result, the Partnership has changed the accounting policy for the recognition ofCustomers,” revenue from contracts with customers as detailed below.
The Partnership adopted ASC 606 using the modified retrospective method, which has been applied for the year ended December 31, 2018. The Partnership has applied ASC 606 only to those contracts that were not complete as of January 1, 2018. As such, the financial information for prior periods has not been adjusted and continues to be reported under Accounting Standards Codification 605 “Revenue Recognition.” The Partnership did not record a cumulative effect adjustment upon initially applying ASC 606 as there was not a significant impact upon adoption; however, the details of significant qualitative and quantitative disclosure changes upon implementing ASC 606 are discussed below.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which the Partnership expects to be entitled to in exchange for those goods or services.
As noteddisclosed in Note 1314 “Segment Information” of the Notes to Consolidated Financial Statements, the Partnership’s business consists of two2 reportable segments: (i) Transportation and Terminaling and (ii) Storage.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The following table provides information relating to the Partnership’s revenue for each service category by segment for the periods presented:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Transportation and Terminaling Segment | | | | | | |
Terminaling | | $ | 155,834 | | | $ | 144,114 | | | $ | 145,307 | |
Pipeline | | 83,373 | | | 80,587 | | | 81,328 | |
Other | | 45,612 | | | 46,322 | | | 56,110 | |
Total | | 284,819 | | | 271,023 | | | 282,745 | |
Storage Segment | | | | | | |
Storage | | 56,264 | | | 57,932 | | | 51,859 | |
Other | | 14,452 | | | 31,300 | | | 5,608 | |
Total | | 70,716 | | | 89,232 | | | 57,467 | |
Total Revenue | | $ | 355,535 | | | $ | 360,255 | | | $ | 340,212 | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Transportation and Terminaling Segment | | | | | | |
Terminaling | | $ | 145,307 |
| | $ | 120,342 |
| | $ | 127,547 |
|
Pipeline | | 81,328 |
| | 78,073 |
| | 67,273 |
|
Other | | 56,110 |
| | 51,997 |
| | 39,518 |
|
Total | | 282,745 |
| | 250,412 |
| | 234,338 |
|
Storage Segment | | | | | | |
Storage | | 51,859 |
| | 33,028 |
| | 23,250 |
|
Other | | 5,608 |
| | — |
| | — |
|
Total | | 57,467 |
| | 33,028 |
| | 23,250 |
|
Total Revenue | | $ | 340,212 |
| | $ | 283,440 |
| | $ | 257,588 |
|
PBFX recognizes revenue by charging fees for crude oil and refined products terminaling, pipeline, storage and processing services based on contractual rates applied to the greater of contractual MVCs, as applicable, or actual volumes transferred, stored or processed.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Minimum Volume Commitments
Transportation and Terminaling Segment
The Partnership’s Transportation and Terminaling segment consists of product terminals, pipelines, crude unloading facilities and other facilities capable of transporting and handling crude oil, refined products and natural gas. Certain of the affiliate and third-party Transportation and Terminaling commercial agreements contain MVCs. Under these commercial agreements, if the Partnership’s customer fails to transport its minimum throughput volumes during any specified period, the customer will pay the Partnership a deficiency paymentan amount equal to the volume ofdifference in actual volumes transported and/or throughput and the deficiencyminimum volumes required under the agreement multiplied by the applicable contractual rate then in effect. The deficiency payment is(each a “deficiency payment”). Deficiency payments are initially recorded as deferred revenueon the Partnership’s consolidated balance sheets for all contracts in which the MVC deficiency makeup period is contractually longer than a fiscal quarter.
Certain of the Partnership’s customers may apply the amount of any such deficiency paymentspayment amounts as a credit foragainst volumes transported on the applicable pipeline or terminal systemthroughput in excess of its MVC, as applicable, during the followingsubsequent quarters under the terms of the applicable agreement. The Partnership recognizes operating revenue for the deficiency payments when credits are used for volumes transported in excess of MVCs or at the end of the contractual period. IfUnused credits determined to have a remote chance of being utilized by customers in the Partnership determines, based on all available information, that it is remote that the Partnership’s customer will utilize these deficiency payments, the amount of the expected unused credits will befuture are recognized as operating revenue in the period when that determination is made. The use or recognition of the credits is recorded as a reduction to deferred revenue.
Storage Segment
The Partnership earns storage revenue under crude oil and refined products storage contracts. In addition, the Partnership earns storage revenue under its processing agreementagreements at theits East Coast Storage Assets (as defined in Note 4 “Acquisitions” of the Notes to Consolidated Financial Statements).storage facility. Certain of these affiliate and third-party contracts contain capacity reservation agreements, under which the Partnership collects a fee for reserving storage capacity for customers in its facilities. Customers generally pay reservation fees based on the level of storage capacity reserved rather than the actual volumes stored.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
MVC Payments to be Received
As of December 31, 2019,2021, MVC payments to be received, based on future performance obligations of the Partnership, related to noncancelablenoncancellable commercial terminaling, pipeline and storage agreements were as follows:
| | 2020 | $ | 115,195 |
| |
2021 | 111,238 |
| |
2022 | 88,793 |
| 2022 | $ | 95,787 | |
2023 | 86,305 |
| 2023 | 89,110 | |
2024 | 85,346 |
| 2024 | 87,176 | |
2025 | | 2025 | 86,937 | |
2026 | | 2026 | — | |
Thereafter | 146,753 |
| Thereafter | — | |
Total MVC payments to be received(1)(2) | $ | 633,630 |
| Total MVC payments to be received(1)(2) | $ | 359,010 | |
(1) All fixed consideration from contracts with customers is included in the amounts presented above. Variable consideration that is constrained or not required to be estimated as it reflects our efforts to perform is excluded.
(2) Arrangements deemed leases are excluded from this table.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Leases
Lessor Disclosure Following the Adoption of ASC 842Disclosures
The Partnership has leased certain of its assets under lease agreements with varying terms up to fifteen years, including leases of storage, terminaling, pipeline and processing assets. Certain of these leases include options to extend or renew the lease for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Partnership’s lease agreements generally do not provide an option for the lessee to purchase the leased equipment at the end of the lease term. However, in connection with the affiliate lease agreement for the Paulsboro Natural Gas Pipeline, (as defined in Note 4 “Acquisitions” of the Notes to Consolidated Financial Statements), the Partnership granted a right of first refusal in favor of PBF LLC such that the Partnership would be required to give PBF Holding the first opportunity to purchase the Paulsboro Natural Gas Pipeline at market value prior to selling to an unrelated third party.
At inception, the Partnership determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. As of December 31, 2019,2021, all of the Partnership’s leases have been determined to be operating leases. Some of the Partnership’s lease arrangements contain lease components (e.g., MVCs) and non-lease components (e.g., maintenance, labor charges, etc.). The Partnership accounts for the lease and non-lease components as a single lease component for every asset class.
Certain of the Partnership’s lease agreements include MVCs that are adjusted periodically for anbased on a specified index or rate. The leases are initially measured using the projected payments adjusted for the index or rate in effect at the commencement date. The Partnership’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Partnership expects to derive significant future benefits from its leased assets following the end of the lease term, as the remaining useful life would be sufficient to allow the Partnership to enter into new leases for such assets.
In the normal course of business, the Partnership enters into contracts with PBF Holding and its refineries whereby PBF Holding and its refineries lease certain of the Partnership’s storage, terminaling and pipeline assets. The Partnership believes the terms and conditions under these leases are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. The terms for these affiliate leases range from one to fifteen years. Leases with affiliates represent approximately 86%91% of the undiscounted contractual future rental income from the Partnership’s leased assets.
The table below quantifies lease revenue for the periods presented:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Affiliate | | $ | 150,540 | | | $ | 148,563 | | | $ | 153,399 | |
Third-party | | 31,990 | | | 53,456 | | | 24,255 | |
Total lease revenue | | $ | 182,530 | | | $ | 202,019 | | | $ | 177,654 | |
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The table below quantifies lease revenue for the periods presented:
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 |
Affiliate | | $ | 153,399 |
| | $ | 133,973 |
|
Third-party | | 24,255 |
| | 5,243 |
|
Total lease revenue | | $ | 177,654 |
| | $ | 139,216 |
|
Undiscounted Cash Flows
The table below presents the fixed component of the undiscounted cash flows to be received for each of the periods presented for the Partnership’s operating leases with customers as of December 31, 2019:2021:
| | | | | |
2022 | $ | 138,829 | |
2023 | 137,719 | |
2024 | 136,498 | |
2025 | 109,816 | |
2026 | 79,395 | |
Thereafter | 54,573 | |
Total undiscounted future cash to be received | $ | 656,830 | |
|
| | | |
2020 | $ | 176,785 |
|
2021 | 175,481 |
|
2022 | 156,993 |
|
2023 | 131,012 |
|
2024 | 129,790 |
|
Thereafter | 225,285 |
|
Total undiscounted future cash to be received | $ | 995,346 |
|
Assets Under Lease
The Partnership’s assets that are subject to lease are included in “Property, plant and equipment, net” within the Partnership’s consolidated balance sheets. The table below quantifies, by category within property, plant and equipment, category the assets that are subject to lease as of December 31, 2019:2021 and 2020:
| | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
Land | $ | 98,337 | | | $ | 98,337 | |
Pipelines | 322,437 | | | 321,254 | |
Terminals and equipment | 83,411 | | | 83,387 | |
Storage facilities and processing units | 183,493 | | | 182,600 | |
| 687,678 | | | 685,578 | |
Accumulated depreciation | (133,962) | | | (109,153) | |
Net assets subject to lease | $ | 553,716 | | | $ | 576,425 | |
|
| | | |
| December 31, 2019 |
Land | $ | 98,337 |
|
Pipelines | 318,459 |
|
Terminals and equipment | 95,392 |
|
Storage facilities | 164,841 |
|
| 677,029 |
|
Accumulated depreciation | (77,243 | ) |
Net assets subject to lease | $ | 599,786 |
|
Deferred Revenue
The Partnership records deferred revenue when cash payments are received or due in advance of performance, including amounts which are refundable. Deferred revenue was $3,189$2,372 and $2,960$2,117 as of December 31, 20192021 and 2018,2020, respectively. The increaseChanges in the deferred revenue balance as of December 31, 2019 isare primarily driven by the timing and extent of cash payments received in advance of satisfying the Partnership’s performance obligations for the comparative periods.
The Partnership’s payment terms vary by the type and location of the customer and the services offered. The period between invoicing and when payment is due is not significant (i.e., generally within two months). For certain services and customer types, the Partnership requires payment before the services are performed for the customer.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Significant Judgment and Practical Expedients
For performance obligations, the Partnership determined that customers are able to obtain control of these services over time. The Partnership determined that these performance obligations, which are satisfied over time, are considered a series that generally have the same pattern of transfer to customers. For stand ready performance obligations, the Partnership generally recognizes revenue over time on a straight-line basis under the time-elapsed output method as the Partnership believes this is a reasonable basis in determining how customers obtain the benefits of the Partnership’s services. For non-stand ready performance obligations, the Partnership generally recognizes revenue over time based on actual performance (current period volumes multiplied by the applicable rate per unit of volume) as the Partnership believes this accurately depicts the transfer of benefits to customers.
The Partnership did not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Partnership recognizes revenue at the amount to which the Partnership has the right to invoice for services performed.
4. ACQUISITIONS
Third-Party AcquisitionsAcquisition from PBF
PBFX accounted for the following third-party acquisitions as business combinations in accordance with GAAP whereby the Partnership recognizes assets acquired and liabilities assumed at their estimated fair values as of the corresponding date of acquisition. Any excess consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
East Coast Storage Assets Acquisition
On October 1, 2018, the Partnership closed the acquisition of CPI Operations LLC (“CPI”), whose assets include a storage facility with multi-use storage capacity, an Aframax-capable marine facility, a rail facility, a truck terminal, equipment, contracts and certain other idled assets (collectively, the “East Coast Storage Assets”) located on the Delaware River near Paulsboro, New Jersey (the “East Coast Storage Assets Acquisition”), which had been contemplated by a purchase and sale agreement dated as of July 16, 2018 between the Partnership and Crown Point International LLC (“Crown Point”). Additionally, the East Coast Storage Assets Acquisition includes an earn-out provision related to an existing commercial agreement with a third party, based on the future results of certain of the acquired idled assets (the “Contingent Consideration”), which recommenced operations in October 2019.
The aggregate purchase price for the East Coast Storage Assets Acquisition was $126,989, including working capital and the Contingent Consideration, which was comprised of an initial payment at closing of $75,000 with a remaining balance of $32,000 that was paid one year after closing on October 1, 2019. The consideration was financed through a combination of cash on hand and borrowings under the Partnership’s Revolving Credit Facility (as defined in Note 7 “Debt” of the Notes to Consolidated Financial Statements). The final purchase price and fair value allocation were completed as of September 30, 2019.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:
|
| | | |
| Purchase Price |
Gross purchase price* | $ | 105,900 |
|
Working capital adjustments | (11 | ) |
Contingent Consideration** | 21,100 |
|
Total consideration | $ | 126,989 |
|
* Includes $30,900 net present value payable of $32,000 due to Crown Point one year after closing, which was included in “Accrued liabilities” within the Partnership’s consolidated balance sheets at December 31, 2018. The remaining $32,000 payment was paid in full on October 1, 2019.
** The short-term Contingent Consideration is included in “Accrued liabilities” and the long-term Contingent Consideration is included in “Other long-term liabilities” within the Partnership’s consolidated balance sheets.
The following table summarizes the final amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
|
| | | |
| Fair Value Allocation |
Accounts receivable | $ | 436 |
|
Prepaids and other current assets | 555 |
|
Property, plant and equipment | 115,621 |
|
Intangibles* | 13,300 |
|
Accounts payable | (902 | ) |
Accrued liabilities | (1,271 | ) |
Other long-term liabilities | (750 | ) |
Fair value of net assets acquired | $ | 126,989 |
|
* Intangibles are included in “Other non-current assets” within the Partnership’s consolidated balance sheets.
The East Coast Storage Assets Acquisition includes consideration in the form of the Contingent Consideration. Pursuant to the purchase and sale agreement, the Partnership 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 Partnership recorded the Contingent Consideration based on its estimated fair value of $21,100 at the acquisition date, which was recorded in “Other long-term liabilities” within the Partnership’s consolidated balance sheets at December 31, 2018.
The results of operations of the East Coast Storage Assets are included in the Partnership’s consolidated financial statements for the full year ended December 31, 2019. The Partnership’s consolidated financial statements for the year ended December 31, 2018 include the results of operations of the East Coast Storage Assets since October 1, 2018, during which period the East Coast Storage Assets contributed third-party revenue of $5,918, and net income of $787. On an unaudited pro forma basis, the revenue and net income of PBFX assuming the acquisition had occurred on January 1, 2017, for the periods indicated, are shown below. The unaudited pro forma information does not purport to present what PBFX’s actual results would have been had the East Coast Storage Assets Acquisition occurred on January 1, 2017, nor is the financial information indicative of the results of future operations.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition and interest expense associated with the East Coast Storage Assets Acquisition financing.
|
| | | | | | | |
| Year Ended December 31, 2018 | | Year Ended December 31, 2017 |
(Unaudited) |
Pro forma revenue | $ | 300,863 |
| | $ | 271,667 |
|
Pro forma net income attributable to PBF Logistics LP unitholders | 67,847 |
| | 42,931 |
|
Pro forma net income available per limited partner unit: | | | |
Common units - basic | $ | 1.55 |
| | $ | 1.02 |
|
Common units - diluted | 1.55 |
| | 1.02 |
|
Subordinated units - basic and diluted | — |
| | 1.01 |
|
Knoxville Terminals Purchase
On April 16, 2018, the Partnership’s wholly-owned subsidiary, PBF Logistics Products Terminals LLC (“PLPT”), completed the purchase of two refined product terminals located in Knoxville, Tennessee, which include product tanks, pipeline connections to the Colonial Pipeline Company and Plantation Pipe Line Company pipeline systems and truck loading facilities (the “Knoxville Terminals”) from Cummins Terminals, Inc. (the “Knoxville Terminals Purchase”).
The aggregate purchase price for the Knoxville Terminals Purchase was $58,000, excluding working capital. The consideration was financed through a combination of cash on hand and borrowings under the Partnership’s Revolving Credit Facility. The final purchase price and fair value allocation were completed as of December 31, 2018.
The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:
|
| | | |
| Purchase Price |
Gross purchase price | $ | 58,000 |
|
Working capital adjustments | 356 |
|
Total consideration | $ | 58,356 |
|
The following table summarizes the final amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
|
| | | |
| Fair Value Allocation |
Prepaids and other current assets | $ | 356 |
|
Property, plant and equipment | 45,768 |
|
Intangibles* | 5,900 |
|
Goodwill | 6,332 |
|
Fair value of net assets acquired | $ | 58,356 |
|
* Intangibles are included in “Other non-current assets” within the Partnership’s consolidated balance sheets.
The results of operations of the Knoxville Terminals are included in the Partnership’s consolidated financial statements for the full year ended December 31, 2019. The Partnership’s consolidated financial statements for the year ended December 31, 2018 include the results of operations of the Knoxville Terminals since April 16, 2018, during which period the Knoxville Terminals contributed affiliate revenue of $652, third-party revenue of $5,382, and net income of $2,054. On an unaudited pro forma basis, the revenue and net income of PBFX assuming the acquisition had occurred on January 1, 2017, for the periods indicated, are shown below. The unaudited pro forma
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
information does not purport to present what PBFX’s actual results would have been had the Knoxville Terminals Purchase occurred on January 1, 2017, nor is the financial information indicative of the results of future operations. The unaudited pro forma financial information includes the depreciation and amortization expense related to the acquisition and interest expense associated with the Knoxville Terminals Purchase financing.
|
| | | | | | | |
| Year Ended December 31, 2018 | | Year Ended December 31, 2017 |
(Unaudited) |
Pro forma revenue | $ | 286,970 |
| | $ | 272,267 |
|
Pro forma net income attributable to PBF Logistics LP unitholders | 75,862 |
| | 91,182 |
|
Pro forma net income available per limited partner unit: | | | |
Common units - basic | $ | 1.74 |
| | $ | 2.17 |
|
Common units - diluted | 1.74 |
| | 2.17 |
|
Subordinated units - basic and diluted | — |
| | 2.15 |
|
Toledo Products Terminal Acquisition
On April 17, 2017, the Partnership’s wholly-owned subsidiary, PLPT, completed the acquisition of the Toledo, Ohio refined products terminal assets (the “Toledo Products Terminal”) from Sunoco Logistics Partners L.P. (the “Toledo Products Terminal Acquisition”). The Toledo Products Terminal is directly connected to, and currently supplied by, PBF Holding’s Toledo Refinery.
