PBF Energy 2013 Annual Report Download - page 74

67
since each company may define this term differently. The following table presents a reconciliation of gross refining
margin to the most directly comparable GAAP financial measure, gross margin, on a historical basis, as applicable,
for each of the periods indicated:
Year Ended December 31,
2013 2012 2011
$
per barrel of
throughput $
per barrel of
throughput $
per barrel of
throughput
Reconciliation of gross
margin to gross refining
margin:
Gross margin $ 436,867 $ 2.64 $1,046,598 $ 6.17 $ 417,962 $ 3.07
Add:
Refinery operating
expense 812,652 4.92 738,824 4.36 635,517 5.12
Refinery depreciation
expense 98,622 0.60 84,187 0.50 51,696 0.40
Gross refining margin $1,348,141 $ 8.16 $1,869,609 $ 11.03 $1,105,175 $ 8.59
EBITDA and Adjusted EBITDA
Our management uses EBITDA (earnings before interest, income taxes, depreciation and amortization) and
Adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period
on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall
expectations and for evaluating actual results against such expectations, and in communications with our board of
directors, creditors, analysts and investors concerning our financial performance. The Senior Secured Notes,
revolving credit facility and other contractual obligations also include similar measures as a basis for certain
covenants under those agreements which may differ from the Adjusted EBITDA definition described below.
EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and our computation
of EBITDA and Adjusted EBITDA may vary from others in our industry. In addition, Adjusted EBITDA contains
some, but not all, adjustments that are taken into account in the calculation of the components of various covenants
in the agreements governing the Senior Secured Notes and the ABL Revolving Credit Facility. EBITDA and
Adjusted EBITDA should not be considered as alternatives to operating income or net income (loss) as measures
of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be
considered, an alternative to cash flows from operations as a measure of liquidity. Adjusted EBITDA is defined
as EBITDA before equity-based compensation expense, gains (losses) from certain derivative activities and
contingent consideration and the non-cash change in the deferral of gross profit related to the sale of certain finished
products. Other companies, including other companies in our industry, may calculate Adjusted EBITDA differently
than we do, limiting its usefulness as a comparative measure. Adjusted EBITDA also has limitations as an analytical
tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Some of these limitations include that Adjusted EBITDA:
• does not reflect depreciation expense or our cash expenditures, or future requirements, for capital expenditures
or contractual commitments;
• does not reflect changes in, or cash requirements for, our working capital needs;
• does not reflect our interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt;
• does not reflect realized and unrealized gains and losses from hedging activities, which may have a substantial
impact on our cash flow;