Valero (NYSE:VLI)
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Valero L.P. (NYSE:VLI) today announced net income
applicable to limited partners from continuing operations and before
certain non-cash items of $29.6 million, or $0.63 per unit, for the
fourth quarter of 2005 compared to $17.9 million, or $0.78 per unit,
as reported for the fourth quarter of 2004. For the full year 2005,
net income applicable to limited partners from continuing operations
and before certain non-cash items was $101.5 million, or $2.90 per
unit, compared to $72.5 million, or $3.15 per unit, as reported for
the full year 2004.
Including certain non-cash items and discontinued operations,
Valero L.P. reported net income applicable to limited partners of
$24.2 million, or $0.52 per unit, for the fourth quarter of 2005 and
$100.3 million, or $2.86 per unit for the full year 2005.
The certain non-cash items mentioned above, which totaled $4.6
million in the fourth quarter, or $0.09 per unit, primarily relate to
the write-off of a portion of idle pipeline in South Texas and
increased depreciation and amortization expense related to the
purchase accounting for the Kaneb acquisition completed on July 1,
2005.
Distributable cash flow excludes the effects of the certain
non-cash items mentioned above. For the fourth quarter of 2005, Valero
L.P. reported distributable cash flow available to limited partners
from continuing operations of $42.2 million, or $0.90 per unit,
compared to $22.4 million, or $0.97 per unit, as reported for the
fourth quarter of 2004. For the full year 2005, distributable cash
flow available to limited partners from continuing operations was
$136.5 million, or $3.90 per unit, compared to $90.3 million, or $3.92
per unit, as reported for the full year 2004.
With respect to the quarterly distribution to unitholders payable
for the fourth quarter of 2005, Valero L.P. also announced that it has
declared a distribution of $0.855 per unit payable February 14, 2006,
to holders of record as of February 7, 2006. Distributable cash flow
available to limited partners from continuing operations covers the
distribution to the limited partners by 1.05 times for the fourth
quarter and 1.16 times for the full year 2005.
The partnership also reported that on December 13, 2005, it signed
a definitive agreement to sell to ANZ Terminals Pty, Ltd. its
businesses located in Australia and New Zealand acquired when it
purchased Kaneb. The sales price for these businesses is approximately
$65 million and includes the partnership's four terminals located in
Australia and four terminals located in New Zealand. Combined these
assets have a total capacity of approximately 1.3 million barrels.
Completion of the proposed sale is subject to customary conditions and
the sale is scheduled to close during the first quarter of 2006. The
partnership intends to repay debt with the sales proceeds. Results for
these assets have been classified as discontinued operations on the
income statement.
"The partnership's earnings for the fourth quarter were below our
guidance and expectations provided to investors on the third quarter
conference call," said Curt Anastasio, Valero L.P.'s Chief Executive
Officer. "All of the factors we mentioned on that call, including the
sale of assets to Pacific Energy Partners, L.P. on September 30, 2005,
the turnaround of Valero Energy's McKee refinery and increased
maintenance expense, impacted earnings in the fourth quarter. The
plant-wide turnaround at Valero Energy's McKee refinery took longer
than planned and as a result our volumes and earnings were hit harder
than originally expected. Additionally, as a result of the purchase
accounting for the Kaneb acquisition, the depreciation charge for the
quarter and the final six months of the year was higher than indicated
in our guidance. Despite the weaker fourth quarter earnings,
distributable cash flow available to limited partners from continuing
operations covers the distribution to limited partners by 1.05 times,
and, for the full year, we had coverage at over 1.15 times.
"Looking back at 2005, our biggest accomplishment was the
successful completion of the Kaneb acquisition. Combined, we are now
one of the premier logistics partnerships with stronger, more
diversified operations, increased earnings stability, and a stable
foundation for future growth. We have identified many accretive
strategic growth projects in 2006, the majority of which are related
to the former Kaneb assets we've acquired.
