PBF Energy Inc
For the period ended Apr 30, 2024. Filed Mar 15, 2024.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
Apr 30, 2024 · Filed Mar 15, 2024
Contents
PROXY STATEMENT SUMMARYv
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this proxy statement. We encourage you to review the entire proxy statement. This proxy statement and our Annual Report for the year ended December 31, 2023 are first being mailed to the Company’s stockholders and made available on the internet at www.pbfenergy.com on or about March 18, 2024. Website addresses included throughout this proxy statement are for reference only. The information contained on our website is not incorporated by reference into this proxy statement.
MATTERS TO BE VOTED ON AT THE ANNUAL MEETING AND BOARD RECOMMENDATION
- Election of Directors (p.10)
| Name · · · Years of Service · · · Independent · · · Board Recommendation | ||||||||||
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| Thomas J. Nimbley | | | 9 | | | No | | | For | |
| Spencer Abraham | | | 11 | | | Yes | | | For | |
| Paul J. Donahue, Jr. | | | 2 | | | Yes | | | For | |
| S. Eugene Edwards | | | 10 | | | Yes | | | For | |
| Georganne Hodges | | | 1 | | | Yes | | | For | |
| Kimberly S. Lubel | | | 6 | | | Yes | | | For | |
| Matthew C. Lucey | | | — | | | No | | | For | |
| George E. Ogden | | | 6 | | | Yes | | | For | |
| Damian W. Wilmot | | | 1 | | | Yes | | | For | |
| Lawrence M. Ziemba | | | 1 | | | Yes | | | For | |
| 2. | Ratification of KPMG LLP as Independent Auditors (p. 68) | | | For | ||||||
| 3. | Advisory Vote on 2023 Named Executive Officer Compensation (p. 71) | | | For | ||||||
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Proxy Statement Summary
COMPANY PERFORMANCE
We are one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. We sell our products throughout the Northeast, Midwest, Gulf Coast and West Coast of the United States, as well as in other regions of the United States, Canada and Mexico and are able to ship products to other international destinations. We own and operate six domestic oil refineries and related assets.
In 2023, our leadership team delivered strong financial results that enabled us to strengthen our financial condition by reducing and extending maturities of our debt and increasing liquidity, while continuing to invest in our assets to support our long-term strategic goal of increasing the value of our Company. Our significant financial achievements in 2023 include:
| * | Adjusted EBITDA is a non-GAAP financial measure. For an explanation of how we use Adjusted EBITDA and a reconciliation, please see “Non-GAAP Financial Measures” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). |
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| • | Continued Strong Financial Performance With Second Highest Revenues, Net Income and Adjusted EBITDA in the Company’s History. In 2022, we achieved record revenues of $46.8 billion, an increase of 71.8% from $27.3 billion in 2021, our net income increased to $2,972.8 million in 2022 from $315.5 million in 2021, and our Adjusted EBITDA increased by over 900% from $467.4 million in 2021 to $4,775.7 million in 2022. In 2023, we achieved revenues of $38.3 billion, a decrease of 18.2% from 2022 but an increase of 40.3% compared to 2021. Our 2023 net income decreased to $2,162.0 million and our Adjusted EBITDA decreased to $2,641.3 million, a decrease of 27.3% and 44.7%, respectively, compared to net income and Adjusted EBITDA in 2022, but represented an increase of 585.3% and 465.1%, respectively, compared to net income and Adjusted EBITDA in 2021. |
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Proxy Statement Summary
| • | Closing of St Bernard Renewables LLC (“SBR”) Joint Venture. On June 27, 2023, we and Eni Sustainable Mobility US Inc., a subsidiary of Eni SpA (“Eni”), completed the closing of the 50-50 joint venture to own, develop, and operate the Renewable Diesel Facility located in Chalmette, Louisiana. We contributed the SBR business, which had a total estimated fair value of $1.69 billion, excluding working capital. To acquire its fifty percent ownership interest in SBR, Eni contributed $845.6 million of total consideration, which was distributed to us. |
