PBF Energy 2013 Annual Report Download - page 121

PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
F- 25
granted by PBF LLC to certain employees, Series B units of PBF LLC that were granted to certain members of
management and restricted PBF LLC Series A Units and restricted PBF Energy Class A common stock granted to
certain directors. The estimated fair value of the options to purchase PBF Energy Class A common stock and the
PBF LLC Series A warrants and options, is based on the Black-Scholes option pricing model and the fair value of
the PBF LLC Series B units is estimated based on a Monte Carlo simulation model. The estimated fair value is
amortized as stock-based compensation expense on a straight-line method over the vesting period and included in
general and administration expense.
Income Taxes
As a result of the PBF Energy’s acquisition of PBF LLC Series A Units or exchanges of PBF LLC Series A Units
for PBF Energy Class A common stock, PBF Energy expects to benefit from amortization and other tax deductions
reflecting the step up in tax basis in the acquired assets. Those deductions will be allocated to PBF Energy and
will be taken into account in reporting PBF Energy’s taxable income. As a result of a federal income tax election
made by PBF LLC, applicable to a portion of PBF Energy’s acquisition of PBF LLC Series A Units, the income
tax basis of the assets of PBF LLC, underlying a portion of the units PBF Energy acquired, has been adjusted based
upon the amount that PBF Energy paid for that portion of its PBF LLC Series A Units. PBF Energy has entered
into an agreement with the . members of PBF LLC other than PBF Energy that will provide for an additional
payment by PBF Energy to the exchanging holders of PBF LLC Units equal to 85% of the amount of cash savings,
if any, in U.S. federal, state and local income tax that PBF Energy realizes as a result of (i) these increases in tax
basis and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits
attributable to payments under the tax receivable agreement. As a result of these transactions, PBF Energy’s tax
basis in its share of PBF LLC’s assets will be higher than the book basis of these same assets. This resulted in a
deferred tax asset of $310,132 as of December 31, 2013, of which the majority is expected to be realized over 10
years as the tax basis of these assets is amortized.
Deferred taxes are provided using a liability method, whereby deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences represent the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effect or change in tax laws and rates on the date of enactment. PBF Energy recognizes tax
benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its
technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for
income taxes on the consolidated statements of operations.
As PBF Holding 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 Federal and state tax returns for all years since inception (March 1, 2008) are subject to examination by the
respective tax authorities.
Net Income Per Share
For the period subsequent to the IPO basic net income per share is calculated by dividing the net income available
to PBF Energy Class A common stockholders by the weighted average number of shares of PBF Energy Class A
common stock outstanding during the period. Diluted net income per share is calculated by dividing the net income
available to PBF Energy Class A common stockholders, adjusted for the net income attributable to the noncontrolling
interest and the assumed income tax expense thereon, by the weighted average number of PBF Energy Class A
common shares outstanding during the period adjusted to include the assumed exchange of all PBF LLC Series A
units outstanding for PBF Energy Class A common stock, if applicable under the if converted method, and the
potentially dilutive effect of outstanding options to purchase shares of PBF Energy Class A common stock, and
options and warrants to purchase PBF LLC Series A Units, subject to forfeiture utilizing the treasury stock method.