"We also had several positive developments in 2005 with respect to
our operations in South Texas and Mexico. Not only did we benefit from
an increase in volumes on our Dos Laredos system, which increased from
5,000 barrels per day to over 9,000 barrels per day, we also benefited
from the expansion of our Rio Grande Valley pipeline by over 10,000
barrels per day. In addition, we announced the start of a major
pipeline construction project of more than 110 miles of pipeline in
northeastern Mexico and South Texas, which will allow us to move
around 36,000 barrels per day of petroleum products. We still expect
to have this project completed in May of this year.
"Looking ahead to 2006, operations are expected to be adversely
impacted by lower throughput volumes from the scheduled maintenance
turnarounds at some of the Valero Energy refineries we serve. In
addition, we expect to have increased maintenance. In the second half
of 2006, we expect to benefit from increases in our pipeline tariffs
effective July 1," said Anastasio.
A conference call with management is scheduled for 4:00 p.m. ET
(3:00 p.m. CT) today to discuss the financial and operational results
for the fourth quarter of 2005. Investors interested in listening to
the presentation may call 800-622-7620, passcode 3988266.
International callers may access the presentation by dialing
706-645-0327, passcode 3988266. The company intends to have a playback
available following the presentation, which may be accessed by calling
800-642-1687, passcode 3988266. A live broadcast of the conference
call will also be available on the company's website at
www.valerolp.com.
Valero L.P. is a master limited partnership based in San Antonio,
with 9,122 miles of pipeline, 94 terminal facilities and four crude
oil storage facilities. One of the largest terminal and independent
petroleum liquids pipeline operators in the nation, the partnership
has terminal facilities in 24 U.S. states, Canada, Mexico, the
Netherlands Antilles, the Netherlands, Australia, New Zealand and the
United Kingdom. The partnership's combined system has approximately
80.8 million barrels of storage capacity, and includes crude oil and
refined product pipelines, refined product terminals, petroleum and a
specialty liquids storage and terminaling business, as well as crude
oil storage tank facilities. For more information, visit Valero L.P.'s
web site at www.valerolp.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements within the
meaning of the Securities Litigation Reform Act of 1995 regarding
future events and the future financial performance of Valero L.P. All
forward-looking statements are based on the partnership's beliefs as
well as assumptions made by and information currently available to the
partnership. These statements reflect the partnership's current views
with respect to future events and are subject to various risks,
uncertainties and assumptions. These risks, uncertainties and
assumptions are discussed in Valero L.P.'s 2004 annual report on Form
10-K and subsequent filings with the Securities and Exchange
Commission.
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Valero L.P.
Consolidated Financial Information
December 31, 2005 and 2004
(unaudited, thousands of dollars, except unit data and per unit data)
Three Months Ended Years Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Statement of Income
Data (Note 1):
Revenues
Services $144,043 $54,686 $407,194 $220,792
Product 142,188 - 252,363 -
----------- ----------- ----------- -----------
Total revenues 286,231 54,686 659,557 220,792
Costs and expenses:
Cost of sales 128,589 - 229,806 -
Operating expenses 74,850 18,552 184,609 78,298
General and
administrative
expenses 9,489 3,088 26,553 11,321
Depreciation and
amortization 24,640 8,613 64,895 33,149
----------- ----------- ----------- -----------
Total costs and
expenses 237,568 30,253 505,863 122,768
----------- ----------- ----------- -----------
Operating income 48,663 24,433 153,694 98,024
Equity income (loss)
from joint ventures (21) 242 2,319 1,344
Interest and other
