[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 74-1828067 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Large accelerated filer X | Accelerated filer __ | Non-accelerated filer __ |
Page | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
30 | ||||
50 | ||||
54 | ||||
54 | ||||
55 | ||||
55 | ||||
56 | ||||
57 | ||||
58 |
2
June 30, | December 31, | |||||||
2007 |
2006 |
|||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and temporary cash investments |
$ | 2,336 | $ | 1,590 | ||||
Restricted cash |
31 | 31 | ||||||
Receivables, net |
4,693 | 4,384 | ||||||
Inventories |
4,578 | 3,979 | ||||||
Income taxes receivable |
- | 32 | ||||||
Deferred income taxes |
183 | 143 | ||||||
Prepaid expenses and other |
133 | 145 | ||||||
Assets held for sale |
1,613 | 1,527 | ||||||
Total current assets |
13,567 | 11,831 | ||||||
Property, plant and equipment, at cost |
24,452 | 23,421 | ||||||
Accumulated depreciation |
(3,667 | ) | (3,241 | ) | ||||
Property, plant and equipment, net |
20,785 | 20,180 | ||||||
Intangible assets, net |
293 | 303 | ||||||
Goodwill |
4,092 | 4,103 | ||||||
Deferred charges and other assets, net |
1,613 | 1,336 | ||||||
Total assets |
$ | 40,350 | $ | 37,753 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital lease obligations |
$ | 66 | $ | 475 | ||||
Accounts payable |
7,348 | 6,841 | ||||||
Accrued expenses |
536 | 507 | ||||||
Taxes other than income taxes |
603 | 584 | ||||||
Income taxes payable |
522 | 23 | ||||||
Deferred income taxes |
337 | 363 | ||||||
Liabilities related to assets held for sale |
53 | 67 | ||||||
Total current liabilities |
9,465 | 8,860 | ||||||
Long-term debt and capital lease obligations, less current portion |
6,855 | 4,619 | ||||||
Deferred income taxes |
4,146 | 4,047 | ||||||
Other long-term liabilities |
1,769 | 1,622 | ||||||
Commitments and contingencies (Note 14) |
||||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 1,200,000,000 shares authorized;
627,501,593 and 627,501,593 shares issued |
6 | 6 | ||||||
Additional paid-in capital |
7,446 | 7,779 | ||||||
Treasury stock, at cost; 74,188,725 and 23,738,162 common shares |
(4,876 | ) | (1,396 | ) | ||||
Retained earnings |
15,204 | 11,951 | ||||||
Accumulated other comprehensive income |
335 | 265 | ||||||
Total stockholders equity |
18,115 | 18,605 | ||||||
Total liabilities and stockholders equity |
$ | 40,350 | $ | 37,753 | ||||
3
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Operating revenues (1) |
$ | 24,202 | $ | 25,592 | $ | 42,957 | $ | 45,567 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales |
19,310 | 21,311 | 34,820 | 38,525 | ||||||||||||
Refining operating expenses |
985 | 911 | 1,919 | 1,795 | ||||||||||||
Retail selling expenses |
200 | 182 | 371 | 354 | ||||||||||||
General and administrative expenses |
177 | 171 | 322 | 322 | ||||||||||||
Depreciation and amortization expense |
337 | 279 | 659 | 534 | ||||||||||||
Total costs and expenses |
21,009 | 22,854 | 38,091 | 41,530 | ||||||||||||
Operating income |
3,193 | 2,738 | 4,866 | 4,037 | ||||||||||||
Equity in earnings of NuStar Energy L.P. |
| 10 | | 22 | ||||||||||||
Other income (expense), net |
7 | (5 | ) | 12 | (5 | ) | ||||||||||
Interest and debt expense: |
||||||||||||||||
Incurred |
(110 | ) | (93 | ) | (199 | ) | (189 | ) | ||||||||
Capitalized |
27 | 45 | 58 | 81 | ||||||||||||
Income from continuing operations before income tax expense |
3,117 | 2,695 | 4,737 | 3,946 | ||||||||||||
Income tax expense |
1,055 | 876 | 1,587 | 1,299 | ||||||||||||
Income from continuing operations |
2,062 | 1,819 | 3,150 | 2,647 | ||||||||||||
Income from discontinued operations, net of income tax expense |
187 | 78 | 243 | 99 | ||||||||||||
Net income |
2,249 | 1,897 | 3,393 | 2,746 | ||||||||||||
Preferred stock dividends |
| 1 | | 2 | ||||||||||||
Net income applicable to common stock |
