PBF Energy 2012 Annual Report Download - page 132

PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
15 - COMMITMENTS AND CONTINGENCIES (Continued)
Remediation Liabilities (Continued)
The Company is also currently subject to certain other existing claims and proceedings. The Company believes
that there is only a remote probability that future costs related to any of these known contingent liability
exposures would have a material impact on its financial position or results of operations.
PBF LLC Limited Liability Company Agreement
In connection with the IPO, the limited liability agreement of PBF LLC was amended and restated. PBF LLC’s
amended and restated limited liability company agreement provides for tax distributions to the members of PBF
LLC, including PBF Energy, subject to available cash and applicable law and contractual restrictions (including
pursuant to the Company’s debt instruments) and based on certain assumptions. Generally, these tax distributions
will be an amount equal to the Company’s estimate of the taxable income of PBF LLC multiplied by an assumed
tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate (subject to
adjustment for certain non-deductible expenses).
Tax Receivable Agreement
The Company has recognized a $160,011 payable to related parties pursuant to a Tax Receivable Agreement for
the estimated payments to the holders of PBF LLC Series A Units, of which $1,007 and $159,004 is classified as
current and noncurrent, respectively, as of December 31, 2012. The estimated liability is based on forecasts of
future taxable income over the anticipated life of the Company’s future business operations, assuming no
material changes in the relevant tax law. The assumptions used in the forecasts are subject to substantial
uncertainty about the Company’s future business operations and the actual payments that the Company is
required to make under the Tax Receivable Agreement could differ materially from current estimates. PBF
Energy is obligated to make these payments and expects to obtain funding for these payments by causing PBF
LLC to distribute cash on a pro-rata basis to its owners, which currently include PBF Energy, which holds a
24.4% interest, and PBF LLC Series A Unit holders who hold a 75.6% interest in PBF LLC. Accordingly, based
on current ownership percentages, the total cash payments related to the Tax Receivable Agreement, including
pro-rata distributions from PBF LLC to PBF LLC Series A Unit holders, would exceed the amounts that PBF
Energy is directly obligated to pay.
The PBF LLC Series A Unit holders may reduce their ownership in PBF LLC by exchanging their Series A Units
in PBF LLC for shares of PBF Energy common stock. Such a decrease in ownership would reduce subsequent
pro-rata distributions, but may result in additional increases in the tax basis of PBF Energy’s investment in PBF
LLC and require PBF Energy to make increased payments under the Tax Receivable Agreement. Required
payments under the Tax Receivable Agreement also may increase or become accelerated if PBF Energy exercises
its right to terminate the Tax Receivable Agreement, PBF Energy breaches any of its material obligations under
the Tax Receivable Agreement, or certain changes of control occur.
16 - EMPLOYEE BENEFIT PLANS
Defined Contribution Plan
The Company’s defined contribution plan covers all employees. Employees are eligible to participate as of the
first day of the month following 30 days of service. Participants can make basic contributions up to 50 percent of
F-40