Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - PBF Logistics LP | a8-katoledotankfarm.htm |
| EX-99.3 - EXHIBIT - PBF Logistics LP | a993-toledotankfarmxprofor.htm |
| EX-99.2 - EXHIBIT - PBF Logistics LP | a992-toledotankfarmxreview.htm |
| EX-23.1 - EXHIBIT - PBF Logistics LP | a231-toledotankfarmxconsent.htm |
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
PBF Energy Inc. and subsidiaries
We have audited the accompanying financial statements of the Toledo Tank Farm (the "Business"), which consist of assets under common ownership and common management, which comprise the balance sheets as of December 31, 2013 and 2012, and the related statements of operations, net investment, and cash flows for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Business' preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Business' internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Toledo Tank Farm as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis-of-Matter
As discussed in Note 1 to the financial statements, the accompanying financial statements have been prepared from the separate records maintained by subsidiaries of PBF Energy Inc. and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Toledo Tank Farm was operated as an unaffiliated company. Portions of certain expenses represent allocations made from corporate expenses applicable to PBF Energy Inc. as a whole.
/s/ Deloitte & Touche LLP
Parsippany, NJ
January 21, 2015
TOLEDO TANK FARM
BALANCE SHEETS
(in thousands)
December 31, 2013 | December 31, 2012 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | — | $ | — | ||||
Total current assets | — | — | ||||||
Property, plant and equipment, net | 38,053 | 21,390 | ||||||
Total assets | $ | 38,053 | $ | 21,390 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accrued construction in progress | $ | 696 | $ | 1,909 | ||||
Total current liabilities | 696 | 1,909 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Equity: | ||||||||
Net investment | 37,357 | 19,481 | ||||||
Total liabilities and equity | $ | 38,053 | $ | 21,390 | ||||
See notes to financial statements.
TOLEDO TANK FARM
STATEMENTS OF OPERATIONS
(in thousands)
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Revenues | $ | — | $ | — | ||||
Costs and expenses: | ||||||||
Operating and maintenance expenses | 7,887 | 7,537 | ||||||
General and administrative expenses | 112 | 96 | ||||||
Depreciation and amortization expense | 1,334 | 944 | ||||||
Total costs and expenses | 9,333 | 8,577 | ||||||
Net loss | $ | (9,333 | ) | $ | (8,577 | ) | ||
See notes to financial statements.
TOLEDO TANK FARM
STATEMENTS OF CHANGES IN NET INVESTMENT
(in thousands)
Balance, January 1, 2012 | $ | 14,487 | ||
Net loss | (8,577 | ) | ||
Contributions | 13,571 | |||
Balance, December 31, 2012 | 19,481 | |||
Net loss | (9,333 | ) | ||
Contributions | 27,209 | |||
Balance, December 31, 2013 | $ | 37,357 | ||
See notes to financial statements.
TOLEDO TANK FARM
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (9,333 | ) | $ | (8,577 | ) | ||
Depreciation and amortization | 1,334 | 944 | ||||||
Net cash used in operations | (7,999 | ) | (7,633 | ) | ||||
Cash flows from investing activities: | ||||||||
Expenditures for property, plant and equipment | (19,210 | ) | (5,938 | ) | ||||
Net cash used in investing activities | (19,210 | ) | (5,938 | ) | ||||
Cash flows from financing activities: | ||||||||
Parent contributions | 27,209 | 13,571 | ||||||
Net cash provided by financing activities | 27,209 | 13,571 | ||||||
Net increase (decrease) in cash and equivalents | — | — | ||||||
Cash and equivalents, beginning of period | — | — | ||||||
Cash and equivalents, end of period | $ | — | $ | — | ||||
Supplemental cash flow disclosure | ||||||||
Accrued construction in progress | $ | 696 | $ | 1,909 | ||||
See notes to financial statements.