$ | 2,249 | $ | 1,896 | $ | 3,393 | $ | 2,744 | ||||||||
Earnings per common share: |
||||||||||||||||
Continuing operations |
$ | 3.66 | $ | 2.97 | $ | 5.42 | $ | 4.30 | ||||||||
Discontinued operations |
0.33 | 0.13 | 0.42 | 0.16 | ||||||||||||
Total |
$ | 3.99 | $ | 3.10 | $ | 5.84 | $ | 4.46 | ||||||||
Weighted-average common shares outstanding (in millions) |
563 | 611 | 581 | 615 | ||||||||||||
Earnings per common share assuming dilution: |
||||||||||||||||
Continuing operations |
$ | 3.57 | $ | 2.86 | $ | 5.28 | $ | 4.13 | ||||||||
Discontinued operations |
0.32 | 0.12 | 0.40 | 0.16 | ||||||||||||
Total |
$ | 3.89 | $ | 2.98 | $ | 5.68 | $ | 4.29 | ||||||||
Weighted-average common equivalent shares
outstanding (in millions) |
578 | 636 | 597 | 640 | ||||||||||||
Dividends per common share |
$ | 0.12 | $ | 0.08 | $ | 0.24 | $ | 0.14 | ||||||||
Supplemental information: |
||||||||||||||||
(1) Includes excise taxes on sales by our U.S. retail system |
$ | 203 | $ | 196 | $ | 399 | $ | 390 |
4
Six Months Ended June 30, |
||||||||
2007 |
2006 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 3,393 | $ | 2,746 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Depreciation and amortization expense |
675 | 553 | ||||||
Stock-based compensation expense |
46 | 52 | ||||||
Deferred income tax expense |
153 | 116 | ||||||
Changes in current assets and current liabilities |
60 | 381 | ||||||
Changes in deferred charges and credits and other, net |
24 | (25 | ) | |||||
Net cash provided by operating activities |
4,351 | 3,823 | ||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(1,042 | ) | (1,588 | ) | ||||
Deferred turnaround and catalyst costs |
(230 | ) | (387 | ) | ||||
Investment in Cameron Highway Oil Pipeline Company, net |
(215 | ) | (10 | ) | ||||
Advance proceeds related to sale of Lima Refinery |
96 | | ||||||
Contingent payments in connection with acquisitions |
(75 | ) | (76 | ) | ||||
Other investing activities, net |
15 | 28 | ||||||
Net cash used in investing activities |
(1,451 | ) | (2,033 | ) | ||||
Cash flows from financing activities: |
||||||||
Long-term notes: |
||||||||
Borrowings |
2,245 | | ||||||
Repayments |
(413 | ) | (221 | ) | ||||
Bank credit agreements: |
||||||||
Borrowings |
3,000 | 501 | ||||||
Repayments |
(3,000 | ) | (439 | ) | ||||
Termination of interest rate swaps |
| (54 | ) | |||||
Purchase of treasury stock |
(4,181 | ) | (1,187 | ) | ||||
Issuance of common stock in connection with
employee benefit plans |
111 | 65 | ||||||
Benefit from tax deduction in excess of recognized
stock-based
compensation cost |
215 | 130 | ||||||
Common and preferred stock dividends |
(139 | ) | (87 | ) | ||||
Other financing activities |
(21 | ) | (1 | ) | ||||
Net cash used in financing activities |
(2,183 | ) | (1,293 | ) | ||||
Effect of foreign exchange rate changes on cash |
29 | 4 | ||||||
Net increase in cash and temporary cash investments |
746 | 501 | ||||||
Cash and temporary cash investments at beginning of period |
1,590 | 436 | ||||||
Cash and temporary cash investments at end of period |
$ | 2,336 | $ | 937 | ||||
5
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Net income |
$ | 2,249 | $ | 1,897 | $ | 3,393 | $ | 2,746 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation adjustment, net of
income tax expense of $31, $0, $31 and $0 |
141 | 80 | 161 | 72 | ||||||||||||
Pension and other postretirement benefits net
loss reclassified into income, net of income
tax benefit of $1, $0, $2 and $0 |
2 | - | 3 | - | ||||||||||||
Net loss on derivative instruments
designated and qualifying as cash flow hedges: |
||||||||||||||||
Net gain (loss) arising during the period,
net of income tax (expense) benefit of
$24, $0, $47 and $(1) |
(45 | ) | - | (87 | ) | 2 | ||||||||||
Net (gain) loss reclassified into income,
net of income tax expense (benefit) of $(2),
$0, $4 and $3 |
4 | - | (7 | ) | (6 | ) | ||||||||||