The aggregate purchase price for the Toledo Products Terminal Acquisition was $10,000, plus working capital. The consideration was funded in full with cash on hand. The entire purchase consideration of $10,000 was allocated to “Property, plant and equipment, net” within the Partnership’s consolidated balance sheets.
Acquisitions from PBF
The following Acquisitions from PBF were transactions was a transaction between affiliate companies. As a result, the acquisitions wereacquisition was accounted for as transfersa transfer of assets between entities under common control in accordance with GAAP. The net assets of the Acquisitions from PBF were transferred at their historical carrying value.
TVPC Acquisition
On April 24, 2019, the Partnership entered into the TVPCa Contribution Agreement with PBF LLC, pursuant to which the Partnership acquired from PBF LLC all of the issued and outstanding limited liability company interests of TVP Holding Company LLC (“TVP Holding”), which held the remaining 50% equity interest in TVPC.Torrance Valley Pipeline Company LLC (“TVPC”) (the “TVPC Acquisition”). The TVPC Acquisition closed on May 31, 2019 for total consideration of $200,000 in cash, which was financed through proceeds from the 2019 Registered Direct Offering (as defined in Note 89 “Equity” of the Notes to Consolidated Financial Statements) and borrowings under the Partnership’s Revolving Credit Facility.Facility (as defined in Note 8 “Debt” of the Notes to Consolidated Financial Statements). As a result of the TVPC Acquisition, the Partnership owns 100% of the equity interest in TVPC.
Development Assets Acquisition
On July 16, 2018, the Partnership entered into four contribution agreements with PBF LLC, pursuant to which PBF Energy contributed to PBFX certain of its subsidiaries (the “Development Assets Contribution Agreements”). Pursuant to the Development Assets Contribution Agreements, the Partnership acquired from PBF LLC all of the issued and outstanding limited liability company interests of: Toledo Rail Logistics Company LLC (“TRLC”), whose assets consist of a loading and unloading rail facility located at PBF Holding’s Toledo Refinery (the “Toledo Rail Products Facility”); Chalmette Logistics Company LLC (“CLC”), whose assets consist of a truck loading rack facility (the “Chalmette Truck Rack”) and a rail yard facility (the “Chalmette Rosin Yard”), both of which are located at PBF Holding’s Chalmette Refinery; Paulsboro Terminaling Company LLC (“PTC”), whose assets
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
consist of a lube oil terminal facility located at PBF Holding’s Paulsboro Refinery (the “Paulsboro Lube Oil Terminal”); and DCR Storage and Loading Company LLC (“DSLC”), whose assets consist of an ethanol storage facility located at PBF Holding’s Delaware City Refinery (the “Delaware Ethanol Storage Facility” and collectively with the Toledo Rail Products Facility, the Chalmette Truck Rack, the Chalmette Rosin Yard, and the Paulsboro Lube Oil Terminal, the “Development Assets”). The acquisition of the Development Assets closed on July 31, 2018 for total consideration of $31,586, consisting of 1,494,134 common units issued to PBF LLC (the “Development Assets Acquisition”).
PNGPC Acquisition
On February 28, 2017, the Partnership closed the acquisition of Paulsboro Natural Gas Pipeline Company LLC (“PNGPC”), which had been contemplated by a contribution agreement dated as of February 15, 2017 between the Partnership and PBF LLC (the “PNGPC Contribution Agreement”). Pursuant to the PNGPC Contribution Agreement, the Partnership, through its wholly-owned subsidiary, PBFX Operating Company LLC (“PBFX Op Co”), acquired from PBF LLC all of the issued and outstanding limited liability company interests of PNGPC (the “PNGPC Acquisition”), which owned and operated an existing interstate natural gas pipeline subject to regulation by the Federal Energy Regulation Commission. In connection with the PNGPC Acquisition, the Partnership constructed a new pipeline to replace the existing pipeline, which commenced services in August 2017 (the “Paulsboro Natural Gas Pipeline”). The Paulsboro Natural Gas Pipeline serves PBF Holding’s Paulsboro Refinery.
In consideration for the PNGPC limited liability company interests, the Partnership delivered to PBF LLC (i) an $11,600 intercompany promissory note in favor of Paulsboro Refining Company LLC (“PRC”), a wholly-owned subsidiary of PBF Holding (the “Affiliate Note Payable”), (ii) an expansion rights and right of first refusal agreement in favor of PBF LLC with respect to the Paulsboro Natural Gas Pipeline and (iii) an assignment and assumption agreement with respect to certain outstanding litigation involving PNGPC and the existing pipeline. As a result of the completion of the Paulsboro Natural Gas Pipeline in the fourth quarter of 2017, the Partnership fully repaid the Affiliate Note Payable and related accrued interest.
As the Acquisitions from PBF were considered transfers of businesses between entities under common control, the TRLC, CLC, PTC and DSLC net assets were transferred at their historical carrying value of $12,677 as of July 31, 2018. The PNGPC net assets were transferred at their historical carrying value of $11,538 as of February 28, 2017. The historical financial statements have been retrospectively adjusted to reflect the financial position, results of operations and cash flows of TRLC, CLC, PTC and PNGPC. No retrospective adjustments were made regarding DSLC as the Delaware Ethanol Storage Facility was considered an asset purchase. Net income (loss) attributable to TRLC, CLC, PTC and PNGPC prior to their respective effective dates were allocated entirely to PBF GP as if only PBF GP had rights to that net income (loss); therefore, there is no retrospective adjustment to net income per unit.
Prior to the TVPC Acquisition, PBFX consolidated TVPC, a variable interest entity with the interest in TVPC not owned by PBFX reflected as a reduction to net income and equity as a noncontrolling interest. In accordance with the Amended and Restated Limited Liability Company Agreement of TVPC, the Partnership’s wholly-owned subsidiary PBFX Operating Company LLC (“PBFX Op CoCo”) serves as TVPC’s managing member. PBFX, through its ownership of PBFX Op Co, has the sole ability to direct the activities of TVPC that most significantly impact its economic performance. PBFX was also considered to be the primary beneficiary for accounting purposes and, as a result, fully consolidated TVPC. TVPC provides transportation and storage services to PBF Holding, primarily under fee-based contracts.
Subsequent to the TVPC Acquisition, PBFX owns 100% of the equity interest in TVPC and no longer records a noncontrolling interest related to TVPC.
101
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Acquisition Expenses
PBFX incurreddid not incur any acquisition-related costs for the year ended December 31, 2021. Acquisition-related costs were $1,382 for the year ended December 31, 2020, primarily consisting of consulting and legal expenses related to pending and non-consummated acquisitions. Acquisition-related costs were $1,696 for the year ended December 31, 2019, primarily consisting of consulting and legal expenses related to the TVPC Acquisition and other pending and non-consummated acquisitions. Acquisition-related costs were $2,896 for the year ended December 31, 2018, primarily consisting of consulting and legal expenses related to the Knoxville Terminals Purchase, the East Coast Storage Assets Acquisition, the Development Assets Acquisition and other pending and non-consummated acquisitions. Acquisition-related costs were $533 for the year ended December 31, 2017, primarily consisting of consulting and legal expenses related to the PNGPC Acquisition, the Toledo Products Terminal Acquisition and other pending and non-consummated acquisitions. These costs are included in “General and administrative expenses” within the Partnership’s consolidated statements of operations.
5. PROPERTY, PLANT AND EQUIPMENT, NETCURRENT EXPECTED CREDIT LOSSES
Property, plantCredit Losses
The Partnership has exposure to credit losses through its collection of fees charged to customers for terminaling, pipeline, storage and equipment, net consistedprocessing services. The Partnership evaluates creditworthiness on an individual customer basis. The Partnership 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 Partnership 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 Partnership may require security in the form of letters of credit or cash payments in advance of product and services delivery for certain customers that are deemed higher risk. Additionally, the Partnership may hold customers’ product in storage at its facilities as collateral and/or deny access to its facilities, as allowable under commercial law or its contractual agreements, should payment not be received.
The Partnership 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 coronavirus disease 2019 (“COVID-19”) pandemic, including resurgences and variants of the following:virus and related governmental and consumer responses, the Partnership has been performing ongoing credit reviews of its customers including monitoring for any negative credit events such as customer bankruptcy or insolvency events. Based on its credit assessments, the Partnership may adjust payment terms or limit available trade credit for customers, and customers within certain industries, which are deemed to be at a higher risk.
|
| | | | | | | | |
| | December 31, 2019 | | December 31, 2018 |
| | | | |
Land | | $ | 115,957 |
| | $ | 115,957 |
|
Pipelines | | 342,533 |
| | 337,474 |
|
Terminals and equipment | | 315,322 |
| | 259,441 |
|
Storage facilities and processing units | | 194,843 |
| | 213,937 |
|
Construction in progress | | 8,093 |
| | 20,439 |
|
| | 976,748 |
| | 947,248 |
|
Accumulated depreciation | | (122,138 | ) | | (85,131 | ) |
Property, plant and equipment, net | | $ | 854,610 |
| | $ | 862,117 |
|
Capitalized interestThe Partnership 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 connection with construction during 2019 and 2018future collectability issues. There was $526 and $143, respectively. Depreciation expense was $37,295, $29,414 and $24,404no allowance for the years ended December 31, 2019, 2018 and 2017, respectively.
6. GOODWILL AND INTANGIBLES
Goodwill
Asdoubtful accounts recorded as of December 31, 2019, the carrying amount of goodwill was $6,332, all of which was recorded within the Transportation and Terminaling segment. The Partnership performed its annual goodwill impairment assessment as of July 1, 2019 and determined that the carrying value of goodwill was not impaired.2021 or 2020.
Intangibles
The Partnership’s net intangibles consisted of the following:
|
| | | | | | | | |
| | December 31, 2019 | | December 31, 2018 |
Customer contracts | | $ | 13,300 |
| | $ | 13,300 |
|
Customer relationships | | 5,900 |
| | 5,900 |
|
| | 19,200 |
| | 19,200 |
|
Accumulated amortization | | (1,701 | ) | | (395 | ) |
Total intangibles, net* | | $ | 17,499 |
| | $ | 18,805 |
|
* Intangibles, net are included in “Other non-current assets” within the Partnership’s consolidated balance sheets.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
6. PROPERTY, PLANT AND EQUIPMENT, NET
Amortization
Property, plant and equipment, net consisted of the following:
| | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| | | | |
Land | | $ | 114,844 | | | $ | 115,957 | |
Pipelines | | 346,512 | | | 345,328 | |
Terminals and equipment | | 321,082 | | | 319,861 | |
Storage facilities and processing units | | 202,729 | | | 200,662 | |
Construction in progress | | 2,991 | | | 3,761 | |
| | 988,158 | | | 985,569 | |
Accumulated depreciation | | (200,820) | | | (165,395) | |
Property, plant and equipment, net | | $ | 787,338 | | | $ | 820,174 | |
Capitalized interest in connection with construction during 2021 and 2020 was $187 and $710, respectively. Depreciation expense was $1,306$37,304, $43,512 and $395$37,295 for the years ended December 31, 2021, 2020 and 2019, respectively.
On December 30, 2021, the Partnership closed on a third-party sale of real property at the Partnership’s refined product terminals located in and around Philadelphia, Pennsylvania (the “East Coast Terminals”) and recognized a gain of $2,795 on the sale, which is included within “Gain on sale of assets” within the Partnership’s consolidated statements of operations.
In connection with the Partnership’s acquisition of CPI Operations LLC (“CPI”) from Crown Point International LLC (“Crown Point”) in October 2018, the purchase and sale agreement included an earn-out provision related to an existing commercial agreement (the “CPI Processing Agreement”), based on the future results of certain acquired idled assets, which recommenced operations in October 2019. In the third quarter of 2020, pursuant to the terms of the CPI Processing Agreement, the counterparty exercised its right to terminate the contract at the conclusion of the initial contract year, effective in the fourth quarter of 2020 (the “CPI Contract Termination”). In the third quarter of 2020, as a result of the CPI Contract Termination, the Partnership recorded an impairment charge of $3,000 within the Storage Segment to write-down the related processing unit assets.
7. GOODWILL AND INTANGIBLES
Goodwill
The Partnership performed its annual goodwill impairment assessment as of July 1, 2021 and determined that the carrying value of goodwill was not impaired. As of December 31, 2021, the carrying amount of goodwill was $6,332, all of which was recorded within the Transportation and Terminaling segment.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Intangibles
The Partnership’s net intangibles consisted of the following:
| | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
Customer contracts | | $ | 9,300 | | | $ | 9,300 | |
Customer relationships | | 5,900 | | | 5,900 | |
| | 15,200 | | | 15,200 | |
Accumulated amortization | | (12,397) | | | (11,896) | |
Total intangibles, net* | | $ | 2,803 | | | $ | 3,304 | |
* Intangibles, net are included in “Other non-current assets” within the Partnership’s consolidated balance sheets.
Amortization expense was $501 and $10,195 for the years ended December 31, 2021 and 2020, respectively. The Partnership estimates amortization expense will be $501 for each of the next five yearsyears.
In the third quarter of 2020, as follows:a result of the CPI Contract Termination, the Partnership recorded an impairment charge of $4,000 within the Storage Segment to write-down a customer contract intangible asset.
|
| | | |
Year Ending December 31, | |
2020 | $ | 5,334 |
|
2021 | 5,334 |
|
2022 | 4,530 |
|
2023 | 501 |
|
2024 | 501 |
|
7.8. DEBT
Revolving Credit Facility
On May 14, 2014, in connection with the closing of PBFX’s IPO, the Partnership entered into a five-year, $360,000 senior secured revolving credit facility (the “Original Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, and a syndicate of lenders. On July 30, 2018, the Partnership amended the Original Revolving Credit Facility and entered into an amended and restated revolving credit facility (as amended, the “Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, and a syndicate of lenders for an increasedwith a capacity of $500,000.
The Revolving Credit Facility is available to fund working capital, acquisitions, distributions and capital expenditures and for other general partnership purposes. The Partnership has the ability to increase the maximum amount of the Revolving Credit Facility by an aggregate amount of up to $250,000, to a total facility size of $750,000, subject to receiving increased commitments from the lenders or other financial institutions and satisfaction of certain conditions. The Revolving Credit Facility includes a $75,000 sublimit for standby letters of credit and a $25,000 sublimit for swingline loans. Obligations under the Revolving Credit Facility are guaranteed by the Partnership’s restricted subsidiaries and secured by a first priority lien on the Partnership’s assets and those of the Partnership’s restricted subsidiaries. The maturity date of the Revolving Credit Facility is July 30, 2023 and may be extended for one year on up to two2 occasions, subject to certain customary terms and conditions. Borrowings under the Revolving Credit Facility will bear interest either at the Base Rate (as defined in the Revolving Credit Agreement, which is defined below) plus an applicable margin ranging from 0.75% to 1.75%, or at LIBOR (London Interbank Offering Rate) plus an applicable margin ranging from 1.75% to 2.75%. The applicable margin will vary based on the Partnership’s Consolidated Total Leverage Ratio (as defined in the Revolving Credit Agreement).
The agreement governing the Revolving Credit Facility (the “Revolving Credit Agreement”) contains affirmative and negative covenants customary for revolving credit facilities of this nature which, among other things, limit or restrict the Partnership’s ability and the ability of its restricted subsidiaries to incur or guarantee debt, incur liens, make investments, make restricted payments, amend material contracts, engage in certain business activities, engage in mergers, consolidations and other organizational changes, sell, transfer or otherwise dispose of assets, enter into burdensome agreements or enter into transactions with affiliates on terms which are not at arm’s length. Additionally, the Partnership is required to maintain the following financial ratios, each as defined in the Revolving Credit Agreement: (a) Consolidated Interest Coverage of at least 2.50 to 1.00, (b) Consolidated Total Leverage of not greater than 4.50 to 1.00 and (c) Consolidated Senior Secured Leverage of not greater than 3.50 to 1.00.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The Revolving Credit Agreement contains events of default customary for transactions of its nature, including, but not limited to (and subject to grace periods in certain circumstances), the failure to pay any principal, interest or fees when due, failure to perform or observe any covenant contained in the Revolving Credit Agreement or related documentation, any representation or warranty made in the agreements or related documentation being untrue in any material respect when made, default under certain material debt agreements, commencement of bankruptcy or other insolvency proceedings, certain changes in the Partnership’s ownership or the ownership or
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
board composition of PBF GP and material judgments or orders. Upon the occurrence and during the continuation of an event of default under the Revolving Credit Agreement, the lenders may, among other things, terminate their commitments, declare any outstanding loans to be immediately due and payable and/or exercise remedies against the Partnership and the collateral as may be available to the lenders under the Revolving Credit Agreement and related documentation or applicable law.
AtAs of December 31, 2019,2021, PBFX had $283,000$100,000 of borrowings and $4,768$3,508 of letters of credit outstanding under the Revolving Credit Facility.
Senior Notes
On May 12, 2015, the Partnership entered into an indenture (as supplemented by the supplemental indenture for the additional notes, the “Indenture”) among the Partnership, PBF Logistics Finance Corporation, a Delaware corporation and wholly-owned subsidiary of the Partnership (“PBF Logistics Finance,” and together with the Partnership, the “Issuers”), the Guarantors (as defined below) and Deutsche Bank Trust Company Americas, as Trustee, under which the Issuers issued $350,000 in aggregate principal amount of 6.875% Senior Notes due 2023.
On October 6, 2017, the Partnership entered into a supplemental indenture for the purpose of issuing an additional $175,000 in aggregate principal amount of 6.875% Senior Notes due 2023 (together with the initially issued notes, the “2023 Notes”). The additional amount of 2023 Notes were issued at 102% of face value with an effective interest rate of 6.442%. The additional amount of 2023 Notes are treated as a single series with the initially issued 2023 Notes and have the same terms as those of the initially issued 2023 Notes, except that (a) the additional amount of 2023 Notes are subject to a separate registration rights agreement, which was filed and deemed effective on April 2, 2018, and the exchange was finalized in May 2018, and (b) the additional amount of 2023 Notes were issued initially under CUSIP numbers different from the initially issued 2023 Notes.
AtAs of December 31, 2019,2021, PBFX had $525,000 of borrowings outstanding under the 2023 Notes.
