PBF Energy 2012 Annual Report Download - page 26

ITEM 1A. RISK FACTORS
Risks Relating to Our Business and Industry
You should carefully read the risks and uncertainties described below. The risks and uncertainties described
below are not the only ones facing our company. Additional risks and uncertainties may also impair our business
operations. If any of the following risks actually occurs, our business, financial condition, results of operations or
cash flows would likely suffer. In that case, the trading price of our Class A common stock could fall.
We have incurred losses in the past and may incur losses in the future. If we incur losses over an extended
period of time, the value of our Class A common stock could decline.
We experienced losses during our time as a development company and certain periods thereafter. We may
not be profitable in future periods. A lack of profitability could adversely affect the price of our Class A common
stock. We may not continue to remain profitable, which could impair our ability to complete future financings
and have a material adverse effect on our business.
Our limited operating history makes it difficult to evaluate our current business and future prospects. If we
are unsuccessful in executing our business model, our business and operating results will be adversely
affected.
We were formed in March 2008, we acquired our first oil refinery in June 2010 in an idle state and we
acquired our first operating asset in December 2010. Therefore, we have a limited operating history and track
record in executing our business model. Our future success depends on our ability to execute our business
strategy effectively. Our limited operating history may make it difficult to evaluate our current business and
future prospects. We may not be successful in operating any of our refineries or any other properties we may
acquire in the future. In addition, we have encountered and will continue to encounter risks and difficulties
frequently experienced by new companies, and specifically companies in the oil refining industry. If we do not
manage these risks successfully, our business, results of operations and financial condition will be adversely
affected.
The price volatility of crude oil, other feedstocks, blendstocks, refined products and fuel and utility services
may have a material adverse effect on our revenues, profitability, cash flows and liquidity.
Our revenues, profitability, cash flows and liquidity from operations depend primarily on the margin above
operating expenses (including the cost of refinery feedstocks, such as crude oil, intermediate partially refined
petroleum products, and natural gas liquids that are processed and blended into refined products) at which we are
able to sell refined products. Refining is primarily a margin-based business and, to increase profitability, it is
important to maximize the yields of high value finished products while minimizing the costs of feedstock and
operating expenses. When the margin between refined product prices and crude oil and other feedstock costs
contracts, our earnings, profitability and cash flows are negatively affected. Refining margins historically have
been volatile, and are likely to continue to be volatile, as a result of a variety of factors, including fluctuations in
the prices of crude oil, other feedstocks, refined products and fuel and utility services. An increase or decrease in
the price of crude oil will likely result in a similar increase or decrease in prices for refined products; however,
there may be a time lag in the realization, or no such realization, of the similar increase or decrease in prices for
refined products. The effect of changes in crude oil prices on our refining margins therefore depends in part on
how quickly and how fully refined product prices adjust to reflect these changes.
In addition, the nature of our business requires us to maintain substantial crude oil, feedstock and refined
product inventories. Because crude oil, feedstock and refined products are commodities, we have no control over
the changing market value of these inventories. Our crude oil, feedstock and refined product inventories are
valued at the lower of cost or market value under the last-in-first-out (“LIFO”) inventory valuation methodology.
If the market value of our crude oil, feedstock and refined product inventories were to decline to an amount less
than our LIFO cost, we would record a write-down of inventory and a non-cash charge to cost of sales.
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