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| • | Continued to Strengthen Our Balance Sheet Through Further Debt Reduction. In the second half of 2023, we entered into an amendment and restatement of our existing asset-based revolving credit agreement (the “Revolving Credit Agreement”) that extended the maturity to August 2028 and increased the maximum commitment to $3.5 billion from $2.85 billion. We issued $500.0 million in aggregate principal amount of 7.875% senior unsecured notes due 2030 (the “2030 Senior Notes”) and used the net proceeds, together with cash on hand, to fully redeem the outstanding 7.25% senior unsecured notes due 2025 (the “2025 Senior Notes”), including accrued and unpaid interest, on September 13, 2023 for approximately $664.5 million. Combined with the settlement of certain other financing arrangements, consolidated debt for PBF was reduced by approximately $713.2 million during 2023. As of December 31, 2023, our operational liquidity was more than $4.6 billion, including approximately $1.8 billion of cash, and in excess of $2.8 billion of borrowing availability under our Revolving Credit Agreement. |
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| • | Increase in Reinstated Stockholder Dividend. In October 2022, we reinstated a regular quarterly dividend for our stockholders of $0.20 per share of Class A Common Stock. In October 2023, we increased the quarterly dividend to $0.25 per share of Class A Common Stock, with the first such dividend being paid on November 30, 2023. |
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| • | Increased Stock Repurchase Program. In December 2022, our Board authorized a stock repurchase program pursuant to which the Company is authorized to repurchase up to $500 million of shares of Class A Common Stock. On May 3, 2023, our Board approved an increase in the repurchase authorization amount under the Repurchase Program from $500.0 million to $1.0 billion and extended the program expiration date to December 2025. In 2023, we repurchased $532.5 million, inclusive of commissions paid, of Class A Common Stock. On February 13, 2024, our Board of Directors approved an increase in the repurchase authorization amount under the Repurchase Program from $1.0 billion to $1.75 billion. The total amount of Class A Common Stock repurchased under the program through February 14, 2024 was $736.8 million. |
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Proxy Statement Summary
INVESTOR ENGAGEMENT THROUGH BOARD-LED PROGRAM
Since 2019, we have had an investor engagement program under the direction of our Nominating and Corporate Governance Committee to help us better understand the views of our investors on key corporate governance topics. In addition to engagement with our largest investors, we have continued our engagement efforts with additional investors and stakeholders to hear their perspectives and help identify focus and priorities for the coming year. We continue to consider the constructive and candid feedback we receive from our investors and other stakeholders during these meetings to inform our priorities as we assess our progress and enhance our corporate governance practices and disclosures each year.
BOARD-LED ENGAGEMENT PROGRAM CONDUCTED YEAR ROUND
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| | | Shareholder Engagement Topics – Feedback Shared with the Full Board and Other Board Committees | | | |||
| | | • Board skills and experience and Board matrix • Board composition, diversity, size, and tenure• Board oversight of risk, including allocating oversight responsibilities to committees, where appropriate | | | • Board-level engagement and oversight of management • Executive compensation and compensation metrics • Environment, Social, and Governance practices and reporting | | |
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| | | Governance Practices | | | | | Enhanced Transparency and Disclosures | | |
| | | • Actively pursuing Board refreshment, with 45% of the Board having served 5 years or less• Continued to implement formal and thoughtful Board and committee succession plans, with four new directors joining in 2023• Continued implementation of risk management framework, including management level committees in support of Board’s risk oversight | | | | | • Ongoing disclosure of Board qualifications and experience matrix disclosures in proxy statement, including qualifications and experience identified by the Board as important in light of our Company’s strategy, risk profile, and risk appetite • Enhanced Board disclosures to include gender, ethnic and racial diversity information as self-identified by Board members | | |
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Proxy Statement Summary
BOARD OVERVIEW
PBF’s business is managed under the direction of our Board. Our Board currently has eleven members, nine of whom are independent directors and our Executive Chairman, Thomas J. Nimbley and our President and Chief Executive Officer, Matthew C. Lucey. As previously announced, effective July 1, 2023, Thomas J. Nimbley transitioned from his position as our Chief Executive Officer to Executive Chairman, and Matthew C. Lucey, who has served as our President since January 2015, succeeded Thomas J. Nimbley as Chief Executive Officer and continued in his role of President.