The 2023 Notes are guaranteed on a senior unsecured basis by Delaware City Logistics Company LLC (“DCLC”), Delaware Pipeline Company LLC (“DPC”), Delaware City Terminaling Company LLC (“DCTC”), Toledo Terminaling Company LLC, PBF Logistics Products Terminals LLC (“Toledo Terminaling”PLPT”), PLPT, PBFX Op Co, TVPC, PNGPC, TRLC, CLC, PTC, DSLCPaulsboro Natural Gas Pipeline Company LLC, Toledo Rail Logistics Company LLC, Chalmette Logistics Company LLC, Paulsboro Terminaling Company LLC, DCR Storage and Loading Company LLC, CPI and PBFX Ace Holdings LLC (collectively, the “Guarantors” and each a “Guarantor”). In addition, PBF LLC provides a limited guarantee of collection of the principal amount of the 2023 Notes, but is not otherwise subject to the covenants of the Indenture. The 2023 Notes are general senior unsecured obligations of the Issuers and are equal in right of payment with all of the Issuers’ existing and future senior indebtedness, including amounts outstanding under the Revolving Credit Facility. The 2023 Notes are effectively subordinated to all of the Issuers’ and the Guarantors’ existing and future secured debt, including the Revolving Credit Facility, to the extent of the value of the assets securing that secured debt and will be structurally subordinated to all indebtedness of the Partnership’s subsidiaries that do not guarantee the 2023 Notes. The 2023 Notes will mature on May 15, 2023. The 2023 Notes will be senior to any future subordinated indebtedness the Issuers may incur. The Partnership pays interest on the 2023 Notes semi-annually in cash in arrears on May 15 and November 15 of each year.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The Indenture contains customary terms, events of default and covenants for transactions of this nature. These covenants include limitations on the Partnership’s and its restricted subsidiaries’ ability to, among other things: (i) make investments, (ii) incur additional indebtedness or issue preferred units, (iii) pay dividends or make distributions on units or redeem or repurchase our subordinated debt, (iv) create liens, (v) incur dividend or other payment restrictions affecting subsidiaries, (vi) sell assets, (vii) merge or consolidate with other entities and (viii) enter into transactions with affiliates. These covenants are subject to a number of important limitations and exceptions.
The Issuers may redeem all or part of the 2023 Notes, in each case at the redemption prices described in the Indenture, together with any accrued and unpaid interest to the date of redemption.If the Partnership undergoes
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
certain change of control events, holders of the 2023 Notes will have the right to require the Issuers to purchase all or any part of the 2023 Notes at a price equal to 101% of the aggregate principal amount of the 2023 Notes, together with any accrued and unpaid interest to the date of purchase. In connection with certain asset dispositions, the Issuers will be required to use the net cash proceeds of the asset dispositions (subject to a right to reinvest such net cash proceeds) to make an offer to purchase the 2023 Notes at 100% of the principal amount, together with any accrued and unpaid interest to the date of purchase.
The Issuers may issue additional notes, from time to time, pursuant to the Indenture.
Fair Value Measurement
The estimated fair value of the Revolving Credit Facility approximates its carrying value, categorized as a Level 2 measurement, as this borrowing bears interest based on short-term floating market interest rates. The estimated fair value of the 2023 Notes, 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 2023 Notes and was approximately $542,966$513,661 at December 31, 2019.2021. The carrying value and fair value of PBFX’s debt, exclusive of unamortized debt issuance costs and unamortized premium on the additional 2023 Notes, was $808,000$625,000 and $825,966$613,661 as of December 31, 20192021 and $681,000$725,000 and $671,336$703,025 as of December 31, 2018,2020, respectively.
Debt Maturities
Debt maturing in the next five years and thereafter is as follows:
| | | | | |
Year Ending December 31, | |
2022 | $ | — | |
2023 | 625,000 | |
2024 | — | |
2025 | — | |
2026 | — | |
Thereafter | — | |
Total debt outstanding | 625,000 | |
Unamortized debt issuance costs | (3,383) | |
Unamortized 2023 Notes premium | 927 | |
Net carrying value of debt | $ | 622,544 | |
|
| | | |
Year Ending December 31, | |
2020 | $ | — |
|
2021 | — |
|
2022 | — |
|
2023 | 808,000 |
|
2024 | — |
|
Thereafter | — |
|
Total debt outstanding | 808,000 |
|
Unamortized debt issuance costs | (8,125 | ) |
Unamortized 2023 Notes premium | 2,229 |
|
Net carrying value of debt | $ | 802,104 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA) 8.
9. EQUITY
PBFX had 32,176,40432,621,013 outstanding common units held by the public outstanding as of December 31, 2019.2021. PBF LLC owns 29,953,631 PBFX common units constituting an aggregate of 48.2%47.9% of PBFX’s limited partner interest as of December 31, 2019. On June 1, 2017, the requirements under PBFX’s partnership agreement for the conversion of all subordinated units into common units were satisfied and the subordination period ended. As a result, each of the Partnership’s 15,886,553 outstanding subordinated units converted on a one-for-one basis into common units and began participating pro rata with the other common units in distributions of available cash. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership’s outstanding units representing limited partner interests.2021.
ShareUnit Activity
The partnership agreement authorizes PBFX to issue an unlimited number of additional partnership interests for the consideration of, and on the terms and conditions determined by, PBFX’s general partner without the
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
approval of the unitholders. It is possible that PBFX will fund future acquisitions through the issuance of additional common units, subordinated units or other partnership interests.
The following table presents changes in PBFX common units outstanding:
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
Balance at beginning of period | | 62,364,838 | | | 62,130,035 | |
Vesting of phantom units, net of forfeitures | | 209,806 | | | 234,803 | |
| | | | |
Balance at end of period | | 62,574,644 | | | 62,364,838 | |
|
| | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 |
Balance at beginning of period | | 45,348,663 |
| | 41,900,708 |
|
Vesting of phantom units, net of forfeitures | | 195,872 |
| | 178,071 |
|
New units issued | | 16,585,500 |
| | 3,269,884 |
|
Balance at end of period | | 62,130,035 |
| | 45,348,663 |
|
On February 28, 2019, as a result of the closing of the IDR Restructuring, PBFX’s IDRs held by PBF LLC were canceled and converted into 10,000,000 newly issued PBFX common units. On April 24, 2019, the Partnership 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 $135,000. The 2019 Registered Direct Offering closed on April 29, 2019.
On July 16, 2018, the Partnership entered into a common unit purchase agreement with certain funds managed by Tortoise Capital Advisors, L.L.C. providing for the issuance and sale in a registered direct offering (the “2018 Registered Direct Offering”) of an aggregate of 1,775,750 common units representing limited partner interests for gross proceeds of $35,000. The 2018 Registered Direct Offering closed on July 30, 2018. On July 31, 2018, the Partnership issued 1,494,134 common units representing limited partner interests, having an aggregate value of $31,586, to PBF LLC in connection with the Development Assets Acquisition.
Additionally, 292,341, 233,993308,427, 325,384 and 217,171292,341 of the Partnership’s phantom units issued under the PBFX 2014 Long-Term Incentive Plan (as amended, “LTIP”) vested and were converted into common units held by certain directors, officers and current and former employees of PBFX’s general partner or its affiliates during the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively.
Holders of any additional common units PBFX issues will be entitled to share equally with the then-existing common unitholders in PBFX’s distributions of available cash. Refer to Note 910 “Unit-Based Compensation” of the Notes to Consolidated Financial Statements for further information.
Noncontrolling Interest
Prior to the TVPC Acquisition, PBFX’s wholly-owned subsidiary, PBFX Op Co, held a 50% controlling equity interest in TVPC, with the other 50% equity interest in TVPC held by TVP Holding, a subsidiary of PBF Holding. PBFX Op Co was the sole managing member of TVPC. PBFX, through its ownership of PBFX Op Co, consolidated the financial results of TVPC and recorded a noncontrolling interest for the economic interest in TVPC held by TVP Holding. Noncontrolling interest on the consolidated statements of operations included the portion of net income or loss attributable to the economic interest in TVPC held by TVP Holding. Noncontrolling interest on the consolidated balance sheets included the portion of net assets of TVPC attributable to TVP Holding.
Subsequent to the TVPC Acquisition, PBFX owns 100% of the equity interest in TVPC and no longer records a noncontrolling interest related to TVPC.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Allocations of Net Income
PBFX’s partnership agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, PBFX’s partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Normal
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions allocated 100% to PBF LLC. Subsequent to the closing of the IDR Restructuring, the IDRs were canceled, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions.
The tables below summarize PBFX’s 20192021 and 20182020 quarterly cash distributions declared:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2021 |
| | Declaration Date | | Record Date | | Distribution Date | | Quarterly Distribution per Common Unit |
First quarter | | April 29 | | May 13 | | May 27 | | $ | 0.30 | |
Second quarter | | July 29 | | August 12 | | August 26 | | 0.30 | |
Third quarter | | October 28 | | November 12 | | November 30 | | 0.30 | |
Fourth quarter | | February 10, 2022 | | February 24, 2022 | | March 10, 2022 | | 0.30 | |
Total | | | | | | | | $ | 1.20 | |
|
| | | | | | | | | | |
| | 2019 |
| | Declaration Date | | Record Date | | Payment Date | | Quarterly Distribution per Common Unit |
First quarter | | May 1 | | May 15 | | May 30 | | $ | 0.5100 |
|
Second quarter | | August 1 | | August 15 | | August 30 | | 0.5150 |
|
Third quarter | | October 31 | | November 14 | | November 26 | | 0.5200 |
|
Fourth quarter | | February 13, 2020 | | February 25, 2020 | | March 17, 2020 | | 0.5200 |
|
Total | | | | | | | | $ | 2.0650 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| | Declaration Date | | Record Date | | Distribution Date | | Quarterly Distribution per Common Unit |
First quarter | | May 15 | | May 27 | | June 17 | | $ | 0.30 | |
Second quarter | | July 31 | | August 13 | | August 26 | | 0.30 | |
Third quarter | | October 29 | | November 16 | | November 30 | | 0.30 | |
Fourth quarter | | February 11, 2021 | | February 25, 2021 | | March 17, 2021 | | 0.30 | |
Total | | | | | | | | $ | 1.20 | |
|
| | | | | | | | | | |
| | 2018 |
| | Declaration Date | | Record Date | | Payment Date | | Quarterly Distribution per Common Unit |
First quarter | | May 3 | | May 15 | | May 30 | | $ | 0.4900 |
|
Second quarter | | August 2 | | August 15 | | August 30 | | 0.4950 |
|
Third quarter | | October 31 | | November 15 | | November 30 | | 0.5000 |
|
Fourth quarter | | February 14, 2019 | | March 1, 2019 | | March 14, 2019 | | 0.5050 |
|
Total | | | | | | | | $ | 1.9900 |
|
The allocations of total quarterly distributions to general and limited partners for the years ended December 31, 20192021 and 20182020 are shown in the table below. The Partnership’s distributions are declared subsequent to quarter end; therefore, the table represents total estimated distributions applicable to the period in which the distributions were earned:
| | | | | | | | Year Ended December 31, |
| | Year Ended December 31, | | 2021 | | 2020 |
| | 2019 | | 2018 | |
IDR - PBF LLC (1) | | $ | — |
| | $ | 10,011 |
| |
Limited partners’ distributions: | | | | | Limited partners’ distributions: | | | | |
Common | | 129,892 |
| | 95,120 |
| Common | | $ | 76,065 | | | $ | 75,578 | |
Total distributions | | $ | 129,892 |
| | $ | 105,131 |
| Total distributions | | $ | 76,065 | | | $ | 75,578 | |
Total cash distributions (2) | | $ | 128,266 |
| | $ | 103,679 |
| |
Total cash distributions (1) | | Total cash distributions (1) | | $ | 75,049 | | | $ | 74,828 | |
(1) Subsequent to the closing of the IDR Restructuring, the IDRs were canceled, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions.
(2) Excludes phantom unit distributions, which are accrued and paid upon vesting.
9.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
10. UNIT-BASED COMPENSATION
PBF GP’s board of directors adopted the LTIP in connection with the completion of the IPO and subsequently amended the LTIP effective April 18, 2019. The LTIP is for the benefit of employees, consultants, service providers and non-employee directors of PBFX’s general partner and its affiliates.
Under thePBFX’s LTIP, PBFX issues phantom unit awards to certain directors, officers and seconded employees of ourPBFX’s general partner or its affiliates and its employees as compensation. The fair value of each phantom unit on the grant date is equal to the market price of PBFX’s common units on that date. The estimated fair value of PBFX’s
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
phantom units is amortized using the straight-line method over the vesting period of four years, subject to acceleration if certain conditions are met. Total unrecognized compensation cost related to PBFX’s nonvested phantom units totaled $7,496 as of December 31, 2019 and is expected to be recognized over a weighted-average period of four years. The fair value of nonvested service phantom units outstanding as of December 31, 2019 totaled $15,823.
Unit-based compensation expense related to the Partnership was $6,765, $5,757$5,320, $4,939 and $5,345$6,765 for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, respectively. These expenses are included in “General and administrative expenses” within the Partnership’s consolidated statements of operations.
There was no accelerated vesting of phantom units for the years ended December 31, 2019, 2018 and 2017.
A summary of PBFX’s unit award activity for the yearsyear ended December 31, 2019, 2018 and 20172021 is set forth below:
| | | | | | | | | | | | | | |
| | Number of Phantom Units | | Weighted Average Grant Date Fair Value |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Nonvested at January 1, 2021 | | 769,688 | | | $ | 15.29 | |
Granted | | 344,546 | | | 14.50 | |
Vested | | (308,427) | | | 17.07 | |
Forfeited | | (15,125) | | | 12.81 | |
Nonvested at December 31, 2021 | | 790,682 | | | $ | 14.30 | |
|
| | | | | | | |
| | Number of Phantom Units | | Weighted Average Grant Date Fair Value |
Nonvested at December 31, 2016 | | 564,880 |
| | $ | 22.47 |
|
Granted | | 319,940 |
| | 20.97 |
|
Vested | | (217,171 | ) | | 23.15 |
|
Forfeited | | (24,875 | ) | | 21.23 |
|
Nonvested at December 31, 2017 | | 642,774 |
| | 21.54 |
|
Granted | | 328,052 |
| | 19.95 |
|
Vested | | (233,993 | ) | | 22.71 |
|
Forfeited | | (20,125 | ) | | 18.81 |
|
Nonvested at December 31, 2018 | | 716,708 |
| | 20.53 |
|
Granted | | 343,848 |
| | 21.39 |
|
Vested | | (292,341 | ) | | 20.20 |
|
Forfeited | | (6,375 | ) | | 20.31 |
|
Nonvested at December 31, 2019 | | 761,840 |
| | $ | 20.77 |
|
Total unrecognized compensation cost related to PBFX’s nonvested phantom units totaled $4,702 as of December 31, 2021 and will be recognized from 2022 through 2025. The fair value of nonvested phantom units outstanding as of December 31, 2021 totaled $11,307.
The following table shows fair value information related to PBFX’s phantom units for the periods presented:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Weighted-average grant-date fair value per share of phantom units granted | | $ | 14.50 | | | $ | 8.14 | | | $ | 21.39 | |
Fair value of phantom units vested (in thousands) | | $ | 4,576 | | | $ | 3,187 | | | $ | 6,198 | |
PBFX’s LTIP provideprovides for the issuance of distribution equivalent rights (“DERs”) in connection with phantom unit awards. A DER entitles the participant, upon vesting of the related phantom units, to a mandatory cash payment equal to the product of the number of vested phantom unit awards and the cash distribution per common unit paid by PBFX to its common unitholders during the vesting period. Cash payments made in connection with DERs are charged to partners’ equity, accrued and paid upon vesting.
10.11. NET INCOME PER UNIT
Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to PBFX’s unitholders are determined in relation to actual distributions declared and are not based on the net income (loss) allocations used in the calculation of net income (loss) per unit.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Diluted net income per unit includes the effect of potentially dilutive units of PBFX’s common units that consist of unvested phantom units. Diluted net income per unit excludes the effects of 5,500, 20,750117,253, 490,262 and 92,1665,500 phantom units because they were anti-dilutive for the years ended December 31, 2021, 2020 and 2019, 2018 and 2017, respectively. Basic and diluted net income per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.
In addition to the common and subordinated units, (prior to the subordinated units conversion to common units), PBFX hashad also identified the IDRs (prior to the IDR Restructuring) as participating securities and used the
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
two-class method when calculating the net income per unit applicable to limited partners that is based on the weighted-average number of common units outstanding during the period.
On June 1, 2017, following the May 31, 2017 payment of the cash distribution attributable to the second quarter of 2017, the requirements under PBFX’s partnership agreement for the conversion of all subordinated units into common units were satisfied and the subordination period for such subordinated units ended. As a result, in the second quarter of 2017, each of the Partnership’s 15,886,553 outstanding subordinated units converted on a one-for-one basis into common units and began participating pro rata with the other common units in distributions of available cash. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership’s outstanding units representing limited partner interests. The Partnership’s net income was allocated to the general partner, the limited partners, including the holder of the subordinated units through May 31, 2017 and IDR holder, in accordance with the partnership agreement.
Refer to Note 89 “Equity” of the Notes to Consolidated Financial Statements for descriptions of the Partnership’s recent equity activity.
When calculating basic earnings per unit under the two-class method for a master limited partnership,an MLP, net income for the current reporting period is reduced by the amount of available cash that has been or will be distributed to the limited partners and IDR holder (prior to the IDR Restructuring) for that reporting period.
