PBF Energy 2013 Annual Report Download - page 150
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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- 54
• The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value
based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair
value hierarchy are measured at fair value using a market approach based upon future commodity prices
for similar instruments quoted in active markets.
• The commodity contracts categorized in Level 3 of the fair value hierarchy consist of commodity price
swap contracts that relate to forecasted purchases of crude oil for which quoted forward market prices
are not readily available due to market illiquidity. The forward price used to value these swaps was derived
using broker quotes, prices from other third party sources and other available market based data.
• The derivatives included with inventory supply arrangement obligations, derivatives included with
inventory intermediation agreement obligations and the catalyst lease obligations are categorized in Level
2 of the fair value hierarchy and are measured at fair value using a market approach based upon commodity
prices for similar instruments quoted in active markets.
• The contingent consideration for refinery acquisition obligation at December 31, 2012 is categorized in
Level 3 of the fair value hierarchy and is estimated using a discounted cash flow model based on
management's estimate of the future cash flows of the Toledo refinery; a risk free rate of return of 0.16%;
credit rate spread of 4.38%; and a discount rate of 4.54%. During the year ended December 31, 2013,
there was no change in fair value, as the obligation was known and was paid in full on April 30, 2013.
The table below summarizes the changes in fair value measurements of contingent consideration for refinery
acquisition categorized in Level 3 of the fair value hierarchy:
Year Ended December 31,
2013 2012
Balance at beginning of period $ 21,358 $ 122,232
Purchases ——
Settlements (21,358)(103,642)
Unrealized loss included in earnings — 2,768
Transfers into Level 3 ——
Transfers out of Level 3 ——
Balance at end of period $ — $ 21,358
The table below summarizes the changes in fair value measurements of commodity contracts categorized in Level
3 of the fair value hierarchy:
Year Ended December 31,
2013 2012
Balance at beginning of period $—$—
Purchases ——
Settlements 24,678 —
Unrealized loss included in earnings (48,043)—
Transfers into Level 3 ——
Transfers out of Level 3 ——
Balance at end of period $(23,365)$ —