expense, net (17,281) (5,320) (43,625) (20,950)
----------- ----------- ----------- -----------
Income from
continuing
operations before
income tax expense 31,361 19,355 112,388 78,418
Income tax expense 2,663 - 4,713 -
----------- ----------- ----------- -----------
Income from
continuing
operations 28,698 19,355 107,675 78,418
Income (loss) from
discontinued
operations (908) - 3,398 -
----------- ----------- ----------- -----------
Net income applicable
to general partner
and limited
partners' interest 27,790 19,355 111,073 78,418
Net income applicable
to general partner
including incentive
distributions (Note
2) (3,543) (1,476) (10,758) (5,927)
----------- ----------- ----------- -----------
Net income applicable
to limited partners $24,247 $17,879 $100,315 $72,491
=========== =========== =========== ===========
Net income (loss) per
unit applicable to
limited partners
(Note 2):
Continuing
operations $0.54 $0.78 $2.76 $3.15
Discontinued
operations (0.02) - 0.10 -
----------- ----------- ----------- -----------
Net income $0.52 $0.78 $2.86 $3.15
Weighted average
number of limited
partnership units
outstanding 46,809,749 23,041,394 35,023,250 23,041,394
EBITDA from continuing
operations (Note 3) $71,298 $33,288 $218,671 $132,517
Distributable cash
flow from continuing
operations (Note 3) $46,862 $25,205 $153,873 $101,895
December 31, September 30,
----------------------- -------------
2005 2004 2005
----------- ----------- -------------
Balance Sheet Data:
Long-term debt,
including current
portion (a) $1,170,705 $385,161 $1,175,473
Partners' equity
(b) 1,900,779 438,311 1,918,933
Debt-to-
capitalization
ratio (a) /
((a)+(b)) 38.1% 46.8% 38.0%
Valero L.P.
Consolidated Financial Information - Continued
December 31, 2005 and 2004
(unaudited, thousands of dollars, except barrel information)
Three Months Ended Years Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
---------- -------- --------- ---------
Operating Data:
Crude oil pipelines:
Throughput (barrels/day) 348,260 371,573 358,965 381,358
Gross margin $11,828 $13,000 $51,429 $52,462
Operating expenses 3,914 3,643 16,378 15,468
Depreciation and
amortization 1,155 1,131 4,612 4,499
---------- -------- --------- ---------
Segment operating income $6,759 $8,226 $30,439 $32,495
========== ======== ========= =========
Refined product pipelines:
Throughput (barrels/day) 652,689 447,789 556,654 442,596
Gross margin $51,244 $22,654 $149,853 $86,418
Operating expenses 23,288 8,972 64,671 37,332
Depreciation and
amortization 12,244 3,737 27,778 14,715
---------- -------- --------- ---------
Segment operating income $15,712 $9,945 $57,404 $34,371
========== ======== ========= =========
Refined product terminals:
Throughput (barrels/day)
(a) 221,798 257,423 245,085 256,576
Throughput gross margin $9,809 $9,725 $43,617 $39,984
Storage lease gross margin 58,941 - 115,352 -
Bunkering gross margin 13,599 - 22,557 -
Operating expenses 44,953 4,435 94,607 18,365
Depreciation and
amortization 9,354 1,878 25,008 6,471
---------- -------- --------- ---------
Segment operating income $28,042 $3,412 $61,911 $15,148
========== ======== ========= =========
Crude oil storage tanks:
Throughput (barrels/day) 532,425 424,643 517,409 473,714
Gross margin $12,221 $9,307 $46,943 $41,928
Operating expenses 2,695 1,502 8,953 7,133
Depreciation and
amortization 1,887 1,867 7,497 7,464
---------- -------- --------- ---------
Segment operating income $7,639 $5,938 $30,493 $27,331
========== ======== ========= =========
Consolidated Information:
Gross margin $157,642 $54,686 $429,751 $220,792
Operating expenses 74,850 18,552 184,609 78,298
Depreciation and
amortization 24,640 8,613 64,895 33,149
---------- -------- --------- ---------
Segment operating income 58,152 27,521 180,247 109,345
General and administrative
expenses 9,489 3,088 26,553 11,321
---------- -------- --------- ---------
Consolidated operating
income $48,663 $24,433 $153,694 $98,024
========== ======== ========= =========
(a) Excludes throughputs related to the storage lease and bunkering
operations acquired in the Kaneb Acquisition.
Valero L.P.