The following tables show the calculation of net income per limited partner unit:
| | | | | | | | |
| | Year Ended December 31, 2021 |
| | |
Net income attributable to the partners: | | |
Distributions declared | | $ | 76,065 | |
Earnings less distributions | | 77,222 | |
Net income attributable to the partners | | $ | 153,287 | |
| | |
Weighted-average units outstanding - basic | | 62,810,703 | |
Weighted-average units outstanding - diluted | | 62,906,080 | |
| | |
Net income per limited partner unit - basic | | $ | 2.44 | |
Net income per limited partner unit - diluted | | 2.44 | |
|
| | | | |
| | Year Ended December 31, 2019 |
Net income attributable to the partners: | | |
Distributions declared | | $ | 129,892 |
|
Earnings less distributions | | (29,604 | ) |
Net income attributable to the partners | | $ | 100,288 |
|
| | |
Weighted-average units outstanding - basic | | 58,583,231 |
|
Weighted-average units outstanding - diluted | | 58,687,945 |
|
| | |
Net income per limited partner unit - basic | | $ | 1.71 |
|
Net income per limited partner unit - diluted | | 1.71 |
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2020 |
Net income attributable to the partners: | | | | | | | | | | |
Distributions declared | | $ | 75,578 | | | | | | | | | |
Earnings less distributions | | 71,854 | | | | | | | | | |
Net income attributable to the partners | | $ | 147,432 | | | | | | | | | |
| | | | | | | | | | |
Weighted-average units outstanding - basic | | 62,535,964 | | | | | | | | | |
Weighted-average units outstanding - diluted | | 62,543,700 | | | | | | | | | |
| | | | | | | | | | |
Net income per limited partner unit - basic | | $ | 2.36 | | | | | | | | | |
Net income per limited partner unit - diluted | | 2.36 | | | | | | | | | |
|
| | | | | | | | | | | | |
| | Year Ended December 31, 2018 |
| | Limited Partner Common Units | | IDRs - PBF LLC | | Total |
Net income attributable to the partners: | | | | | | |
Distributions declared(1) | | $ | 95,120 |
| | $ | 10,011 |
| | $ | 105,131 |
|
Earnings less distributions | | (19,670 | ) | | — |
| | (19,670 | ) |
Net income attributable to the partners(1) | | $ | 75,450 |
| | $ | 10,011 |
| | $ | 85,461 |
|
| | | | | | |
Weighted-average units outstanding - basic | | 43,646,997 |
| | | | |
Weighted-average units outstanding - diluted | | 43,731,299 |
| | | | |
| | | | | | |
Net income per limited partner unit - basic | | $ | 1.73 |
| | | | |
Net income per limited partner unit - diluted | | 1.73 |
| | | | |
110
(1) As a result of the IDR Restructuring, no income was allocated to the IDR holder for the fourth quarter of 2018 as the holder was not entitled to an IDR distribution related to the fourth quarter of 2018.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2019 |
Net income attributable to the partners: | | | | | | | | | | |
Distributions declared | | $ | 129,892 | | | | | | | | | |
Earnings less distributions | | (29,604) | | | | | | | | | |
Net income attributable to the partners | | $ | 100,288 | | | | | | | | | |
| | | | | | | | | | |
Weighted-average units outstanding - basic | | 58,583,231 | | | | | | | | | |
Weighted-average units outstanding - diluted | | 58,687,945 | | | | | | | | | |
| | | | | | | | | | |
Net income per limited partner unit - basic | | $ | 1.71 | | | | | | | | | |
Net income per limited partner unit - diluted | | 1.71 | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2017 |
| | Limited Partner Common Units | | Limited Partner Subordinated Units – PBF LLC | | IDRs - PBF LLC | | Total |
Net income attributable to the partners: | | | | | | | | |
Distributions declared | | $ | 73,322 |
| | $ | 7,308 |
| | $ | 9,055 |
| | $ | 89,685 |
|
Earnings less distributions | | 3,897 |
| | 6,855 |
| | — |
| | 10,752 |
|
Net income attributable to the partners | | $ | 77,219 |
| | $ | 14,163 |
| | $ | 9,055 |
| | $ | 100,437 |
|
| | | | | | | | |
Weighted-average units outstanding - basic | | 35,505,446 |
| | 6,572,245 |
| | | | |
Weighted-average units outstanding - diluted | | 35,568,760 |
| | 6,572,245 |
| | | | |
| | | | | | | | |
Net income per limited partner unit - basic | | $ | 2.17 |
| | $ | 2.15 |
| | | | |
Net income per limited partner unit - diluted | | 2.17 |
| | 2.15 |
| | | | |
11.12. COMMITMENTS AND CONTINGENCIES
Regulatory Matters
The DCR Rail Terminal and the DCR West Rack are collocated with PBF Holding’s Delaware City Refinery and are located in Delaware’s coastal zone where certain activities are regulated under the Delaware Coastal Zone Act (the “CZA”(“CZA”). Therefore, determinations regarding the CZA that impact the Delaware City Refinery may potentially adversely impact the Partnership’s assets even if the Partnership is not directly involved.
The Delaware City Refinery appealed a Notice of Penalty Assessment and Secretary’s Order issued in March 2017 (the “2017 Secretary’s Order”), including a $150 fine, alleging violation of a 2013 Secretary’s Order authorizing crude oil shipment by barge (the “2013 Secretary’s Order”). TheOn December 28, 2016, the Delaware Department of Natural Resources and Environmental Control (“DNREC”) asserted that the Delaware City Refinery had violated the 2013 Secretary’s Order by allegedly failing to make timely and full disclosure to DNREC about the nature and extent of certain shipments and allegedly misrepresenting the number of shipments that went to other facilities. The Notice of Penalty Assessment and 2017 Secretary’s Order conclude that the 2013 Secretary’s Order was violated by the Delaware City Refinery by shipping crude oil from the Partnership’s Delaware City assets to three locations other than PBF Holding’s Paulsboro Refinery, on 15 days in 2014, making a total of 17 separate barge shipments containing approximately 35,700,000 gallons of crude oil in total. On April 28, 2017, the Delaware City Refinery appealed the Notice of Penalty Assessment and 2017 Secretary’s Order. On March 5, 2018, the Notice of Penalty Assessment was settled by DNREC, the Delaware Attorney General and the Delaware City Refinery for $100. The Delaware City Refinery made no admissions with respect to the alleged violations and agreed to request a CZA status decision prior to making crude oil shipments to destinations other than the Paulsboro Refinery. The Delaware City Refinery has paid the penalty. The CZA status decision request was submitted to DNREC and the outstanding appeal was withdrawn as required under the settlement agreement. DNREC has confirmed that the Delaware City Refinery has fully satisfied its obligations under the settlement agreement, and therefore that the resolution of liability provided under the settlement agreement has taken effect.
On December 28, 2016, DNREC issued a CZA permit for ethanol (the “Ethanol Permit”) to the Delaware City RefineryDCR 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 two2 environmental groups. On February 27, 2017,
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
the Coastal Zone Industrial Board (the “Coastal Zone Board”) held a public hearing and dismissed the appeal, determining that the appellants did not have standing. The 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 have filed a joint motion with the Coastal Zone Board, requesting that the Coastal Zone 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. That jointThe 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 remains pendingwith 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 pre-hearing 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.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
On October 19, 2017, the Delaware City Refinery received approval from the DNREC for the construction and operation of the ethanol marketing project to allow for a combined total loading of up to 10,000 barrels per day (“bpd”), on an annual average basis, of ethanol on to marine vessels at the marine piers and the terminal truck loading rack, subject to certain operational and emissions limitations as well as other conditions. On the same date, DCLC received DNREC approval for the construction of (i) four4 additional loading arms for each of lanes 4, 10 and 11 for purposes of loading ethanol at its truck loading rack and (ii) a vapor vacuum control system for loading lanes connected to the existing vapor recovery unit located at its terminal in Delaware City. This approval is also subject to certain operational and emission limitations as well as other conditions.
During 2018, EPAthe U.S. Environmental Protection Agency (“EPA”) conducted certain evaluations of the ambient air in the vicinity of one of PBFX’s terminals. PBFX and the EPA agreed to resolve the EPA’s allegations through execution of an Administrative Consent Order (the “ACO”). The ACO, effective on November 13, 2019, provides for PBFX to make a civil penalty payment of $226, and commit to certain injunctive relief, notably including the installation and operation of a thermal oxidizer to reduce the emissions to the atmosphere of volatile organic compound emissions collected from certain existing tanks. Pursuant to the terms of the ACO, PBFX does not admit the factual or legal allegations, nor any liability for noncompliance as alleged by the EPA. PBFX began the renegotiation of the ACO in December 2020 specifically with regard to provision for the installation and operation of a thermal oxidizer. As PBFX’s terminal no longer inventories the material for which the ACO was written, the ACO should be amended accordingly.
On December 4, 2020, the Pennsylvania Department of Environmental Protection (the “PADEP”) issued a draft Consent Order and Agreement (“CAO”) to PLPT with respect to 2 alleged violations at the Philadelphia terminal for failure to: 1) test and inspect regulated piping as required in accordance with industry standards; and 2) have a professional engineering certification that all above ground storage tanks meet the applicable performance standards and requirements as a result of an alleged release of oil on January 10, 2019 into the Schuylkill River resulting from a pipe leak that was not contained by emergency containment structure. The draft order included a proposed penalty of $800. On December 15, 2021, the Partnership entered into a final CAO and agreed to pay the $800 penalty. Under the final CAO, the Partnership capped its future liability at $250 if the PADEP were to bring a subsequent enforcement action under the Pennsylvania Clean Streams Law (the “CSL”) for environmental damage allegedly caused by the release of oil from PLPT’s operational violations. Under the final CAO, the Partnership also reserved its rights to challenge any subsequent enforcement action brought by the PADEP under the CSL. On January 13, 2022, the Partnership received from the PADEP, a Consent Assessment of Civil Penalty alleging violations under the CSL of over $1,000. However, because of the final CAO cap, the PADEP’s penalty demand to settle these alleged violations is $250. The Partnership is currently reviewing the alleged violations and settlement offer.
Environmental Matters
PBFX’s assets, along with PBF Energy’s refineries, are subject to extensive and frequently changing federal, state and local laws and regulations, including, but not limited to, those relating to the discharge of materials into the environment or that otherwise relate to the protection of the environment, waste management and the characteristics and the composition of fuels. Compliance with existing and anticipated laws and regulations can increase the overall cost of operating the Partnership’s assets, including remediation, operating costs and capital costs to construct, maintain and upgrade equipment and facilities.
PBFX recorded a total liability related to environmental remediation costsobligations at certain of its assets of $2,347$1,695 and $2,587$1,760 as of December 31, 20192021 and 2018,2020, respectively, related to existing environmental liabilities.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
During the first quarter of 2019, the Partnership notified certain agencies of an oil sheen present in the Schuylkill River near one of its facilities. Clean-up, identification and mitigation of the source were immediately initiated. The Partnership is working on a remedial investigationPADEP approved the Site Characterization Report submitted by the Partnership. A Remedial Action Plan was submitted to the PADEP in October 2020. The PADEP approved the Remedial Action Plan in January 2021, and action plan with the state agency. Although response activities are nearly complete,substantially complete. Future remediation costs will not be finalized until the action plan is complete. Incremental costsand any potential penalties are currently not expected to be material to the Partnership.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Contingent Consideration
In connection with the East Coast Storage Assets Acquisition,Partnership’s acquisition of CPI from Crown Point in October 2018, the purchase and sale agreement between the Partnership and Crown Point included aan earn-out provision for the Contingent Consideration. Pursuantrelated to the purchase and sale agreement,CPI Processing Agreement, based on the future results of certain acquired idled assets (the “Contingent Consideration”). The Partnership and Crown Point willagreed to 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 Contingent Consideration recorded was $26,086$2,932 and $12,120 as of December 31, 2019 ($21,100 as2021 and 2020, respectively. As of December 31, 2018) representing2021, the present value of expected future payments discounted at a blended rate of 8.79%. The short-term Contingent Consideration is included in “Accrued liabilities” and the long-term Contingent Consideration is included in “Other long-term liabilities” within the Partnership’s consolidated balance sheets. At
The Contingent Consideration is categorized in Level 3 of the fair value hierarchy and is estimated based on management’s estimate of the future cash flows associated with the recommenced idled assets. The changes in fair value of the obligation during the years ended December 31, 2019,2021 and 2020 were primarily due to the changes in the estimated undiscounted liability totaled $30,596 basedfuture cash flows of the assets, accretion on the Partnership’s anticipated total annualdiscounted liability and settlement payments made by the Partnership.
Pursuant to the terms of the CPI Processing Agreement, the counterparty exercised its right to terminate the contract at the conclusion of the initial contract year, resulting in an adjustment to the fair value of the Contingent Consideration for the year ended December 31, 2020 of $16,429, reflecting the elimination of the estimated earn-out payments.for years 2 and 3 of the performance period. Subsequent to the CPI Contract Termination, the counterparty and the Partnership agreed to multiple extension agreements for certain of the originally contracted services on a limited basis through the third quarter of 2021. Following the conclusion of these extension agreements, the Partnership and a new counterparty have entered into a short-term commercial agreement (the “Successor Processing Agreement”) at the restarted processing unit assets. The acquired idled assets that areSuccessor Processing Agreement runs through February 2022. The operating profits resulting from the Successor Processing Agreement remain subject to the earn-out provision between the Partnership and Crown Point, and any future agreements entered into related to the restarted processing unit assets could result in earn-out obligations for the Partnership during the three-year contractual period, which runs through October 2022.
The following table summarizes the changes in fair value of the Contingent Consideration recommenced operations in October 2019.for the years ended December 31, 2021 and 2020:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 |
Balance at beginning of period | $ | 12,120 | | | $ | 26,086 | |
| | | |
Accretion on discounted liabilities | — | | | 1,760 | |
Settlements | (12,176) | | | (1,500) | |
Unrealized charge (gain) included in earnings | 2,988 | | | (14,226) | |
Balance at end of period | $ | 2,932 | | | $ | 12,120 | |
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PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
13. RELATED PARTY TRANSACTIONS
Agreements with PBF Energy Entities
Commercial Agreements
PBFX currently derives a majority of its revenue from long-term, fee-based agreements with PBF Holding, which generally include MVCs and contractual fee escalations for inflation adjustments and certain increases in operating costs. PBFX believes the terms and conditions under these agreements, as well as the Omnibus Agreement and the Services Agreement (each as defined below), each with PBF Holding, are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services.
These commercial agreements (as defined in the table below) with PBF Holding include:
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Agreements | Initiation Date | Initial Term | Renewals (a) | MVC | Force Majeure |
Transportation and Terminaling | | | | | |
Amended and Restated Rail Agreements (b) | 5/8/2014 | 7 years, 8 months | N/A | 125,000 bpd | PBFX or PBF Holding can declare |
Toledo Truck Unloading & Terminaling Services Agreement (c) | 5/8/2014 | 7 years, 8 months | 2 x 5 | 5,500 bpd |
Toledo Storage Facility Storage and Terminaling Services Agreement- Terminaling Facility (c) | 12/12/2014 | 10 years | 2 x 5 | 4,400 bpd |
Delaware Pipeline Services Agreement | 5/15/2015 | 10 years, 8 months | 2 x 5 | 50,000 bpd |
Delaware Pipeline Services Agreement- Magellan Connection | 11/1/2016 | 2 years, 5 months | See note (d) | See note (d) |
Delaware City Truck Loading Services Agreement- Gasoline | 5/15/2015 | 10 years, 8 months | 2 x 5 | 30,000 bpd |
Delaware City Truck Loading Services Agreement- LPGs | 5/15/2015 | 10 years, 8 months | 2 x 5 | 5,000 bpd |
East Coast Terminals Terminaling Services Agreements (e) | 5/1/2016 | Various (f) | Evergreen | 15,000 bpd (g) |
East Coast Terminals Tank Lease Agreements | 5/1/2016 | Various (f) | Evergreen | 350,000 barrels (h) |
Torrance Valley Pipeline Transportation Services Agreement- North Pipeline (c) | 8/31/2016 | 10 years | 2 x 5 | 50,000 bpd |
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PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
| | | | | | | | | | | | | | | | | |
Agreements | Initiation Date | Initial Term | Renewals (a) | MVC | Force Majeure |
Transportation and Terminaling (continued) | | | | | |
| | | | | |
Agreements | Initiation Date | Initial Term | Renewals (a) | MVC | Force Majeure |
Transportation and Terminaling (continued) | | | | | |
| | | | | |
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Torrance Valley Pipeline Transportation Services Agreement- South Pipeline (c) | 8/31/2016 | 10 years | 2 x 5 | 75,000 bpd (i) | PBFX or PBF Holding can declare |
Torrance Valley Pipeline Transportation Services Agreement- Midway Storage Tank (c) | 8/31/2016 | 10 years | 2 x 5 | 55,000 barrels (h) |
Torrance Valley Pipeline Transportation Services Agreement- Emidio Storage Tank (c) | 8/31/2016 | 10 years | 2 x 5 | 900,000 barrels per month |
Torrance Valley Pipeline Transportation Services Agreement- Belridge Storage Tank (c) | 8/31/2016 | 10 years | 2 x 5 | 770,000 barrels per month |
Paulsboro Natural Gas Pipeline Services Agreement (c)(j) | 8/4/2017 | 15 years | Evergreen | 60,000 dekatherms per day |
Knoxville Terminals Agreement- Terminaling Services | 4/16/2018 | 5 years | Evergreen | Various (k)(j) |
Knoxville Terminals Agreement- Tank Lease (c)Storage Services | 4/16/2018 | 5 years | Evergreen | 115,334 barrels (h) |
Toledo Rail Loading Agreement (c) | 7/31/2018 | 7 years, 5 months | 2 x 5 | Various (l)(k) |
Chalmette Terminal Throughput Agreement | 7/31/2018 | 1 year | Evergreen | N/A |
Chalmette Rail Unloading Agreement | 7/31/2018 | 7 years, 5 months | 2 x 5 | 7,600 bpd |
DSL Ethanol Throughput Agreement (c) | 7/31/2018 | 7 years, 5 months | 2 x 5 | 5,000 bpd |
Delaware City Terminaling Services Agreement (m)(l) | 1/1/2022 | 4 years | 2 x 5 | 95,000 bpd |
Storage | | | | | |
Toledo Storage Facility Storage and Terminaling Services Agreement- Storage Facility (c) | 12/12/2014 | 10 years | 2 x 5 | 3,849,271 barrels (h) | PBFX or PBF Holding can declare |
Chalmette Storage Agreement (c) | See note (n)(m) | 10 years | 2 x 5 | 625,000 barrels (h) |
East Coast Storage Assets Terminal Storage Agreement (c) | 1/1/2019 | 8 years | Evergreen | 2,953,725 barrels (h) |
___________________
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(a) | PBF Holding has the option to extend the agreements for up to two additional five-year terms, as applicable. |
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(b) | The Amended and Restated Rail Agreements, as amended and effective as of January 1, 2018, include the Amended and Restated Delaware City Rail Terminaling Services Agreement and the Amended and Restated Delaware West Ladder Rack Terminaling Services Agreement, each between DCTC and PBF Holding, with the service fees thereunder being adjusted, including the addition of an ancillary fee paid by PBF Holding on an actual cost basis. In determining payments due under the Amended and Restated Rail Agreements, excess volumes throughput under the agreements shall apply against required payments in respect to the minimum throughput commitments on a quarterly basis and, to the extent not previously applied, on an annual basis against the MVCs. Effective January 1, 2019, the existing Amended and Restated Rail Agreements were further amended for the inclusion of services through certain rail infrastructure at the East Coast Storage Assets. |
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(c) | These commercial agreements with PBF Holding are considered leases. |
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(d) | In connection with the inclusion of an additional destination at the Magellan connection under the Delaware Pipeline Services Agreement, DPC and PBF Holding agreed to a two-year, five-month MVC (the “Magellan MVC”) under the Delaware Pipeline Services Agreement. The Magellan MVC expired on |
(a)PBF Holding has the option to extend the agreements for up to 2 additional five-year terms, as applicable.
(b)The Amended and Restated Rail Agreements, as amended and effective as of January 1, 2018, include the Amended and Restated Delaware City Rail Terminaling Services Agreement and the Amended and Restated Delaware West Ladder Rack Terminaling Services Agreement, each between DCTC and PBF Holding, with the service fees thereunder being adjusted, including the addition of an ancillary fee paid by PBF Holding on an actual cost basis. In determining payments due under the Amended and Restated Rail Agreements, excess volumes throughput under the agreements shall apply against required payments in respect to the minimum throughput commitments on a quarterly basis and, to the extent not previously applied, on an annual basis against the MVCs. Effective January 1, 2019, the existing Amended and Restated Rail Agreements were further amended for the inclusion of services through certain rail infrastructure at the Partnership’s East Coast storage facility.