During 2023, our Board held six meetings and each member of the Board participated in at least 75% of the meetings held while they were in office. All of the directors then in office participated in the 2023 Annual Meeting of Stockholders.
All current Board members standing for re-election are expected to attend the 2024 Annual Meeting. The following sets forth certain demographic information regarding the current members of the Board:
2023 Board of Directors
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Proxy Statement Summary
EXECUTIVE COMPENSATION
At our 2023 Annual Meeting, our stockholders approved our named executive officer compensation with approximately 94.50% of the vote
Detailed discussion and analysis of our Executive Compensation begins on page 19. Our Executive Compensation program uses a mix of base salary, annual cash incentives and equity-based awards and standard benefits to attract and retain highly qualified executives and maintain a strong relationship between executive pay and Company performance. As such, the Compensation Committee believes in providing for continuous improvement and further refinement of the program to reflect current realities, business environment and performance as described below.
At our 2023 Annual Meeting of Stockholders, our stockholders approved our named executive officers’ 2022 compensation with approximately 94.50% of the vote. Stockholder engagement and the outcome of our annual Say-on-Pay vote will continue to inform our future compensation decisions. The Compensation Committee annually reviews our compensation programs to ensure pay for performance alignment and implement best practices. Below are recent actions taken by the Compensation Committee in furtherance of those objectives:
RECENT COMPENSATION COMMITTEE ACTIONS
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| | | • CASH BONUS PROGRAM INCLUDES FINANCIAL AND ESG PERFORMANCE METRICS | | | • ENHANCED DISCLOSURE OF CASH BONUS PROGRAM METRICS, INCLUDING ACHIEVED RESULTS | | |
| | | • REVISED PAYOUTS FOR PERFORMANCE AWARDS TO ALIGN PAY FOR PERFORMANCE IN THE EVENT PEER GROUP SIZE DECREASES | | | • COMPETITIVE LONG-TERM INCENTIVE PROGRAM INCLUDES POTENTIAL TO GRANT STOCK OPTIONS, RESTRICTED STOCK AND PERFORMANCE AWARDS | | |
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| • | Multi-Year Cash Incentive Plan (“CIP”) Bonus Program Includes Financial and ESG Performance Metrics: In April 2022, the Compensation Committee approved a new three-year Cash Incentive Plan (“2022-2024 CIP”) effective for each fiscal year from 2022 to 2024. The 2022-2024 CIP continues to provide executives with a bonus opportunity as a percentage of their normal base salary based on predetermined financial (Adjusted EBITDA), and environment, social and governance (“ESG”) metrics. |
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| • | Enhanced Disclosure of Cash Bonus Program Metrics: In 2022, at the direction of the Compensation Committee, the Company enhanced its disclosures regarding the CIP bonus program to include the weighting of the performance measures and the threshold, target and maximum performance objectives as well as the achieved results. |
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| • | Continued Review of Components of the Long-Term Incentive Program: In 2022, after a review of refining industry peer equity incentive programs, the Compensation Committee determined that, in order to maintain the competitiveness of the Company’s equity incentive program for purposes of recruiting and retaining executive management talent, the program would include stock options, restricted stock and performance awards, with the decision as to whether restricted stock or stock options will be awarded in a given year to be determined based on a number of factors, including market practices and the Committee’s desired mix of equity incentives. The Compensation Committee determined that the 2023 long-term incentive program would consist of restricted stock (40%), performance share units (30%) and performance units (30%). |
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| • | Revised Performance Award Payouts to Better Align Pay for Performance in the Event Peer Group Size Decreases: In order to further improve alignment with stockholder interests, the Compensation Committee revised the forms of the performance award agreements to decrease the target payout opportunities where there are only six companies (including the Company) in the peer group. |
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Proxy Statement Summary
EXECUTIVE COMPENSATION PROGRAM HIGHLIGHTS