Consolidated Financial Information - Continued
December 31, 2005 and 2004
(unaudited)
Notes:
1. The statement of income data for the year ended December 31, 2005
includes $55.5 million of operating income related to the Kaneb
Acquisition. Of the $55.5 million, $13.2 million is attributed to
the refined product pipeline segment and $42.3 million is
attributed to the refined product terminal segment.
2. Net income is allocated between limited partners and the general
partner's interests based on provisions in the partnership
agreement. The net income applicable to limited partners is
divided by the weighted average number of limited partnership
units outstanding in computing the net income per unit applicable
to limited partners. On July 1, 2005, Valero L.P. issued
23,768,751 of common units in exchange for all of the outstanding
common units of Kaneb Pipe Line Partners, L.P. As of December 31,
2005, Valero L.P. has 46,809,749 common and subordinated units
outstanding. Net income applicable to the general partner includes
incentive distributions aggregating $3.0 million and $1.1 million
for the three months ended December 31, 2005 and 2004,
respectively, and $8.7 million and $4.4 million for the years
ended December 31, 2005 and 2004, respectively.
3. Valero L.P. utilizes two financial measures, EBITDA and
distributable cash flow, which are not defined in United States
generally accepted accounting principles. Management uses these
financial measures because they are widely accepted financial
indicators used by investors to compare partnership performance.
In addition, management believes that these measures provide
investors an enhanced perspective of the operating performance of
the partnership's assets and the cash that the business is
generating. Neither EBITDA nor distributable cash flow are
intended to represent cash flows for the period, nor are they
presented as an alternative to net income. They should not be
considered in isolation or as substitutes for a measure of
performance prepared in accordance with United States generally
accepted accounting principles.
The following is a reconciliation of income from continuing operations
to EBITDA and distributable cash flow (in thousands):
Three Months Ended Years Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Income from continuing
operations $28,698 $19,355 $107,675 $78,418
Plus interest
expense, net 15,297 5,320 41,388 20,950
Plus income tax
expense 2,663 - 4,713 -
Plus depreciation
and amortization 24,640 8,613 64,895 33,149
----------- ----------- ----------- -----------
EBITDA from
continuing operations 71,298 33,288 218,671 132,517
EBITDA from
discontinued
operations 324 - 11,518 -
----------- ----------- ----------- -----------
Total EBITDA $71,622 $33,288 $230,189 $132,517
=========== =========== =========== ===========
EBITDA from continuing
operations $71,298 $33,288 $218,671 $132,517
Less equity (income)
loss from joint
ventures 21 (242) (2,319) (1,344)
Less interest
expense, net (15,297) (5,320) (41,388) (20,950)
Less reliability
capital
expenditures (11,338) (2,671) (23,707) (9,701)
Less income tax
expense (2,663) - (4,713) -
Plus distributions
from joint ventures 2,169 150 4,657 1,373
Plus other non-cash
items 2,672 - 2,672 -
----------- ----------- ----------- -----------
Distributable cash
flow from continuing
operations 46,862 25,205 153,873 101,895
General partner's
interest in
distributable cash
flow from continuing
operations (4,656) (2,826) (17,398) (11,574)
----------- ----------- ----------- -----------
Limited partners'
interest in
distributable cash
flow from continuing
operations $42,206 $22,379 $136,475 $90,321
=========== =========== =========== ===========
Weighted average
number of limited
partnership units
outstanding 46,809,749 23,041,394 35,023,250 23,041,394
Distributable cash
flow from continuing
operations per
limited partner unit $0.90 $0.97 $3.90 $3.92
Distributable cash
flow from continuing
operations $46,862 $25,205 $153,873 $101,895
Distributable cash
flow from
discontinued
operations (211) - 5,265 -
----------- ----------- ----------- -----------
Total distributable
cash flow $46,651 $25,205 $159,138 $101,895
General partner's
interest in
distributable cash
flow (4,603) (2,826) (18,714) (11,574)
----------- ----------- ----------- -----------
Limited partners'
interest in
distributable cash
flow $42,048 $22,379 $140,424 $90,321
=========== =========== =========== ===========
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