(c)These commercial agreements with PBF Holding are considered leases.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
(d)In connection with the inclusion of an additional destination at the Magellan connection under the Delaware Pipeline Services Agreement, DPC and PBF Holding agreed to a two-year, five-month MVC (the “Magellan MVC”) under the Delaware Pipeline Services Agreement. The Magellan MVC expired on March 31, 2019, subsequent to which the Partnership has been billing actual throughput on the Magellan connection.
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(e) | Subsequent to the Toledo Products Terminal Acquisition, the Toledo Products Terminal was added to the East Coast Terminals Terminaling Services Agreements. |
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(f) | The East Coast Terminals related party agreements include varying initial term lengths, ranging from one to five years. |
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(g) | The East Coast Terminals Terminaling Services Agreements have no MVCs and are billed based on actual volumes throughput, other than a terminaling services agreement between the East Coast Terminals’ Paulsboro, New Jersey location and PBF Holding’s Paulsboro Refinery, with a 15,000 bpd MVC. |
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(h) | Reflects the overall capacity as stipulated by the storage agreement. The storage MVC is subject to the effective operating capacity of each tank, which can be impacted by routine tank maintenance and other factors. PBF Holding’s available shell capacity may be subject to change as agreed to by the Partnership and PBF Holding. |
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(i) | In connection with the TVPC Acquisition on May 31, 2019, the Torrance Valley Pipeline Transportation Services Agreement- South Pipeline was amended and restated to increase the MVC from 70,000 bpd to 75,000 bpd. |
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(j) | In August 2017, the Paulsboro Natural Gas Pipeline commenced service. Concurrent with the commencement of operations, a new services agreement was entered into between PNGPC and PRC regarding the Paulsboro Natural Gas Pipeline. |
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(k) | The minimum throughput revenue commitment for the Knoxville Terminals Agreement- Terminaling Services is $894 for year one, $1,788 for year two and $2,683 for year three and thereafter. |
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(l) | Under the Toledo Rail Loading Agreement, PBF Holding has minimum throughput commitments for (i) 30 railcars per day of products and (ii) 11.5 railcars per day of premium products. The Toledo Rail Loading Agreement also specifies a maximum throughput rate of 50 railcars per day. |
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(m) | The Delaware City Terminaling Services Agreement between DCTC and PBF Holding will commence in 2022 subsequent to the expiration of the Amended and Restated Rail Agreements and includes additional services to be provided by PBFX as operator of other rail facilities owned by PBF Holding’s subsidiaries. |
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(n) | The Chalmette Storage Services Agreement was entered into on February 15, 2017 and commenced on November 1, 2017. |
(e)Subsequent to the Partnership’s acquisition of the Toledo, Ohio refined products terminal assets (the “Toledo Products Terminal”) from Sunoco Logistics Partners L.P., the Toledo Products Terminal was added to the East Coast Terminals Terminaling Services Agreements.
(f)The East Coast Terminals related party agreements include varying initial term lengths, ranging from one to five years.
(g)The East Coast Terminals Terminaling Services Agreements have no MVCs and are billed based on actual volumes throughput, other than a terminaling services agreement between the East Coast Terminals’ Paulsboro, New Jersey location and PBF Holding’s Paulsboro Refinery, with a 15,000 bpd MVC.
(h)Reflects the overall capacity as stipulated by the storage agreement. The storage MVC is subject to the effective operating capacity of each tank, which can be impacted by routine tank maintenance and other factors. PBF Holding’s available shell capacity may be subject to change as agreed to by the Partnership and PBF Holding.
(i)In connection with the TVPC Acquisition on May 31, 2019, the Torrance Valley Pipeline Transportation Services Agreement- South Pipeline was amended and restated to increase the MVC from 70,000 bpd to 75,000 bpd.
(j)The minimum throughput revenue commitment for the Knoxville Terminals Agreement- Terminaling Services is $894 for year one, $1,788 for year two and $2,683 for year three and thereafter.
(k)Under the Toledo Rail Loading Agreement, PBF Holding has minimum throughput commitments for (i) 30 railcars per day of products and (ii) 11.5 railcars per day of premium products. The Toledo Rail Loading Agreement also specifies a maximum throughput rate of 50 railcars per day.
(l)The Delaware City Terminaling Services Agreement between DCTC and PBF Holding commenced on January 1, 2022 subsequent to the expiration of the Amended and Restated Rail Agreements and includes additional services provided by PBFX as operator of other rail facilities owned by PBF Holding’s subsidiaries.
(m)The Chalmette Storage Services Agreement was entered into on February 15, 2017 and commenced on November 1, 2017.
Omnibus Agreement
In addition to the commercial agreements described above, PBFX has entered into an omnibus agreement with PBF GP, PBF LLC and PBF Holding, which has been amended and restated in connection with certain of the Acquisitions from PBF (as amended, the “Omnibus Agreement”) for the provision of executive management services and support for accounting and finance, legal, human resources, information technology, environmental, health and safety, and other administrative functions, as well as (i) PBF LLC’s agreement not to compete with the Partnership under certain circumstances, subject to certain exceptions, (ii) the Partnership’s right of first offer for ten years to acquire certain logistics assets retained by PBF Energy following PBFX’s IPO, including certain logistics assets that PBF LLC or its subsidiaries may construct or acquire in the future, subject to certain exceptions, and (iii) a license to use the PBF Logistics trademark and name.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The annual fee under the Omnibus Agreement for the year ended December 31, 20192021 was $7,748,$7,340, inclusive of obligations under the Omnibus Agreement to reimburse PBF LLC for certain compensation and benefit costs of employees who devoted more than 50% of their time to PBFX during the year ended December 31, 2019. The2021. PBFX expects to pay an annual fee was increased toof $8,275, effective as of January 1, 2020, inclusive of estimated obligations under the Omnibus Agreement to reimburse PBF LLC for certain compensation and benefit costs of employees who devote more than 50% of their time to PBFX for the year ending December 31, 2020.2022.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Services Agreement
Additionally, PBFX has entered into an operation and management services and secondment agreement with PBF Holding and certain of its subsidiaries (as amended, the “Services Agreement”), pursuant to which PBF Holding and its subsidiaries provide PBFX with the personnel necessary for the Partnership to perform its obligations under its commercial agreements. PBFX reimburses PBF Holding for the use of such employees and the provision of certain infrastructure-related services to the extent applicable to its operations, including storm water discharge and waste water treatment, steam, potable water, access to certain roads and grounds, sanitary sewer access, electrical power, emergency response, filter press, fuel gas, APIAmerican Petroleum Institute solids treatment, fire water and compressed air. For the year ended December 31, 2019, we2021, PBFX paid an annual fee of $8,617$8,683 to PBF Holding pursuant to the Services Agreement and expectexpects to pay the same annual fee to PBF Holding pursuant to the Services Agreement for the year ending December 31, 2020.2022.
The Services Agreement will terminate upon the termination of the Omnibus Agreement, provided that the Partnership may terminate any service on 30-days’ notice.
Distributions
In connection with the Partnership’s quarterly distributions, the Partnership distributed $61,405$35,944, $42,534 and $50,599$61,405 to PBF LLC for the years ended December 31, 20192021, 2020 and 2018,2019, respectively. During the five months ended May 31, 2019, and the year ended December 31, 2018, TVPC distributed $8,500 and $20,250, respectively, to each of its members, which included TVP Holding, a subsidiary of PBF Holding. Subsequent to the closing of the TVPC Acquisition on May 31, 2019, PBFX owns 100% of the equity interest in TVPC.
Summary of Transactions
A summary of revenue and expense transactions with the Partnership’s affiliates, including expenses directly charged and allocated to the Partnership, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Revenue | | $ | 304,100 | | | $ | 289,406 | | | $ | 300,877 | |
Operating and maintenance expenses | | 8,683 | | | 8,683 | | | 8,617 | |
General and administrative expenses | | 7,340 | | | 7,592 | | | 7,748 | |
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| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
Revenue | | $ | 300,877 |
| | $ | 259,426 |
| | $ | 240,654 |
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Operating and maintenance expenses | | 8,617 |
| | 7,477 |
| | 6,626 |
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General and administrative expenses | | 7,748 |
| | 7,468 |
| | 6,899 |
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13.14. SEGMENT INFORMATION
The Partnership’s operations are comprised of operating segments, which are strategic business units that offer different services in various geographical locations. PBFX has evaluated the performance of each operating segment based on its respective operating income. The operating segments adhere to the accounting polices used for the consolidated financial statements, as described in Note 2 “Summary of Accounting Policies” of the Notes to Consolidated Financial Statements.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
The Partnership’s operating segments are organized into two2 reportable segments: (i) Transportation and Terminaling and (ii) Storage. Operations that are not included in either the Transportation and Terminaling or the Storage segments are included in Corporate. The Partnership does not have any foreign operations.
The Partnership’s Transportation and Terminaling segment consists of operating segments that include product terminals, pipelines, crude unloading facilities and other facilities capable of transporting and handling crude oil, refined products and natural gas. The Partnership’s Storage segment consists of operating segments that include storage and other facilities capable of processing crude oil and handling crude oil, refined products and intermediates.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
Revenue is generated from third-party transactions as well as commercial agreements entered into with PBF Holding under which the Partnership receives fees for transportation, terminaling, storage and processing services. The commercial agreements with PBF Holding are described in Note 1213 “Related Party Transactions” of the Notes to Consolidated Financial Statements. Certain general and administrative expenses and interest and financing costs are included in Corporate as they are not directly attributable to a specific reporting segment. Identifiable assets are those used by the operating segments, whereas assets included in Corporate are principally cash, deposits and other assets that are not associated with operations specific to a reporting segment.operations.
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| | Year Ended December 31, 2021 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 284,819 | | | $ | 70,716 | | | $ | — | | | $ | 355,535 | |
Depreciation and amortization | | 29,241 | | | 8,564 | | | — | | | 37,805 | |
Income (loss) from operations | | 185,132 | | | 28,967 | | | (18,735) | | | 195,364 | |
Other expense | | — | | | — | | | 42,077 | | | 42,077 | |
Capital expenditures | | 8,048 | | | 574 | | | — | | | 8,622 | |
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| | Year Ended December 31, 2020 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 271,023 | | | $ | 89,232 | | | $ | — | | | $ | 360,255 | |
Depreciation and amortization | | 28,308 | | | 25,399 | | | — | | | 53,707 | |
Income (loss) from operations | | 169,264 | | | 44,822 | | | (18,748) | | | 195,338 | |
Other expense | | — | | | — | | | 47,906 | | | 47,906 | |
Capital expenditures | | 8,334 | | | 3,974 | | | — | | | 12,308 | |
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| | Year Ended December 31, 2019 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 282,745 | | | $ | 57,467 | | | $ | — | | | $ | 340,212 | |
Depreciation and amortization | | 27,826 | | | 10,775 | | | — | | | 38,601 | |
Income (loss) from operations | | 163,036 | | | 20,751 | | | (24,515) | | | 159,272 | |
Other expense | | — | | | — | | | 51,103 | | | 51,103 | |
Capital expenditures | | 16,886 | | | 14,860 | | | — | | | 31,746 | |
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| | Year Ended December 31, 2019 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 282,745 |
| | $ | 57,467 |
| | $ | — |
| | $ | 340,212 |
|
Depreciation and amortization | | 27,826 |
| | 10,775 |
| | — |
| | 38,601 |
|
Income (loss) from operations | | 163,036 |
| | 20,751 |
| | (24,515 | ) | | 159,272 |
|
Other expense | | — |
| | — |
| | 51,103 |
| | 51,103 |
|
Capital expenditures | | 16,886 |
| | 14,860 |
| | — |
| | 31,746 |
|
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2018 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 250,412 |
| | $ | 33,028 |
| | $ | — |
| | $ | 283,440 |
|
Depreciation and amortization | | 24,899 |
| | 4,910 |
| | — |
| | 29,809 |
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Income (loss) from operations | | 149,337 |
| | 15,904 |
| | (21,371 | ) | | 143,870 |
|
Other expense | | — |
| | — |
| | 43,033 |
| | 43,033 |
|
Capital expenditures, including acquisitions | | 97,077 |
| | 78,619 |
| | — |
| | 175,696 |
|
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| | Year Ended December 31, 2017 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total revenue | | $ | 234,338 |
| | $ | 23,250 |
| | $ | — |
| | $ | 257,588 |
|
Depreciation and amortization | | 21,650 |
| | 2,754 |
| | — |
| | 24,404 |
|
Income (loss) from operations | | 146,803 |
| | 12,860 |
| | (16,284 | ) | | 143,379 |
|
Other expense | | — |
| | — |
| | 33,363 |
| | 33,363 |
|
Capital expenditures, including acquisitions | | 59,119 |
| | 31,139 |
| | — |
| | 90,258 |
|
|
| | | | | | | | | | | | | | | | |
| | Balance at December 31, 2019 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total assets | | $ | 726,374 |
| | $ | 228,495 |
| | $ | 18,133 |
| | $ | 973,002 |
|
|
| | | | | | | | | | | | | | | | |
| | Balance at December 31, 2018 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total assets | | $ | 731,505 |
| | $ | 219,326 |
| | $ | 5,522 |
| | $ | 956,353 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2021 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total assets | | $ | 688,005 | | | $ | 188,393 | | | $ | 24,899 | | | $ | 901,297 | |
14. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at December 31, 2020 |
| | Transportation and Terminaling | | Storage | | Corporate | | Consolidated Total |
Total assets | | $ | 715,308 | | | $ | 200,130 | | | $ | 18,114 | | | $ | 933,552 | |
15. SUBSEQUENT EVENTS
Cash distribution
On February 13, 2020,10, 2022, PBF GP’s board of directors announced a cash distribution, based on the results of the fourth quarter of 2019,2021, of $0.5200$0.30 per unit. The distribution is payable on March 17, 202010, 2022 to PBFX unitholders of record at the close of business on February 25, 2020.24, 2022.
PBF LOGISTICS LP119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
DCLC, DPC, DCTC, Toledo Terminaling, PLPT, PBFX Op Co, TVPC, PNGPC, TRLC, CLC, PTC, DSLC and CPI serve as guarantors of the obligations under the 2023 Notes. These guarantees are full and unconditional and joint and several. For purposes of the following footnote, the Partnership is referred to as “Issuer.” The Indenture governs subsidiaries designated as “Guarantor Subsidiaries.” In addition, PBF LLC provides a limited guarantee of collection of the principal amount of the 2023 Notes but is not otherwise subject to the covenants of the Indenture. Refer to PBF LLC’s consolidated financial statements, which are included in its Annual Report on Form 10-K.
The 2023 Notes were co-issued by PBF Logistics Finance. For purposes of the following footnote, PBF Logistics Finance is referred to as “Co-Issuer.” The Co-Issuer has no independent assets or operations.
The following supplemental combining and consolidating financial information reflects the Issuer’s separate accounts, the combined accounts of the Guarantor Subsidiaries, the combining and consolidating adjustments and eliminations and the Issuer’s consolidated accounts for the dates and periods indicated. For purposes of the following combining and consolidating information, the Issuer’s investment in its subsidiaries and the Guarantor Subsidiaries’ investments in their subsidiaries are accounted for under the equity method of accounting.