TOLEDO TANK FARM
NOTES TO FINANCIAL STATEMENTS
(in thousands, except barrel data)
1. BUSINESS AND BASIS OF PRESENTATION
Description of the Business
The Toledo tank farm and propane storage and loading facility (collectively the "Toledo Tank Farm") are part of Toledo Refining Company LLC's ("TRC"), a subsidiary of PBF Holding Company LLC ("PBF Holding"), Toledo, Ohio refinery. Toledo Tank Farm consists of a storage facility which services the Toledo refinery and consists of 29 tanks for storing crude oil, refined products and intermediates and a propane storage facility which consists of 27 propane storage bullets and a truck loading facility. The aggregate capacity of the storage facility is approximately 3.4 million barrels, of which 0.8 million barrels are dedicated to crude oil storage and 2.6 million barrels are allocated to refined products and intermediates. Construction of a 0.5 million barrel crude storage tank within the Toledo Tank Farm began in September 2012 and the crude tank was completed in October 2014, bringing total storage capacity to approximately 3.9 million barrels. The propane truck loading facility has a throughput capacity of approximately 11,000 barrels per day ("bpd").
PBF Holding is the owner of all crude oil, refined products and intermediates handled at the storage facility and loading facility. The assets currently do not generate third-party or intra-entity revenue.
PBF Holding is a wholly-owned subsidiary of PBF Energy Company LLC (“PBF LLC”). PBF Energy Inc. ("PBF Energy") is the managing member of PBF LLC, which is the sole member of PBF Holding. As a result, PBF Energy controls all of the business and affairs of PBF LLC and PBF Holding.
On December 2, 2014, PBF Logistics LP ("PBFX" or the "Partnership") entered into a Contribution Agreement (the "Contribution Agreement") with PBF LLC to acquire the Toledo Tank Farm from PBF LLC for total consideration of $150,000, which includes $135,000 in cash and $15,000 in PBFX common units (the "Acquisition"). The Acquisition closed on December 11, 2014 (the "Effective Date"). PBFX is a Delaware limited partnership formed in February 2013. PBF Logistics GP LLC (“PBF GP”) serves as the general partner of PBFX. PBF GP is wholly-owned by PBF LLC.
Basis of Presentation
The accompanying financial statements and related notes present the financial position, results of operations, cash flows and net investment of Toledo Tank Farm. The financial statements include all of the accounts of Toledo Tank Farm, and certain costs allocated by subsidiaries of PBF Energy. The accompanying financial statements have been prepared from the separate records maintained by subsidiaries of PBF Energy and may not necessarily be indicative of the conditions that would have existed or the results of operations if Toledo Tank Farm was operated as an unaffiliated company. Portions of certain expenses represent allocations made from corporate expenses applicable to PBF Energy as a whole.
Subsequent events have been evaluated through January 21, 2015. Any material subsequent events that occurred during this time have been properly recognized or disclosed in the financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. Actual results could differ from those estimates.
Earnings per Unit
During the periods presented, Toledo Tank Farm was wholly-owned by a subsidiary of PBF Holding. Accordingly, there is no calculation of earnings per unit.
TOLEDO TANK FARM
NOTES TO FINANCIAL STATEMENTS
(in thousands, except barrel data)
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Toledo Tank Farm capitalizes costs associated with the preliminary, pre-acquisition and development/construction stages of a major construction project. Toledo Tank Farm capitalizes the interest cost associated with major construction projects based on the effective interest rate of total borrowings of PBF Holding. Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the lives of the assets, are capitalized.
Toledo Tank Farm's depreciable property, plant and equipment are comprised of storage and propane terminaling equipment which are depreciated using the straight-line method over estimated useful lives of 5-25 years.
Long Lived Assets
Property, plant and equipment and other long-lived assets are reviewed for impairment whenever events or changes in business circumstances indicate the net book values of the assets may not be recoverable. Impairment is evaluated by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result 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.
Income Taxes
The operations of Toledo Tank Farm are currently included in PBF LLC’s consolidated U.S. federal partnership income tax return. PBF LLC's operations are treated as a partnership for federal income tax purposes and for state income tax purposes for those states that follow the Federal income tax treatment of partnerships, with each partner being separately taxed on its share of the taxable income. As PBF LLC is a limited liability company treated as a “flow-through” entity for income tax purposes, there is no benefit or provision for federal or state income tax in the accompanying financial statements.
The PBF LLC U.S. federal and state tax returns for all years since its inception (March 1, 2008) are subject to examination by the respective tax authorities.
Asset Retirement Obligations
Toledo Tank Farm records an asset retirement obligation at fair value for the estimated cost to retire a tangible long-lived asset at the time Toledo Tank Farm incurs that liability, which is generally when the asset is purchased, constructed, or leased. Toledo Tank Farm 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, Toledo Tank Farm will record the liability when sufficient information is available to estimate the liability’s fair value. Certain of the Toledo Tank Farm’s asset retirement obligations are based on its legal obligation to perform remedial activity at PBF Holding's refinery sites when it permanently ceases operations of the long-lived assets. Toledo Tank Farm therefore considers the settlement date of these obligations to be indeterminable. Accordingly, Toledo Tank Farm cannot calculate an associated asset retirement liability for these obligations at this time. Toledo Tank Farm will measure and recognize the fair value of these asset retirement obligations when the settlement date is determinable.
