PBF Energy 2013 Annual Report Download - page 123

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- 27
attributable to the hedged risk. Cash flows related to derivative instruments that are designated as fair value hedges
are included in operating activities.
Economic hedges are hedges not designated as fair value or cash flow hedges for accounting purposes that are
used to (i) manage price volatility in certain refinery feedstock and refined product inventories, and (ii) manage
price volatility in certain forecasted refinery feedstock, refined product, and refined product sales. These instruments
are recorded at fair value and changes in the fair value of the derivative instruments are recognized currently in
cost of sales.
Derivative accounting is complex and requires management judgment in the following respects: identification of
derivatives and embedded derivatives, determination of the fair value of derivatives, documentation of hedge
relationships, assessment and measurement of hedge ineffectiveness and election and designation of the normal
purchases and sales exception. All of these judgments, depending upon their timing and effect, can have a significant
impact on the Company’s earnings.
Recently Issued Accounting Pronouncements
On January 1, 2013, the Company adopted changes issued by the Financial Accounting Standards Board ("FASB")
to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose gross and net
information about instruments and transactions eligible for offset in the statement of financial position and
instruments and transactions subject to an agreement similar to a master netting arrangement. The enhanced
disclosures will enable users of an entity's financial statements to understand and evaluate the effect or potential
effect of master netting arrangements on an entity's financial position, including the effect or potential effect of
rights of setoff associated with certain financial instruments and derivative instruments. As of December 31, 2013
and 2012, the impact of offsetting assets and liabilities was not material to the Company and additional disclosure
is not included in the Company's consolidated financial statements.
On January 1, 2013, the Company adopted changes issued by the FASB to the reporting of amounts reclassified
out of accumulated other comprehensive income. These changes require an entity to report the effect of significant
reclassifications out of accumulated other comprehensive income on the respective line items in net income if the
amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not
required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-
reference other disclosures that provide additional detail about those amounts. These requirements are to be applied
to each component of accumulated other comprehensive income. For the years ended December 31, 2013, 2012
and 2011, the impact of reclassification out of accumulated other comprehensive income was not material to the
Company and additional disclosure is not included in the Company's consolidated financial statements.
3. ACQUISITIONS
Toledo Acquisition
On March 1, 2011, a subsidiary of the Company completed the acquisition of the Toledo refinery in Ohio from
Sunoco. The Toledo refinery has a crude oil throughput capacity of 170,000 barrels per day. The purchase price
for the refinery was $400,000, subject to certain adjustments, and was comprised of $200,000 in cash and a $200,000
promissory note provided by Sunoco. The note was repaid in full in February 2012. The terms of the transaction
also include participation payments beginning in the year ended December 31, 2011 through the year ending
December 31, 2016 not to exceed $125,000 in the aggregate. Participation payments were based on 25% of the
purchased assets’ earnings before interest, taxes, depreciation and amortization, as defined in the agreement
(“EBITDA”) in excess of an annual threshold EBITDA of $125,000 (prorated for 2011 and 2016). Each participation
payment was due no later than one hundred and twenty days after the close of the respective calendar year end for
the years 2011 through 2016. The Company paid $103,643 to Sunoco in April 2012 and $21,357 in April 2013
related to the amount of contingent consideration earned in 2011 and 2012, respectively.