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING BALANCE SHEET
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 16,629 |
| | $ | 18,337 |
| | $ | — |
| | $ | — |
| | $ | 34,966 |
|
Accounts receivable - affiliates | 194 |
| | 47,862 |
| | — |
| | — |
| | 48,056 |
|
Accounts receivable | — |
| | 7,351 |
| | — |
| | — |
| | 7,351 |
|
Prepaids and other current assets | 1,310 |
| | 2,518 |
| | — |
| | — |
| | 3,828 |
|
Due from related parties | 207,290 |
| | 788,430 |
| | — |
| | (995,720 | ) | | — |
|
Total current assets | 225,423 |
| | 864,498 |
| | — |
| | (995,720 | ) | | 94,201 |
|
Property, plant and equipment, net | — |
| | 854,610 |
| | — |
| | — |
| | 854,610 |
|
Goodwill | — |
| | 6,332 |
| | — |
| | — |
| | 6,332 |
|
Other non-current assets | — |
| | 17,859 |
| | — |
| | — |
| | 17,859 |
|
Investment in subsidiaries | 1,481,822 |
| | — |
| | — |
| | (1,481,822 | ) | | — |
|
Total assets | $ | 1,707,245 |
| | $ | 1,743,299 |
| | $ | — |
| | $ | (2,477,542 | ) | | $ | 973,002 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable - affiliates | $ | 1,746 |
| | $ | 4,708 |
| | $ | — |
| | $ | — |
| | $ | 6,454 |
|
Accounts payable | 384 |
| | 9,840 |
| | — |
| | — |
| | 10,224 |
|
Accrued liabilities | 9,498 |
| | 18,341 |
| | — |
| | — |
| | 27,839 |
|
Deferred revenue | — |
| | 3,189 |
| | — |
| | — |
| | 3,189 |
|
Due to related parties | 788,430 |
| | 207,290 |
| | — |
| | (995,720 | ) | | — |
|
Total current liabilities | 800,058 |
| | 243,368 |
| | — |
| | (995,720 | ) | | 47,706 |
|
Long-term debt | 802,104 |
| | — |
| | — |
| | — |
| | 802,104 |
|
Other long-term liabilities | — |
| | 18,109 |
| | — |
| | — |
| | 18,109 |
|
Total liabilities | 1,602,162 |
| | 261,477 |
| | — |
| | (995,720 | ) | | 867,919 |
|
| | | | | | | | | |
Commitments and contingencies (Note 11) | | | | | | | | | |
| | | | | | | | | |
Equity: | | | | | | | | | |
Net investment | — |
| | 1,481,822 |
| | — |
| | (1,481,822 | ) | | — |
|
Common unitholders | 105,083 |
| | — |
| | — |
| | — |
| | 105,083 |
|
Total equity | 105,083 |
| | 1,481,822 |
| | — |
| | (1,481,822 | ) | | 105,083 |
|
Total liabilities and equity | $ | 1,707,245 |
| | $ | 1,743,299 |
| | $ | — |
| | $ | (2,477,542 | ) | | $ | 973,002 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING BALANCE SHEET
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 4,010 |
| | $ | 15,898 |
| | $ | — |
| | $ | — |
| | $ | 19,908 |
|
Accounts receivable - affiliates | 9 |
| | 37,043 |
| | — |
| | — |
| | 37,052 |
|
Accounts receivable | 365 |
| | 7,146 |
| | — |
| | — |
| | 7,511 |
|
Prepaids and other current assets | 1,137 |
| | 3,461 |
| | — |
| | — |
| | 4,598 |
|
Due from related parties | 161,613 |
| | 561,605 |
| | — |
| | (723,218 | ) | | — |
|
Total current assets | 167,134 |
| | 625,153 |
| | — |
| | (723,218 | ) | | 69,069 |
|
Property, plant and equipment, net | — |
| | 862,117 |
| | — |
| | — |
| | 862,117 |
|
Goodwill | — |
| | 6,332 |
| | — |
| | — |
| | 6,332 |
|
Other non-current assets | — |
| | 18,835 |
| | — |
| | — |
| | 18,835 |
|
Investment in subsidiaries | 1,133,775 |
| | — |
| | — |
| | (1,133,775 | ) | | — |
|
Total assets | $ | 1,300,909 |
| | $ | 1,512,437 |
| | $ | — |
| | $ | (1,856,993 | ) | | $ | 956,353 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable - affiliates | $ | 1,239 |
| | $ | 10,808 |
| | $ | — |
| | $ | — |
| | $ | 12,047 |
|
Accounts payable | 1,176 |
| | 3,484 |
| | — |
| | — |
| | 4,660 |
|
Accrued liabilities | 39,847 |
| | 6,465 |
| | — |
| | — |
| | 46,312 |
|
Deferred revenue | — |
| | 2,960 |
| | — |
| | — |
| | 2,960 |
|
Due to related parties | 561,605 |
| | 161,613 |
| | — |
| | (723,218 | ) | | — |
|
Total current liabilities | 603,867 |
| | 185,330 |
| | — |
| | (723,218 | ) | | 65,979 |
|
Long-term debt | 673,324 |
| | — |
| | — |
| | — |
| | 673,324 |
|
Other long-term liabilities | — |
| | 23,860 |
| | — |
| | — |
| | 23,860 |
|
Total liabilities | 1,277,191 |
| | 209,190 |
| | — |
| | (723,218 | ) | | 763,163 |
|
| | | | | | | | | |
Commitments and contingencies (Note 11) | | | | | | | | | |
| | | | | | | | | |
Equity: | | | | | | | | | |
Net investment | — |
| | 1,133,775 |
| | — |
| | (1,133,775 | ) | | — |
|
Common unitholders | 23,718 |
| | — |
| | — |
| | — |
| | 23,718 |
|
Total PBF Logistics LP equity | 23,718 |
| | 1,133,775 |
| | — |
| | (1,133,775 | ) | | 23,718 |
|
Noncontrolling interest | — |
| | 169,472 |
| | — |
| | — |
| | 169,472 |
|
Total equity | 23,718 |
| | 1,303,247 |
| | — |
| | (1,133,775 | ) | | 193,190 |
|
Total liabilities and equity | $ | 1,300,909 |
| | $ | 1,512,437 |
| | $ | — |
| | $ | (1,856,993 | ) | | $ | 956,353 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF OPERATIONS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Issuer | | Guarantors Subsidiaries | | Non-Guarantors Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Revenue: | | | | | | | | | |
Affiliate | $ | — |
| | $ | 300,877 |
| | $ | — |
| | $ | — |
| | $ | 300,877 |
|
Third-party | — |
| | 39,335 |
| | — |
| | — |
| | 39,335 |
|
Total revenue | — |
| | 340,212 |
| | — |
| | — |
| | 340,212 |
|
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Operating and maintenance expenses | — |
| | 118,614 |
| | — |
| | — |
| | 118,614 |
|
General and administrative expenses | 24,515 |
| | — |
| | — |
| | — |
| | 24,515 |
|
Depreciation and amortization | — |
| | 38,601 |
| | — |
| | — |
| | 38,601 |
|
Change in contingent consideration | — |
| | (790 | ) | | — |
| | — |
| | (790 | ) |
Total costs and expenses | 24,515 |
| | 156,425 |
| | — |
| | — |
| | 180,940 |
|
| | | | | | | | | |
Income (loss) from operations | (24,515 | ) | | 183,787 |
| | — |
| | — |
| | 159,272 |
|
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Equity in earnings of subsidiaries | 181,848 |
| | — |
| | — |
| | (181,848 | ) | | — |
|
Interest expense, net | (46,555 | ) | | — |
| | — |
| | — |
| | (46,555 | ) |
Amortization of loan fees and debt premium | (1,780 | ) | | — |
| | — |
| | — |
| | (1,780 | ) |
Accretion on discounted liabilities | (829 | ) | | (1,939 | ) | | — |
| | — |
| | (2,768 | ) |
Net income | 108,169 |
| | 181,848 |
| | — |
| | (181,848 | ) | | 108,169 |
|
Less: Net income attributable to noncontrolling interest | — |
| | 7,881 |
| | — |
| | — |
| | 7,881 |
|
Net income attributable to PBF Logistics LP unitholders | $ | 108,169 |
| | $ | 173,967 |
| | $ | — |
| | $ | (181,848 | ) | | $ | 100,288 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF OPERATIONS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Issuer | | Guarantors Subsidiaries | | Non-Guarantors Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Revenue: | | | | | | | | | |
Affiliate | $ | — |
| | $ | 259,426 |
| | $ | — |
| | $ | — |
| | $ | 259,426 |
|
Third-party | — |
| | 24,014 |
| | — |
| | — |
| | 24,014 |
|
Total revenue | — |
| | 283,440 |
| | — |
| | — |
| | 283,440 |
|
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Operating and maintenance expenses | — |
| | 88,390 |
| | — |
| | — |
| | 88,390 |
|
General and administrative expenses | 21,371 |
| | — |
| | — |
| | — |
| | 21,371 |
|
Depreciation and amortization | — |
| | 29,809 |
| | — |
| | — |
| | 29,809 |
|
Total costs and expenses | 21,371 |
| | 118,199 |
| | — |
| | — |
| | 139,570 |
|
| | | | | | | | | |
Income (loss) from operations | (21,371 | ) | | 165,241 |
| | — |
| | — |
| | 143,870 |
|
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Equity in earnings of subsidiaries | 164,737 |
| | — |
| | — |
| | (164,737 | ) | | — |
|
Interest expense, net | (40,541 | ) | | — |
| | — |
| | — |
| | (40,541 | ) |
Amortization of loan fees and debt premium | (1,717 | ) | | — |
| | — |
| | — |
| | (1,717 | ) |
Accretion on discounted liabilities | (271 | ) | | (504 | ) | | — |
| | — |
| | (775 | ) |
Net income | 100,837 |
| | 164,737 |
| | — |
| | (164,737 | ) | | 100,837 |
|
Less: Net loss attributable to Predecessor | — |
| | (2,443 | ) | | — |
| | — |
| | (2,443 | ) |
Less: Net income attributable to noncontrolling interest | — |
| | 17,819 |
| | — |
| | — |
| | 17,819 |
|
Net income attributable to the partners | 100,837 |
| | 149,361 |
| | — |
| | (164,737 | ) | | 85,461 |
|
Less: Net income attributable to the IDR holder | 10,011 |
| | — |
| | — |
| | — |
| | 10,011 |
|
Net income attributable to PBF Logistics LP unitholders | $ | 90,826 |
| | $ | 149,361 |
| | $ | — |
| | $ | (164,737 | ) | | $ | 75,450 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF OPERATIONS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Issuer | | Guarantors Subsidiaries | | Non-Guarantors Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Revenue: | | | | | | | | | |
Affiliate | $ | — |
| | $ | 240,654 |
| | $ | — |
| | $ | — |
| | $ | 240,654 |
|
Third-party | — |
| | 16,934 |
| | — |
| | — |
| | 16,934 |
|
Total revenue | — |
| | 257,588 |
| | — |
| | — |
| | 257,588 |
|
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Operating and maintenance expenses | — |
| | 73,521 |
| | — |
| | — |
| | 73,521 |
|
General and administrative expenses | 16,284 |
| | — |
| | — |
| | — |
| | 16,284 |
|
Depreciation and amortization | — |
| | 24,404 |
| | — |
| | — |
| | 24,404 |
|
Total costs and expenses | 16,284 |
| | 97,925 |
| | — |
| | — |
| | 114,209 |
|
| | | | | | | | | |
Income (loss) from operations | (16,284 | ) | | 159,663 |
| | — |
| | — |
| | 143,379 |
|
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Equity in earnings of subsidiaries | 159,663 |
| | — |
| | — |
| | (159,663 | ) | | — |
|
Interest expense, net | (31,875 | ) | | — |
| | — |
| | — |
| | (31,875 | ) |
Amortization of loan fees and debt premium | (1,488 | ) | | — |
| | — |
| | — |
| | (1,488 | ) |
Net income | 110,016 |
| | 159,663 |
| | — |
| | (159,663 | ) | | 110,016 |
|
Less: Net loss attributable to Predecessor | — |
| | (4,986 | ) | | — |
| | — |
| | (4,986 | ) |
Less: Net income attributable to noncontrolling interest | — |
| | 14,565 |
| | — |
| | — |
| | 14,565 |
|
Net income attributable to the partners | 110,016 |
| | 150,084 |
| | — |
| | (159,663 | ) | | 100,437 |
|
Less: Net income attributable to the IDR holder | 9,055 |
| | — |
| | — |
| | — |
| | 9,055 |
|
Net income attributable to PBF Logistics LP unitholders | $ | 100,961 |
| | $ | 150,084 |
| | $ | — |
| | $ | (159,663 | ) | | $ | 91,382 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net income | $ | 108,169 |
| | $ | 181,848 |
| | $ | — |
| | $ | (181,848 | ) | | $ | 108,169 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | — |
| | 38,601 |
| | — |
| | — |
| | 38,601 |
|
Amortization of loan fees and debt premium | 1,780 |
| | — |
| | — |
| | — |
| | 1,780 |
|
Accretion on discounted liabilities | 829 |
| | 1,939 |
| | — |
| | — |
| | 2,768 |
|
Unit-based compensation expense | 6,765 |
| | — |
| | — |
| | — |
| | 6,765 |
|
Change in contingent consideration | — |
| | (790 | ) | | — |
| | — |
| | (790 | ) |
Equity in earnings of subsidiaries | (181,848 | ) | | — |
| | — |
| | 181,848 |
| | — |
|
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable - affiliates | (185 | ) | | (10,819 | ) | | — |
| | — |
| | (11,004 | ) |
Accounts receivable | 365 |
| | 445 |
| | — |
| | — |
| | 810 |
|
Prepaids and other current assets | (173 | ) | | (299 | ) | | — |
| | — |
| | (472 | ) |
Accounts payable - affiliates | 507 |
| | (2,152 | ) | | — |
| | — |
| | (1,645 | ) |
Accounts payable | (792 | ) | | 6,356 |
| | — |
| | — |
| | 5,564 |
|
Accrued liabilities | (751 | ) | | 1,260 |
| | — |
| | — |
| | 509 |
|
Amounts due to (from) related parties | 181,148 |
| | (181,148 | ) | | — |
| | — |
| | — |
|
Deferred revenue | — |
| | 229 |
| | — |
| | — |
| | 229 |
|
Other assets and liabilities | (2,043 | ) | | (234 | ) | | — |
| | — |
| | (2,277 | ) |
Net cash provided by operating activities | 113,771 |
| | 35,236 |
| | — |
| | — |
| | 149,007 |
|
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Expenditures for property, plant and equipment | — |
| | (31,746 | ) | | — |
| | — |
| | (31,746 | ) |
Investment in subsidiaries | (4,725 | ) | | — |
| | — |
| | 4,725 |
| | — |
|
Net cash used in investing activities | $ | (4,725 | ) | | $ | (31,746 | ) | | $ | — |
| | $ | 4,725 |
| | $ | (31,746 | ) |
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS (continued)
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from financing activities: | | | | | | | | | |
Proceeds from issuance of common units | $ | 132,483 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 132,483 |
|
Acquisition of TVPC noncontrolling interest | (200,000 | ) | | — |
| | — |
| | — |
| | (200,000 | ) |
Distributions to unitholders | (123,910 | ) | | — |
| | — |
| | — |
| | (123,910 | ) |
Distributions to TVPC members | — |
| | (8,500 | ) | | — |
| | — |
| | (8,500 | ) |
Deferred payment for the East Coast Storage Assets Acquisition | (32,000 | ) | | — |
| | — |
| | — |
| | (32,000 | ) |
Contribution from parent | — |
| | 4,725 |
| | — |
| | (4,725 | ) | | — |
|
Proceeds from revolving credit facility | 228,000 |
| | — |
| | — |
| | — |
| | 228,000 |
|
Repayment of revolving credit facility | (101,000 | ) | | — |
| | — |
| | — |
| | (101,000 | ) |
Deferred financing costs and other | — |
| | 2,724 |
| | — |
| | — |
| | 2,724 |
|
Net cash used in financing activities | (96,427 | ) | | (1,051 | ) | | — |
| | (4,725 | ) | | (102,203 | ) |
| | | | | | | | | |
Net change in cash and cash equivalents | 12,619 |
| | 2,439 |
| | — |
| | — |
| | 15,058 |
|
Cash and cash equivalents, beginning of period | 4,010 |
| | 15,898 |
| | — |
| | — |
| | 19,908 |
|
Cash and cash equivalents, end of period | $ | 16,629 |
| | $ | 18,337 |
| | $ | — |
| | $ | — |
| | $ | 34,966 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net income | $ | 100,837 |
| | $ | 164,737 |
| | $ | — |
| | $ | (164,737 | ) | | $ | 100,837 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | — |
| | 29,809 |
| | — |
| | — |
| | 29,809 |
|
Amortization of loan fees and debt premium | 1,717 |
| | — |
| | — |
| | — |
| | 1,717 |
|
Accretion on discounted liabilities | 271 |
| | 504 |
| | — |
| | — |
| | 775 |
|
Unit-based compensation expense | 5,757 |
| | — |
| | — |
| | — |
| | 5,757 |
|
Equity in earnings of subsidiaries | (164,737 | ) | | — |
| | — |
| | 164,737 |
| | — |
|
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable - affiliates | (8 | ) | | 3,773 |
| | — |
| | — |
| | 3,765 |
|
Accounts receivable | (365 | ) | | (5,723 | ) | | — |
| | — |
| | (6,088 | ) |
Prepaids and other current assets | (566 | ) | | (113 | ) | | — |
| | — |
| | (679 | ) |
Accounts payable - affiliates | (783 | ) | | 530 |
| | — |
| | — |
| | (253 | ) |
Accounts payable | 1,021 |
| | (1,985 | ) | | — |
| | — |
| | (964 | ) |
Accrued liabilities | 330 |
| | (1,702 | ) | | — |
| | — |
| | (1,372 | ) |
Amounts due to (from) related parties | 75,417 |
| | (75,417 | ) | | — |
| | — |
| | — |
|
Deferred revenue | — |
| | 1,522 |
| | — |
| | — |
| | 1,522 |
|
Other assets and liabilities | (1,114 | ) | | (571 | ) | | — |
| | — |
| | (1,685 | ) |
Net cash provided by operating activities | 17,777 |
| | 115,364 |
| | — |
| | — |
| | 133,141 |
|
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Expenditures for property, plant and equipment | — |
| | (42,351 | ) | | — |
| | — |
| | (42,351 | ) |
Knoxville Terminals Purchase | — |
| | (58,356 | ) | | — |
| | — |
| | (58,356 | ) |
East Coast Storage Assets Acquisition | — |
| | (74,989 | ) | | — |
| | — |
| | (74,989 | ) |
Investment in subsidiaries | (83,524 | ) | | — |
| | — |
| | 83,524 |
| | — |
|
Net cash used in investing activities | $ | (83,524 | ) | | $ | (175,696 | ) | | $ | — |
| | $ | 83,524 |
| | $ | (175,696 | ) |
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS (continued)
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from financing activities: | | | | | | | | | |
Proceeds from issuance of common units | $ | 34,820 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 34,820 |
|
Distributions to unitholders | (98,786 | ) | | — |
| | — |
| | — |
| | (98,786 | ) |
Distributions to TVPC members | — |
| | (20,250 | ) | | — |
| | — |
| | (20,250 | ) |
Contribution from parent | — |
| | 87,725 |
| | — |
| | (83,524 | ) | | 4,201 |
|
Proceeds from revolving credit facility | 170,000 |
| | — |
| | — |
| | — |
| | 170,000 |
|
Repayment of revolving credit facility | (43,700 | ) | | — |
| | — |
| | — |
| | (43,700 | ) |
Deferred financing costs and other | (3,486 | ) | | — |
| | — |
| | — |
| | (3,486 | ) |
Net cash provided by financing activities | 58,848 |
| | 67,475 |
| | — |
| | (83,524 | ) | | 42,799 |
|
| | | | | | | | | |
Net change in cash and cash equivalents | (6,899 | ) | | 7,143 |
| | — |
| | — |
| | 244 |
|
Cash and cash equivalents, beginning of period | 10,909 |
| | 8,755 |
| | — |
| | — |
| | 19,664 |
|
Cash and cash equivalents, end of period | $ | 4,010 |
| | $ | 15,898 |
| | $ | — |
| | $ | — |
| | $ | 19,908 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from operating activities: | | | | | | | | | |
Net income | $ | 110,016 |
| | $ | 159,663 |
| | $ | — |
| | $ | (159,663 | ) | | $ | 110,016 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | — |
| | 24,404 |
| | — |
| | — |
| | 24,404 |
|
Amortization of loan fees and debt premium | 1,488 |
| | — |
| | — |
| | — |
| | 1,488 |
|
Unit-based compensation expense | 5,345 |
| | — |
| | — |
| | — |
| | 5,345 |
|
Equity in earnings of subsidiaries | (159,663 | ) | | — |
| | — |
| | 159,663 |
| | — |
|
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable - affiliates | 124 |
| | (4,078 | ) | | — |
| | — |
| | (3,954 | ) |
Accounts receivable | — |
| | 2,871 |
| | — |
| | — |
| | 2,871 |
|
Prepaids and other current assets | (265 | ) | | 226 |
| | — |
| | — |
| | (39 | ) |
Accounts payable - affiliates | 352 |
| | 369 |
| | — |
| | — |
| | 721 |
|
Accounts payable | 105 |
| | 21 |
| | — |
| | — |
| | 126 |
|
Accrued liabilities | 206 |
| | (2,418 | ) | | — |
| | — |
| | (2,212 | ) |
Amounts due to (from) related parties | 82,873 |
| | (82,873 | ) | | — |
| | — |
| | — |
|
Deferred revenue | — |
| | 486 |
| | — |
| | — |
| | 486 |
|
Other assets and liabilities | (957 | ) | | (113 | ) | | — |
| | — |
| | (1,070 | ) |
Net cash provided by operating activities | 39,624 |
| | 98,558 |
| | — |
| | — |
| | 138,182 |
|
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Expenditures for property, plant and equipment | — |
| | (80,161 | ) | | — |
| | — |
| | (80,161 | ) |
Toledo Products Terminal Acquisition | — |
| | (10,097 | ) | | — |
| | — |
| | (10,097 | ) |
Purchases of marketable securities | (75,036 | ) | | — |
| | — |
| | — |
| | (75,036 | ) |
Maturities of marketable securities | 115,060 |
| | — |
| | — |
| | — |
| | 115,060 |
|
Investment in subsidiaries | (11,072 | ) | | — |
| | — |
| | 11,072 |
| | — |
|
Net cash provided by (used in) investing activities | $ | 28,952 |
| | $ | (90,258 | ) | | $ | — |
| | $ | 11,072 |
| | $ | (50,234 | ) |
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
15. CONSOLIDATING FINANCIAL STATEMENTS OF PBF LOGISTICS
CONSOLIDATING STATEMENT OF CASH FLOWS (continued)
|
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Combining and Consolidating Adjustments | | Total |
Cash flows from financing activities: | | | | | | | | | |
Distributions to unitholders | $ | (85,430 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (85,430 | ) |
Distributions to TVPC members | — |
| | (21,544 | ) | | — |
| | — |
| | (21,544 | ) |
Contribution from parent | — |
| | 21,511 |
| | — |
| | (11,072 | ) | | 10,439 |
|
Proceeds from issuance of senior notes | 178,500 |
| | — |
| | — |
| | — |
| | 178,500 |
|
Repayment of term loan | (39,664 | ) | | — |
| | — |
| | — |
| | (39,664 | ) |
Proceeds from revolving credit facility | 20,000 |
| | — |
| | — |
| | — |
| | 20,000 |
|
Repayment of revolving credit facility | (179,500 | ) | | — |
| | — |
| | — |
| | (179,500 | ) |
Repayment of Affiliate Note Payable | — |
| | (11,600 | ) | | — |
| | — |
| | (11,600 | ) |
Deferred financing costs and other | (3,706 | ) | | — |
| | — |
| | — |
| | (3,706 | ) |
Net cash used in financing activities | (109,800 | ) | | (11,633 | ) | | — |
| | (11,072 | ) | | (132,505 | ) |
| | | | | | | | | |
Net change in cash and cash equivalents | (41,224 | ) | | (3,333 | ) | | — |
| | — |
| | (44,557 | ) |
Cash and cash equivalents, beginning of period | 52,133 |
| | 12,088 |
| | — |
| | — |
| | 64,221 |
|
Cash and cash equivalents, end of period | $ | 10,909 |
| | $ | 8,755 |
| | $ | — |
| | $ | — |
| | $ | 19,664 |
|
PBF LOGISTICS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT BARREL, UNIT AND PER UNIT DATA)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes quarterly financial data for the years ended December 31, 2019 and 2018 (in thousands, except per unit amounts).