In addition to the recent compensation actions described above, the executive compensation program for the named executive officers includes best practice features that align executive compensation with the interests of our stockholders:
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| | | What We Do | | | | |||
| | | Annual Say on Pay VoteMajority of named executive officer compensation is variable and linked to performanceLong-term incentives are largely contingent on performanceObjective total shareholder return (“TSR”) metric underlying the performance-based portion of the long-term incentive award aligned with stockholder interestsMeaningful stock ownership guidelines for executive officers, which were met by all of the NEOsChange of control payment under employment agreements limited to 2.99 times base salary | | | Grant stock options only at fair market value as of the grant date Compensation consultant independent from management One-year minimum vesting for all equity grants and one year stock holding requirement for NEOs after vesting or exercise for stock options, stock appreciation rights and full-value awards Payout of performance awards is capped at target amount if PBF’s TSR is negative Clawback policy applicable to NEOs providing that an accounting restatement will trigger the clawback of any erroneously awarded compensation | | | |
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| | | What We Don’t Do | | | | |||
| | | No guaranteed minimum cash bonus payments to any of our executive officersNo repricing of stock options without shareholder approval No hedging or pledging or short selling of PBF stock No excessive perquisites No excise tax gross-ups on any payments at a change of control | | | No individual supplemental executive retirement arrangementsNo liberal share recycling under the Equity Incentive Plan | | | |
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Proxy Statement Summary
GOVERNANCE HIGHLIGHTS
PBF Energy is committed to meeting high standards of ethical behavior, corporate governance and business conduct in everything we do, every day. This commitment has led us to implement the following practices:
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| | | Annual Election of All Directors Our directors are elected annually by vote of our stockholders. Approximately 80% of Our Directors are Independent Nine of our eleven current directors are, and assuming election of the ten director nominees at the Annual Meeting, eight out of ten of the directors, will be independent. Lead Director Our independent directors are led by an independent Lead Director and regularly meet in executive session. Majority Voting for Uncontested Director Elections We have adopted majority voting for uncontested elections of directors, which requires that our directors must be elected by a majority of the votes cast with respect to such elections. | | | Independent Compensation Consultant Our Compensation Committee uses an independent compensation consultant, which performs no consulting or other services for the Company. Absence of Rights Plan We do not have a shareholder rights plan, commonly referred to as a “poison pill.” Chief Executive Officer Succession Planning Succession planning, which is conducted at least annually by our Board of Directors, addresses both an unexpected loss of our CEO and longer-term succession. | | | Transactions in Company Securities Our insider trading policy prohibits all directors and employees from engaging in short sales and hedging or pledging transactions related to our common stock. Stock Ownership and Stock Holding Requirements We adopted stock ownership guidelines for our officers and directors. All of our named executive officers and all of our directors, who have served more than five years, met their stock ownership guidelines requirements. Effective 2022, there is a one-year stock holding requirement for our NEOs following the vesting or exercise of stock options, stock appreciation rights and full-value awards. No Significant Related Party Transactions None of the directors or officers have been involved in any significant related party transactions. | | |
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Proxy Statement Summary
CORPORATE RESPONSIBILITY AND STEWARDSHIP HIGHLIGHTS
ESG matters are important to us and are of increasing importance to many investors. As an independent refiner with operating assets across the United States, we value workplace safety, environmental stewardship, corporate governance, operating reliability, community engagement, and production of cleaner and next generation fuels. In 2022, we published our inaugural ESG Report, which sets forth the current state of our ESG performance.