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 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
TOLEDO TANK FARM
NOTES TO FINANCIAL STATEMENTS
(in thousands, except barrel data)
action. Environmental liabilities are based on best estimates of probable future costs using currently available technology and applying current regulations, as well as Toledo Tank Farm’s own internal environmental policies. 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 Toledo Tank Farm’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.
Related Party Transactions
All of the related party transactions discussed below were settled immediately through net investment.
General and administrative expenses in the statements of operations include affiliate costs totaling $54 and $50 for the years ended December 31, 2013 and 2012, respectively. These expenses were incurred by subsidiaries of PBF Holding to cover costs of corporate functions such as legal, accounting, treasury, human resources, engineering, information technology, insurance, administration, and other corporate services and include related stock-based compensation, retirement and pension benefit plan expenses. These allocations were based on an estimate of the time devoted by PBF employees to services provided to Toledo Tank Farm. In management’s estimation, the allocation methodologies used are reasonable and result in an appropriate allocation of Toledo Tank Farm’s costs of doing business.
The employees supporting Toledo Tank Farm operations are employees of PBF Holding and its subsidiaries. Their payroll costs are allocated to Toledo Tank Farm by PBF Holding. PBF Holding carries employee-related liabilities in its financial statements, including the liabilities related to the employee pension, post retirement medical and life plans, stock-based compensation and other incentive compensation. There were no cost sharing arrangements in place during the years ended December 31, 2013 and 2012 and the cost of the services allocated to Toledo Tank Farm have been settled through net investment in these financial statements.
Immediately subsequent to the Effective Date of the Acquisition, PBFX entered into a commercial arrangement and cost sharing arrangements with PBF Holding and its affiliates which will be cash settled on a monthly basis.
Comprehensive Income (Loss)
Comprehensive loss for the years ended December 31, 2013 and 2012 was equivalent to net loss.
3. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
December 31, 2013 | December 31, 2012 | |||||||
Land | $ | 1,606 | $ | 1,606 | ||||
Tank farm assets | 27,875 | 15,234 | ||||||
Construction in progress | 11,561 | 6,204 | ||||||
41,042 | 23,044 | |||||||
Less-Accumulated depreciation | (2,989 | ) | (1,654 | ) | ||||
$ | 38,053 | $ | 21,390 | |||||
4. STOCK-BASED COMPENSATION
Certain employees of PBF Holding and its subsidiaries who support Toledo Tank Farm’s operations have been granted awards of PBF Energy stock options or PBF LLC compensatory warrants or options under PBF Energy’s and PBF LLC’s share-based compensation programs. The allocation of payroll-related expenses to Toledo Tank Farm for services performed by employees of PBF Holding and its subsidiaries includes the employees’ stock-based compensation
expense. Share-based compensation expense included within general and administrative expenses for the years ended December 31, 2013 and 2012 was de minimus.
5. RETIREMENT AND PENSION PLANS
The employees of PBF Holding and its subsidiaries who support Toledo Tank Farm’s operations participate in the retirement and pension benefit plans of PBF Holding. The allocation of payroll-related expenses to Toledo Tank Farm for services performed by employees of PBF Holding and its subsidiaries includes the cost of such retirement and pension benefit plans. Retirement and pension benefit expense included within operating and maintenance expenses and general and administrative expenses for the years ended December 31, 2013 and 2012 was de minimus.
6. COMMITMENTS AND CONTINGENCIES
Environmental Matters
Toledo Tank Farm’s assets, along with PBFX's assets and PBF Holding’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 Toledo Tank Farm’s assets, including remediation, operating costs and capital costs to construct, maintain and upgrade equipment and facilities.
In connection with PBF Holding’s acquisition of the Toledo refinery, the seller, Sunoco, Inc. (R&M), remains responsible for environmental remediation for conditions that existed on the closing date for twenty years from March 1, 2011. PBF Holding provides indemnities to PBFX and has environmental obligations for the assets contributed to PBFX subject to certain limitations.