|
| | | | | | | | | | | | | | | | |
| | 2019 Quarter Ended |
| | March 31 | | June 30 | | September 30 | | December 31 |
Total revenue | | $ | 78,845 |
| | $ | 82,750 |
| | $ | 86,377 |
| | $ | 92,240 |
|
Income from operations | | 34,198 |
| | 37,763 |
| | 44,390 |
| | 42,921 |
|
Net income | | 22,076 |
| | 25,328 |
| | 30,994 |
| | 29,771 |
|
Net income attributable to PBF Logistics LP unitholders | | 17,357 |
| | 22,166 |
| | 30,994 |
| | 29,771 |
|
Net income per limited partner unit: | | | | | | | | |
Common - basic | | $ | 0.35 |
| | $ | 0.37 |
| | $ | 0.50 |
| | $ | 0.48 |
|
Common - diluted | | 0.35 |
| | 0.37 |
| | 0.50 |
| | 0.48 |
|
|
| | | | | | | | | | | | | | | | |
| | 2018 Quarter Ended |
| | March 31 | | June 30 | | September 30 | | December 31 |
Total revenue | | $ | 64,740 |
| | $ | 68,099 |
| | $ | 70,556 |
| | $ | 80,045 |
|
Income from operations | | 33,926 |
| | 33,796 |
| | 37,577 |
| | 38,571 |
|
Net income | | 23,978 |
| | 23,371 |
| | 27,010 |
| | 26,478 |
|
Net income attributable to PBF Logistics LP unitholders | | 18,280 |
| | 16,677 |
| | 18,724 |
| | 21,769 |
|
Net income per limited partner unit: | | | | | | | | |
Common - basic | | $ | 0.43 |
| | $ | 0.39 |
| | $ | 0.42 |
| | $ | 0.48 |
|
Common - diluted | | 0.43 |
| | 0.39 |
| | 0.42 |
| | 0.48 |
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain a system of disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that is designed to provide reasonable assurance that information which is required to be disclosed is accumulated and communicated to management in a timely manner. Under the supervision and with the participation of management, including our principal executive officer and our principal financial officer, we have evaluated the effectiveness of our system of disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of December 31, 2019.2021. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
The SEC, as required by Section 404 of the Sarbanes-Oxley Act, adopted rules generally requiring every public company that files reports with the SEC to include a management report on such company’s internal control over financial reporting in its annual report. In addition, such company’s independent registered public accounting firm must attest to its internal control over financial reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 20192021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013 framework). Based on such assessment, management concluded that, as of December 31, 2019,2021, our internal control over financial reporting is effective.
Report of Independent Registered Public Accounting Firm
Our independent registered public accounting firm has audited the effectiveness of our internal control over financing reporting as of December 31, 20192021 and issued an attestation report on that effectiveness, which is presented on page 7885 of this report.Form 10-K.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter-ended December 31, 20192021 that hashave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Management of PBF Logistics LP
We are managed by the directors and executive officers of our general partner, PBF GP, which is a wholly-owned subsidiary of PBF LLC. PBF LLC is, in turn, a subsidiary of PBF Energy. Our general partner is not elected by our unitholders and will not be subject to re-election by our unitholders in the future. Our general partner has a board of directors. The initial directors were appointed by PBF Energy and thereafter were appointed by the directors then in office. Our unitholders are not entitled to elect the directors of PBF GP, directly or indirectly, or to participate in our management or operations.
Certain of our general partner’s affiliates’ employees are seconded to us pursuant to the Services Agreement. These seconded employees provide operating, routine maintenance and other services with respect to the assets owned and operated by us under our direction, supervision and control pursuant to the Services Agreement. We sometimes refer to these individuals in this Form 10-K as our employees because they provide services to us directly.
Director Independence
Although most companies listed on the NYSE are required to have a majority of independent directors serving on the board of directors of the listed company, the NYSE does not require a publicly traded limited partnership like us to have a majority of independent directors on the board of directors of our general partner or to establish a compensation or a nominating and corporate governance committee. We are, however, required to have an audit committee of at least three members, and all of our audit committee members are required to meet the independence and financial literacy tests established by the NYSE and the Exchange Act. The board of directors of our general partner has determined that Bruce A. Jones, David Roush and Lawrence Ziemba are independent under applicable SEC rules and regulations and the rules of the NYSE. Under the NYSE’s listing standards, a director will not be deemed independent unless the board of directors of our general partner affirmatively determines that the director has no material relationship with us. Based on information requested from and provided by each director concerning his background, employment and affiliations, including commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, the board of directors of our general partner has determined that each of Messrs. Jones, Roush and Ziemba has no material relationship with us or PBF Energy, either directly or as a partner, stockholder or officer of an organization that has a relationship with us or PBF Energy, and each of them is therefore independent under the NYSE’s listing standards and applicable SEC rules and regulations.
Director Experience and Qualifications
The board of directors of our general partner as a whole is responsible for filling vacancies on the board of directors at any time during the year, and for selecting individuals to serve on the board of directors of our general partner. From time to time, the board of directors may utilize the services of search firms or consultants to assist in identifying and screening potential candidates.
Committees of the Board of Directors
The board of directors of our general partner has two standing committees, an audit committee and a conflicts committee, and may have such other committees as the board of directors of our general partner shall determine from time to time.
Each of the standing committees of the board of directors of our general partner has the composition and responsibilities described below. The standing audit committee has a written charter that may be found on our
website at www.pbflogistics.com. In addition, paper copies of the charter are available free of charge to all unitholders by written request to the Secretary, PBF Logistics LP, One Sylvan Way, Second Floor, Parsippany, New Jersey 07054. The audit committee reviews the adequacy of its charter on an annual basis, in addition to evaluating its performance and reporting to the board on such evaluation. All of the members of the standing committees are independent and outside directors as defined by the rules and regulations of the NYSE, the SEC, the IRS and our corporate guidelines, as applicable.
Audit Committee
The audit committee of the board of directors of our general partner assists the board of directors of our general partner in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and corporate policies and controls. The audit committee has the sole authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof and pre-approve any non-audit services to be rendered by our independent registered public accounting firm. The audit committee also is responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm is given unrestricted access to the audit committee. The board of directors of our general partner has determined that each of Bruce A. Jones, David Roush and Lawrence Ziemba meet the requirements to serve on the audit committee and our audit committee is therefore comprised of the following independent directors: Bruce A. Jones, David Roush and Lawrence Ziemba. Mr. Roush serves as the Chairman of the audit committee and as an “audit committee financial expert.”
Conflicts Committee
At least three members of the board of directors of our general partner serve on the conflicts committee to review specific matters that may involve conflicts of interest in accordance with the terms of our partnership agreement. The conflicts committee determines if the resolution of the conflict of interest is fair and reasonable to us. The members of the conflicts committee are not officers or employees of our general partner or directors, officers or employees of its affiliates, and meet the independence and experience standards established by the NYSE and the Exchange Act to serve on an audit committee of a board of directors. In addition, the members of our conflicts committee may not own any interest in our general partner or its affiliates or any interest in us or our subsidiaries other than common units or awards under our incentive compensation plan. Any matters approved by the conflicts committee in good faith will be deemed to be approved by all of our partners and not a breach by our general partner of any duties it may owe us or our unitholders. The board of directors of our general partner has determined that each of Bruce A. Jones, David Roush and Lawrence Ziemba meet the requirements to serve on the conflicts committee and the conflicts committee is therefore comprised of the following independent directors: Bruce A. Jones, David Roush and Lawrence Ziemba. Mr. Roush serves as the Chairman of the conflicts committee.
Meetings of the Board of Directors
During the last fiscal year, the board of directors of our general partner hadhad five meetings,meetings, while the audit committee hadhad four meetings and there were no meetings held by the conflicts committee had sixteen meetings.committee. All directors have access to members of management and a substantial amount of information transfer and informal communication occurs between meetings. None of the directors attended fewer than 75% of the aggregate number of meetings of the board of directors and committees of the board of directors of our general partner on which the director served. Under our corporatecorporate governance guidelines, executive sessions of the non-management directors are held periodically as part of the routine activities and deliberation of the board of directors. The non-management directors determine among themselves who shall preside at such meetings. The non-management directors may request that certain employees and executive officers of our general partner and/or PBF Energy and other advisers and consultants to make presentations or participate in discussions at such meetings. To the extent this group of non-management directors does not also meet the independence standards of the NYSE, the directors who do meet such independence requirements shall also meet in executive sessions at least once a year.
Directors and Executive Officers of PBF Logistics GP, LLC
The following table shows information for the executive officers and directors of our general partner as of February 20, 2020 (unless otherwise stated).17, 2022. Directors are elected by the board membersof directors of our general partner and are appointed for a one-year term and hold office until their successors have been elected or qualified or until the earlier of their death, resignation, retirement, removal or disqualification. Executive officers are appointed by, and serve at the discretion of, the board of directors of our general partner. Some of our directors and all of our executive officers also serve as executive officers of PBF Energy.
|
| | | | | | | | | | | | | |
| | Age | | |
Name | | (as of December 31, 2019)2021) | | Position with PBF Logistics GP, LLC |
Thomas J. Nimbley | | 6870 | | Chief Executive Officer and Chairman of the Board of Directors |
Matthew C. Lucey | | 4648 | | Executive Vice President and Director |
Trecia Canty | | 5052 | | Senior Vice President, General Counsel and Secretary |
C. Erik Young | | 4244 | | Senior Vice President, Chief Financial Officer and Director |
Timothy Paul Davis | | 5759 | | Assistant Secretary |
Michael D. Gayda | | 6567 | | Director |
Bruce A. Jones | | 6668 | | Director |
David Roush | | 6668 | | Director |
Karen B. Davis | | 63 | | Former Director (through December 31, 2019) |
Lawrence Ziemba | | 6466 | | Director (since December 31, 2019) |
Thomas J. Nimbley was appointed Chairman of the Board of Directors of our general partner in July 2016 and serves as the Chief Executive Officer. Mr. Nimbley has served as the Chief Executive Officer of PBF Energy and its subsidiaries since June 2010 and was the Executive Vice President, Chief Operating Officer of PBF Energy from March 2010 through June 2010. Prior to joining PBF Energy, Mr. Nimbley served as a Principal for Nimbley Consultants LLC from June 2005 to March 2010, where he provided consulting services and assisted on the acquisition of two refineries. He previously served as Senior Vice President and head of Refining for Phillips Petroleum Company (“Phillips”) and subsequently Senior Vice President and head of Refining for ConocoPhillips (“ConocoPhillips”) domestic refining system (13 locations) following the merger of Phillips and Conoco Inc. Before joining Phillips at the time of its acquisition of Tosco Corporation (“Tosco”) in September 2001, Mr. Nimbley served in various positions with Tosco and its subsidiaries starting in April 1993.
Matthew C. Lucey was appointed a Director of our general partner in 2013 and has served as our Executive Vice President since April 2014. Prior to that, from 2013, he served as Senior Vice President, Chief Financial Officer of our general partner. Mr. Lucey has served as the President of PBF Energy since January 2015. From April 2014 to January 2015, Mr. Lucey served as Executive Vice President of PBF Energy. Mr. Lucey joined PBF Energy as Vice President, Finance in April 2008 and served as Senior Vice President, Chief Financial Officer of PBF Energy from April 2010 until his promotion in March 2014. Prior thereto, Mr. Lucey served as a Managing Director of M.E. Zukerman & Co., a New York-based private equity firm specializing in several sectors of the broader energy industry, from 2001 to 2008. Before joining M.E. Zukerman & Co., Mr. Lucey spent six years in the banking industry.
Trecia Canty was appointed Senior Vice President, General Counsel and Secretary of our general partner in September 2015. Ms. Canty joined PBF Energy in November 2012 and has led the Company’s commercial and finance legal operations. Prior to September 2015, she served as our Vice President, Senior Deputy General Counsel and Assistant Secretary. Prior to joining the Company, Ms. Canty served as Associate General Counsel, Corporate
and Assistant Secretary of Southwestern Energy Company, where her responsibilities included finance and mergers and acquisitions, securities and corporate compliance and corporate governance. She also provided legal support to the midstream marketing and logistics businesses. Prior to joining Southwestern Energy Company in 2004, she was an associate with Cleary, Gottlieb, Steen & Hamilton. Ms. Canty has over 20 years of experience focused on energy, mergers and acquisition, securities, finance and corporate matters.
C. Erik Young was appointed a Director of our general partner in October 2016 and serves as the Senior Vice President and Chief Financial Officer. Mr. Young has served as the Senior Vice President and Chief Financial Officer of our general partner and of PBF Energy since April 1, 2014. Mr. Young previously served as Director, Strategic Planning at PBF Energy since December 2010, where he was responsible for both corporate development and capital markets initiatives for PBF Energy. Prior to joining the Company, Mr. Young spent 11 years in corporate finance, strategic planning and mergers and acquisitions roles across a variety of industries. He began his career in investment banking before joining J.F. Lehman & Company, a private equity investment firm, in 2001.
Timothy Paul Davis was appointed Assistant Secretary of a subsidiary of our general partner and President, PBF Energy Western Region LLC in September 2017. Mr. Davis joined PBF Energy in April of 2012 and served as head of its commercial operations related to crude oil and refinery feedstock sourcing from May of 2013 to January 2015 and, from January 2015 to September 2015, served as its Co-Head of Commercial and served as Senior Vice President, Western Region Commercial Operations from September 2015 to September 2017. Previously, Mr. Davis was responsible for managing the U.S. clean products commercial operations for Hess Energy Trading Company from 2006 to 2012. Prior to that, Mr. Davis was responsible for Premcor Inc.’s (“Premcor”) U.S. Midwest clean products disposition group. Mr. Davis has over 30 years of experience in commercial operations in crude oil and refined products, including 16 years with the ExxonMobil Corporation in various operational and commercial positions, including sourcing refinery feedstocks and crude oil and the disposition of refined petroleum products, as well as optimization roles within refineries.
Michael D. Gayda was appointed a Director of our general partner in 2013. Mr. Gayda previously also served as President of our general partner and of PBF Energy until his retirement in January 2015. Since February 2015, Mr. Gayda has served as a consultant and arbiter on U.S. and international energy matters. Mr. Gayda joined PBF Energy as Executive Vice President, General Counsel and Secretary in April 2010 and served as its President from June 2010 until his retirement in 2015 and was a director from inception until October 2009. Prior thereto, from May 2006 until January 2010 Mr. Gayda served as Executive Vice President, General Counsel and Secretary of Petroplus Holdings AG (“Petroplus”). Prior to Petroplus, he served as an executive officer of Premcor until its sale to Valero Energy Corporation (“Valero”) in August 2005 and as General Counsel-Refining for Phillips 66 Company, a division of Phillips, following Phillips’ acquisition of Tosco in September 2001. Mr. Gayda previously served as a Vice President of certain of Tosco’s subsidiaries.
Bruce A. Jones was appointed a Director of our general partner in April 2014. The board of directors of our general partner has determined that Mr. Jones is independent and, as a result, Mr. Jones serves on the Audit and Conflicts Committees. Mr. Jones has over 30 years of experience in energy related industries, including 19 years in refining and distribution. From May 2006 until February 2010, Mr. Jones served as Executive Vice President, Chief Operating Officer of Petroplus during its acquisitions of five European refineries. Mr. Jones retired in February 2010. Prior to Petroplus, he served as Vice President Environmental Health and Safety for Premcor until its sale to Valero in August 2005. Mr. Jones previously held various positions with Phillips, Tosco, Exxon Corporation and Public Service Electric and Gas Company. Mr. Jones has extensive experience in the energy industry, including refining and distribution operations with a strong basis in safe and environmentally compliant operations, and, for these reasons, he is a valuable member of the board of directors of our general partner.
David Roush was appointed a Director of our general partner in April 2014. The board of directors of our general partner has determined that Mr. Roush is independent and, as a result, Mr. Roush serves on the Audit and Conflicts Committees. Mr. Roush is a licensed CPA and an experienced entrepreneur and financial expert. Mr. Roush is a founder and principal of JDP Holdings, Inc. (“JDP Holdings”), an investment company which acquires
and develops technology companies. He founded JDP Holdings, Inc. in the early part of 2010. Prior to that, Mr. Roush founded Insurance.com, a leading, web-based, auto insurance agency, in 2000 and worked as its Chairman and Chief Executive Officer until February 2009. Mr. Roush has also held various positions at Progressive Insurance and worked as an internal auditor for the Bendix/Allied Signal Corporation. Mr. Roush has over 40 years of accounting and management experience and is a licensed CPA, and, for these reasons, he is a valuable member of the board of directors of our general partner.