In 2023, the Renewable Diesel Facility owned by SBR, our joint venture with Eni, commenced operations. The facility is currently targeted to have processing capacity of about 1.1 million tonnes/year of raw materials, with full pretreatment capabilities. It will produce mainly HVO Diesel (Hydrotreated Vegetable Oil, commonly known as 'renewable diesel' in North America), with a production capacity of 306 million gallons per year. The biorefinery will use the Ecofining™ process developed by Eni in cooperation with Honeywell UOP. The joint venture reflects both partners' commitment to deliver more sustainable transportation fuels using low carbon intensity feedstocks.
PBF is also part of MACH2 (“Mid-Atlantic Clean Hydrogen Hub”), a broad consortium exploring the development of a clean energy and logistics hub on 2,500 acres adjacent to PBF’s Delaware City refinery. MACH2 was selected by the Department of Energy to receive up to $750 million to advance the development of a clean hydrogen production and distribution hub. Clean hydrogen is an emerging, dynamic frontier in the energy transition to a low carbon future. In connection with MACH2, PBF is considering investments in renewable electricity, green hydrogen production, development of 10 million square feet of distribution warehouses and office space, and hydrogen fueling facilities for a large fleet of medium duty trucks.
PBF Energy is committed to conservation of energy, continuous reduction of waste generated at our facilities, and ensuring that each of its facilities is in compliance with all applicable local, state, and federal environmental laws and standards. All of our facilities utilize state of the art pollution control equipment to reduce emissions compared to historical rates. This equipment includes wet gas scrubbers, carbon monoxide boilers, and tail gas treating units on sulfur recovery units. In addition, PBF Energy has a robust internal team of technical professionals in our Health, Safety and Environment department, including numerous chemical and environmental engineers, located at our corporate headquarters and each of our major facilities.
Our Board provides oversight of all of our environmental efforts through the Health, Safety and Environment Committee, whose charter is posted on our website. Through the use of state-of-the-art equipment, environmental professionals, and strong Board and management oversight, PBF is able to continue on its path of ongoing improvement in the area of environmental protection.
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Proxy Statement Summary
HUMAN CAPITAL HIGHLIGHTS
PBF Energy believes that our people are our most important asset. We strive to provide our employees with a collaborative, supportive and inclusive work environment where they can maximize their personal and professional potential.
PBF Energy is dedicated to establishing a culture of diversity and inclusion where each employee is afforded the opportunity to excel and is valued for their unique background, experience, and point of view. Our commitment to this culture of inclusion is reflected in our recruiting efforts and the opportunities afforded to PBF Energy employees.
To develop the full potential of our people and to encourage inclusivity, PBF Energy offers a range of training opportunities that address supervisory skills, help employees recognize biases and understand the value of individual differences, and support a diverse workforce. We have a partnership with LinkedIn Learning to provide all employees with access to their library of video courses to broaden employees’ knowledge and skills. PBF Energy also offers a tuition reimbursement program to assist employees with the costs of attending colleges and universities. This allows our employees to gain additional education and training without the financial burden.
PBF Energy is a proud member of the Corporate Partnership Council of the Society of Women Engineers. Through this membership, we promote opportunities for women in engineering and technology careers as we provide financial support for the society and its programs.
PBF Energy supports our labor force’s right to union representation. We work collaboratively with the union representatives at each of our sites to ensure that our employees and their families are cared for. Additionally, we maintain a close working relationship with the leaders of the building and construction trade unions that supply our contactors with many skilled craftspeople.
PBF Energy is committed to the equal treatment of all people, regardless of race, creed, color, national origin, or economic level and PBF Energy supports the goals and principles set forth in the United Nations Universal Declaration of Human Rights. Our commitment to recognizing the value of all people is reflected in our core values and key policies, which touch upon business ethics and conduct; health, safety and environmental protection; and inclusion and diversity.
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