Karen B. Davis was appointed a Director of our general partner in December 2017. The board of directors of our general partner had determined that Ms. Davis was independent and, as a result, Ms. Davis served on the Audit and Conflicts Committees. Ms. Davis most recently served as the Executive Vice President and Chief Financial Officer of both Western Refining Inc. (“Western”) and the general partner of Western Refining Logistics LP from August 2016 to May 2017. Prior to that, she served as the Executive Vice President and Chief Financial Officer of Western’s affiliate, the general partner of Northern Tier Energy LP from February 2015 to August 2016. Ms. Davis also served as the Chief Financial Officer of the general partner of Western Refining Logistics and the Vice President-Director of Investor Relations of Western from December 2014 to February 2015. Previously, Ms. Davis served as the Chief Accounting Officer of PBF Energy Inc. from February 2011 to November 2014, and of PBF Logistics GP LLC, the general partner of PBF Logistics LP, from its inception in February 2013 until November 2014. During her career, Ms. Davis has served in other executive accounting and finance positions with various public and private companies throughout the United States. Ms. Davis’s extensive experience in the energy industry as a finance executive established her as a valuable member of the board of directors of our general partner during her tenure. Ms. Davis resigned from her position as a member of the board of directors of our general partner and as a member of the Audit Committee and Conflicts Committee thereof, each effective as of December 31, 2019.
Lawrence Ziemba was appointed a Director of our general partner in December 2019. The board of directors of our general partner has determined that Mr. Ziemba is independent and, as a result, Mr. Ziemba serves on the Audit and Conflicts Committees. Mr. Ziemba retired from Phillips 66 as Executive VP, Refining and a member of the Executive Committee in December 2017. He held this position since the company’s separation from ConocoPhillips in May 2012. Prior to 2012, he was President, Global Refining and served on the Executive Committee of ConocoPhillips. During his career, he held various positions in downstream for ConocoPhillips, Phillips, Tosco, and Unocal Corporation, where he started his career. Mr. Ziemba’s extensive career across many aspects of the refining industry, including numerous downstream positions, make him a valuable member of the board of directors of our general partner.
Board of Directors Leadership Structure
The board of directors of our general partner has no policy with respect to the separation of the offices of chairman of the board and chief executive officer; rather, that relationship is defined and governed by the limited liability company agreement of our general partner, which permits the same person to hold both offices.
Board of Directors Role in Risk Oversight
Our corporate governance guidelines provide that the board of directors of our general partner is responsible for assessing the major risks facing us and the options for their mitigation. Specifically, pursuant to its charter, the audit committee is responsible for reviewing and discussing with management the guidance and policies governing the process by which risk assessment and management is undertaken.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees as well as a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. These codes are posted on our website at www.pbflogistics.com under “Corporate Governance” in the
“Investor “Investor Relations” section. In addition, paper copies of these codes are available to all unitholders free of charge by written request to the Secretary, PBF Logistics LP, One Sylvan Way, Second Floor, Parsippany, New Jersey 07054. We will, within the time periods proscribed by the SEC and the NYSE, timely post on our website at www.pbflogistics.com any amendments to these codes and any waiver applicable to any of the Chief Executive Officer, Chief Financial Officer or Principal Accounting Officer.
Communications with PBF Logistics GP Board of Directors by Unitholders and Other Interested Parties
Unitholders and other interested parties may send communications to the board of directors of our general partner or any committee thereof, the Chairman of the Board or any other director in care of the Secretary of PBF Logistics LP, One Sylvan Way, Second Floor, Parsippany, New Jersey 07054 and should clearly mark the envelope as “Unitholder Communications with Directors” and clearly identify the intended recipient(s). The General Counsel of our general partner will review each communication received and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted by the board of directors relating to the subject matter of the communication; and (2) the communication falls within the scope of matters generally considered by the board of directors. To the extent the subject matter of a communication relates to matters that have been delegated by the board of directors to a committee or to an executive officer of our general partner, then the General Counsel may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the directors or an executive officer does not imply or create any fiduciary duty of the directors or executive officer to the person submitting the communications.
ITEM 11. EXECUTIVE COMPENSATION
Neither we nor our general partner directly employs any of the persons responsible for managing our business. All of our general partner’s executive officers and other management personnel necessary for our business to function are employees of subsidiaries of PBF Energy.
Named Executive Officers
This Compensation Discussion and Analysis (“CD&A”) discusses the principles underlying our general partner’s compensation programs and the key executive compensation decisions that were made for 2019.2021. It also explains the most important factors relevant to such decisions. This CD&A provides context and background for the compensation earned and awarded to our named executive officers (“NEOs”), as reflected in the compensation tables that follow the CD&A. Our NEOs for 20192021 were as follows:
•Thomas J. Nimbley, Chief Executive Officer and Chairman of the Board of Directors
•C. Erik Young, Senior Vice President, Chief Financial Officer and Director
•Matthew C. Lucey, Executive Vice President and Director
•Trecia Canty, Senior Vice President, General Counsel and Secretary
•Timothy Paul Davis, Assistant Secretary
Overview - Compensation Decisions and Allocation of Compensation Expenses
The board of directors of our general partner does not have a compensation committee. The board of directors of our general partner does not feel that a compensation committee is necessary at this time, primarily because neither our general partner nor the Partnership has a significant amount of direct employees or executive officers to compensate. However, the board of directors believes it is important to promote the interests of the Partnership and the general partner by providing to employees of the Partnership’s affiliates and others who perform services for us or on our behalf incentive compensation awards for their service. Accordingly, pursuant to our partnership agreement, the general partner is allowed to and has adopted the PBF Logistics LP 2014 Long-Term Incentive Plan (as amended, “Long-Term Incentive Plan” or “LTIP”). Due to the fact that several of the members of the
board of directors of our general partner perform services on our behalf in their roles as executive officers of PBF Energy, the LTIP is fully administered by the disinterested members of the board of directors. The disinterested members of the board of directors may also delegate to an executive officer of our general partner the authority to issue awards to employees other than Section 16 officers of our general partner.
Under the terms of the Omnibus Agreement, we pay an annual administrative fee to PBF Energy for the provision of general and administrative services. Pursuant to the terms of the Omnibus Agreement, PBF Energy may increase or decrease such administrative fee by a percentage equal to the change in the PPI over the previous 12 calendar months or to reflect any increase in the cost of providing centralized corporate services due to changes in any law, rule or regulation, including any interpretation of such laws, rules or regulations. The annual administrative fee was increased towill remain at $6.0 million effective as of January 1, 2020.for the year ending December 31, 2022. The general and administrative services covered by the annual administrative fee include, without limitation, executive management services of PBF Energy employees who devote less than 50% of their time to our business, financial and administrative services, information technology services, legal services, health, safety and environmental services, human resources services and insurance administration. No service covered by the administrative fee is assigned any particular value individually. Additionally, the Omnibus Agreement requires us to reimburse PBF Energy directly for a proportionate amount of the salary and employee benefits costs of PBF Energy employees who devote more than 50% of their time to our business and affairs.
None of our NEOs devoted more than 50% of their total business time to our business and affairs in 2019.2021. Although our NEOs provide services to both PBF Energy and us, no portion of the administrative fee is specifically allocated to services provided by our NEOs to us. Instead, the administrative fee covers all centralized services provided to us by PBF Energy, and we have not reimbursed PBF Energy for the cost of such services. Except for awards under the LTIP, which were approved by the independent directors of the board of directors of our general partner, PBF Energy had the ultimate decision-making authority with respect to the compensation of our NEOs.
Compensation Objectives and Philosophy
Overview
Because neither we nor our general partner employ any of our NEOs and because our NEOs are compensated by PBF Energy to manage our business and affairs, we do not provide traditional fixed or discretionary compensation (e.g., salary and bonus) to our NEOs. However, we believe that our NEOs should have an ongoing stake in our success by receiving compensation in the form of long-term incentive awards. Accordingly, our executive compensation program currently consists of a single element: long-term incentives in the form of awards under the LTIP. Our 20192021 NEO compensation framework was designed to reward our NEOs for their efforts with respect to our acquisitions, provide retention incentives for our NEOs, and motivate our NEOs to increase the value of our units. Our compensation program is intended to:
•motivate and retain our general partner’s key executives;
•align the long-term economic interests of our general partner’s executives with those of our unitholders; and
•reward excellence and performance by our general partner’s executives that increases the value of our units.
These objectives govern the decisions of the disinterested members of the board of directors of our general partner with respect to the amount of awards made under the LTIP to our NEOs.
Our general partner did not engage a compensation consultant in 2019.2021.
2014 Long-Term Incentive PlanCompensation
Awards may be made under the LTIP to officers, directors and employees of subsidiaries of PBF Energy, our general partner or its affiliates, as well as any consultants or other individuals who perform services for us. In recognition of the strong performance of our assets and the successful completion of our recent acquisitions and organic growth projects, the Compensation Committee of PBF Energy and the board of directors of our general partner approved grants under the LTIP to our NEOs in 2019.2021. Each of our NEOs received a grant of phantom units that vests ratably over a four-year period, or “service phantom units,” subject to certain accelerated vesting rights. These phantom units are accompanied by distribution equivalent rights (“DERs”) that provide for a lump sum amount paid in cash on the vesting date that is equal to the accrued distributions from the grant date of the phantom units through the vesting date. Phantom units motivate our NEOs to attain our long term goals and support our overall business priorities as well as aligning our NEOs interests with those of our unitholders. The grants of service phantom units provide our NEOs with a stake in our performance and align the interests of our NEOs and our unitholders by providing a direct incentive for our NEOs to focus on unitholder value. The LTIP is now administered by the disinterested directors on the board of directors of our general partner.
Upon a “change in control” (as defined in the LTIP), the disinterested directors may, in their discretion, (i) remove any forfeiture restrictions applicable to an award, (ii) accelerate the time of exercisability or vesting of an award, (iii) require awards to be surrendered in exchange for a cash payment, (iv) cancel unvested awards without payment or (v) make adjustments to awards as the directors deems appropriate to reflect the change of control. Unless determined otherwise by the directors or provided for otherwise in an award agreement, upon involuntary termination of employment or service of a participant within twenty-four (24) months of a change in control, all of the participant’s awards that have not at such time become vested or otherwise remain subject to lapse restrictions shall immediately become vested or no longer subject to lapse restrictions, as applicable. By providing the potential for immediate value to our NEOs in connection with a change in control, this provision aligns our NEOs’ interests with those of our unitholders and incentivizes our NEOs to work to maximize the value of our units in the event such a transaction were to occur. For additional detail regarding the amount of compensation our NEOs may be entitled to in the event of their termination or a change-in-control, refer to “Potential Payments Upon Termination or Change of Control.”
Compensation Consultants
The board of directors of our general partner does not have a compensation committee, and it did not retain a compensation consultant in 2019.2021.
Perquisites
Our general partner does not provide any fringe benefits or perquisites to our NEOs.
Prohibition Against Speculative Transactions
We maintain in a policy that applies to all executive officers and directors of our general partner prohibiting speculative transactions in our units such as short sales, puts, calls or other similar options to buy or sell our units in an effort to hedge certain economic risks or otherwise.
Compensation Committee Report
Neither we nor our general partner have a compensation committee. The non-management members of the board of directors of our general partner, listed below, have reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, approved the CD&A for inclusion in this Form 10-K.
Non-Management Members of the Board of Directors:
Michael D. Gayda
Bruce A. Jones
David Roush
Lawrence Ziemba
Compensation Risk Assessment
Based on an internal review by the board of directors of our general partner and its understanding of our material compensation programs, our general partner has concluded that there are no plans that provide meaningful incentives for individuals, including the NEOs, to take risks that would be reasonably likely to have a material adverse effect on us.
Guidelines for Trades by Insiders
We maintain policies that govern trading in our units by officers and directors required to report under Section 16 of the Exchange Act, as well as certain other employees who may have regular access to material non-public information about us. These policies include pre-approval requirements for all trades and periodic trading “black-out” periods designed with reference to our quarterly financial reporting schedule. We also require pre-approval of all trading plans adopted pursuant to Rule 10b5-1 promulgated under the Exchange Act. To mitigate the potential for abuse, no trades are allowed under a trading plan within 30 days after adoption. In addition, we discourage termination or amendment of trading plans by prohibiting trades under new or amended plans within 90 days following a plan termination or amendment.
Compensation Committee Interlocks and Insider Participation
As previously discussed, our general partner’s board of directors is not required to maintain, and does not maintain, a compensation committee. Thomas J. Nimbley, Matthew C. Lucey and C. Erik Young are directors of our general partner, and are also executive officers of our general partner and PBF Energy. However, all compensation decisions with respect to Thomas J. Nimbley, Matthew C. Lucey and C. Erik Young are made by PBF Energy and they do not receive any compensation directly from us or our general partner other than grants under our LTIP. Refer to “Item 13. Certain Relationships and Related Transactions, and Director Independence” below for information about relationships among us, our general partner and PBF Energy. Refer above for information about our director and executive officer compensation.
20192021 Summary Compensation Table
The Summary Compensation Table summarizes the total compensation paid or earned by each of our NEOs.
| | Name and Principal Position | Fiscal Year | Salary | Bonus | Unit Awards | Option Award | All Other Compensation | Total | Name and Principal Position | Fiscal Year | Salary | Bonus | Unit Awards | Option Award | All Other Compensation | Total |
($) (1) | ($) (2) | ($) (1) | ($) | ($) (1) | ($) (2) | ($) (1) | ($) |
Thomas J. Nimbley, Chief Executive Officer and Chairman of the Board of Directors | 2019 | — | 428,000 | — | 428,000 |
| Thomas J. Nimbley, Chief Executive Officer and Chairman of the Board of Directors | 2021 | — | 290,000 | — | 290,000 | |
| 2018 | — | 398,000 | — | 398,000 |
| | 2020 | — | 159,000 | — | 159,000 | |
| 2017 | — | 420,000 | — | 420,000 |
| | 2019 | — | 428,000 | — | 428,000 | |
C. Erik Young, Senior Vice President, Chief Financial Officer and Director | 2019 | — | 267,500 | — | 267,500 |
| C. Erik Young, Senior Vice President, Chief Financial Officer and Director | 2021 | — | 181,250 | — | 181,250 | |
| 2018 | — | 248,750 | — | 248,750 |
| | 2020 | — | 99,375 | — | 99,375 | |
| 2017 | — | 262,500 | — | 262,500 |
| | 2019 | — | 267,500 | — | 267,500 | |
Matthew C. Lucey, Executive Vice President and Director | 2019 | — | 321,000 | — | 321,000 |
| Matthew C. Lucey, Executive Vice President and Director | 2021 | — | 217,500 | — | 217,500 | |
| 2018 | — | 298,500 | — | 298,500 |
| | 2020 | — | 119,250 | — | 119,250 | |
| 2017 | — | 315,000 | — | 315,000 |
| | 2019 | — | 321,000 | — | 321,000 | |
Trecia Canty, Senior Vice President, General Counsel and Secretary | 2019 | — | 267,500 | — | 267,500 |
| Trecia Canty, Senior Vice President, General Counsel and Secretary | 2021 | — | 181,250 | — | 181,250 | |
| 2018 | — | 248,750 | — | 248,750 |
| | 2020 | — | 99,375 | — | 99,375 | |
| 2017 | — | 262,500 | — | 262,500 |
| | 2019 | — | 267,500 | — | 267,500 | |
Timothy Paul Davis, Assistant Secretary | 2019 | — | 267,500 | — | 267,500 |
| Timothy Paul Davis, Assistant Secretary | 2021 | — | 181,250 | — | 181,250 | |
| 2018 | — | 248,750 | — | 248,750 |
| | 2020 | — | 99,375 | — | 99,375 | |
| 2017 | — | 262,500 | — | 262,500 |
| | 2019 | — | 267,500 | — | 267,500 | |
____________
| |
(1) | As noted above, no compensation other than grants of service phantom units under our LTIP is reported for the NEOs. |
| |
(2) | This column represents the aggregate grant date fair value computed in accordance with FASB Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“FASB ASC Topic 718”) for financial statement reporting purposes for the phantom units granted under the 2014 Long-Term Incentive Plan. Fair value is calculated using the closing price of our units on the date of grant. The per unit grant date fair value for the 2019, 2018 and 2017 grants was $21.40, $19.90 and $21.00, respectively. Assumptions used in the calculation of this amount are included in Note 9 “Unit-Based Compensation” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. |
(1)As noted above, no compensation other than grants of service phantom units under our LTIP is provided to our NEOs.
(2)This column represents the aggregate grant date fair value computed in accordance with FASB Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“FASB ASC Topic 718”) for financial statement reporting purposes for the phantom units granted under our LTIP. Fair value is calculated using the closing price of our common units on the date of grant. The per unit grant date fair value for the 2021, 2020 and 2019 grants was $14.50, $7.95 and $21.40, respectively. Assumptions used in the calculation of this amount are included in Note 10 “Unit-Based Compensation” of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Grants of Plan Based Awards in 20192021
The following table provides information regarding plan-based awards granted to our NEOs during fiscal year 2019.2021.
| | Name and Principal Position | Grant Date | Awards: Number of Units (1) | Option Awards: Number of Securities Underlying Option | Exercise or Base Price of Options Awards (Per Share) | Grant Date Fair Value of Units and Option Awards (2) | Name and Principal Position | Grant Date | Awards: Number of Units (1) | Option Awards: Number of Securities Underlying Option | Exercise or Base Price of Options Awards (Per Share) | Grant Date Fair Value of Units and Option Awards (2) |
Thomas J. Nimbley, Chief Executive Officer and Chairman of the Board of Directors | 4/29/2019 | 20,000 | — | $428,000 | Thomas J. Nimbley, Chief Executive Officer and Chairman of the Board of Directors | 4/26/2021 | 20,000 | — | $290,000 |
C. Erik Young, Senior Vice President, Chief Financial Officer and Director | 4/29/2019 | 12,500 | — | $267,500 | C. Erik Young, Senior Vice President, Chief Financial Officer and Director | 4/26/2021 | 12,500 | — | $181,250 |
Matthew C. Lucey, Executive Vice President and Director | 4/29/2019 | 15,000 | — | $321,000 | Matthew C. Lucey, Executive Vice President and Director | 4/26/2021 | 15,000 | — | $217,500 |
Trecia Canty, Senior Vice President, General Counsel and Secretary | 4/29/2019 | 12,500 | — | $267,500 | Trecia Canty, Senior Vice President, General Counsel and Secretary | 4/26/2021 | 12,500 | — | $181,250 |
Timothy Paul Davis, Assistant Secretary | 4/29/2019 | 12,500 | — | $267,500 | Timothy Paul Davis, Assistant Secretary | 4/26/2021 | 12,500 | — | $181,250 |
The following table provides information regarding the number of outstanding equity awards held by our NEOs at December 31, 2019.2021.