Net loss on cash flow hedges |
(41 | ) | - | (94 | ) | (4 | ) | |||||||||
Other comprehensive income (loss) |
102 | 80 | 70 | 68 | ||||||||||||
Comprehensive income |
$ | 2,351 | $ | 1,977 | $ | 3,463 | $ | 2,814 | ||||||||
6
7
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2006 |
June 30, 2006 |
|||||||
Operating revenues |
$ | (20 | ) | $ | (34 | ) | ||
Cost of sales |
2 | 5 | ||||||
Retail selling expenses |
(22 | ) | (39 | ) |
8
9
June 30, | December 31, | |||||||
2007 |
2006 |
|||||||
Current assets (primarily inventory) |
$ | 533 | $ | 456 | ||||
Property, plant and equipment, net |
929 | 918 | ||||||
Goodwill |
108 | 108 | ||||||
Deferred charges and other assets, net |
43 | 45 | ||||||
Assets held for sale |
$ | 1,613 | $ | 1,527 | ||||
Current liabilities, including current portion
of capital lease obligation |
$ | 15 | $ | 29 | ||||
Capital lease obligation, excluding current portion |
38 | 38 | ||||||
Liabilities related to assets held for sale |
$ | 53 | $ | 67 | ||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Operating revenues |
$ | 1,288 | $ | 1,169 | $ | 2,231 | $ | 2,121 | ||||||||
Income before income tax expense |
300 | 128 | 391 | 163 |
June 30, | December 31, | |||||||
2007 |
2006 |
|||||||
Refinery feedstocks |
$ | 2,318 | $ | 1,680 | ||||
Refined products and blendstocks |
2,007 | 2,056 | ||||||
Convenience store merchandise |
88 | 85 | ||||||
Materials and supplies |
165 | 158 | ||||||
Inventories |
$ | 4,578 | $ | 3,979 | ||||
10
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2006 |
June 30, 2006 |
|||||||
Revenues |
$ | 280 | $ | 554 | ||||
Operating income |
47 | 103 | ||||||
Net income |
32 | 71 |
11
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2006 |
June 30, 2006 |
|||||||
Fees and expenses charged by us to NuStar Energy L.P. |
$ | 31 | $ | 57 | ||||
Fees and expenses charged to us by NuStar Energy L.P. |
64 | 125 |
12
13
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Earnings per common share from
continuing operations: |
||||||||||||||||
Income from continuing operations |
$ | 2,062 | $ | 1,819 | $ | 3,150 | $ | 2,647 | ||||||||
Preferred stock dividends |
- | 1 | - | 2 | ||||||||||||
Income from continuing operations applicable
to
common stock |
$ | 2,062 | $ | 1,818 | $ | 3,150 | $ | 2,645 | ||||||||
Weighted-average common shares outstanding |
563 | 611 | 581 | 615 | ||||||||||||
Earnings per common share from
continuing operations |
$ | 3.66 | $ | 2.97 | $ | 5.42 | $ | 4.30 | ||||||||
Earnings per common share from
continuing operations assuming dilution: |
||||||||||||||||
Income from continuing operations applicable
to common equivalent shares |
$ | 2,062 | $ | 1,819 | $ | 3,150 | $ | 2,647 | ||||||||
Weighted-average common shares outstanding |
563 | 611 | 581 | 615 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options |
13 | 19 | 14 | 19 | ||||||||||||
Performance awards and other benefit plans |
1 | 1 | 1 | 1 | ||||||||||||
Contingently issuable shares related to
accelerated share repurchase program |
1 | - | 1 | - | ||||||||||||
Mandatory convertible preferred stock |
- | 5 | - | 5 | ||||||||||||
Weighted-average common equivalent
shares outstanding |
578 | 636 | 597 | 640 | ||||||||||||
Earnings per common share from
continuing operations assuming dilution |
$ | 3.57 | $ | 2.86 | $ | 5.28 | $ | 4.13 | ||||||||
14
Six Months Ended June 30, |
||||||||
2007 |
2006 |
|||||||
Decrease (increase) in current assets: |
||||||||
Receivables, net |
$ | (268 | ) | $ | (648 | ) | ||
Inventories |
(638 | ) | (573 | ) | ||||
Income taxes receivable |
32 | 46 | ||||||
Prepaid expenses and other |
14 | (105 | ) | |||||
Increase (decrease) in current liabilities: |
||||||||
Accounts payable |
464 | 1,316 | ||||||
Accrued expenses |
(71 | ) | (148 | ) | ||||
Taxes other than income taxes |
3 | (1 | ) | |||||
Income taxes payable |
524 | 494 | ||||||
Changes in current assets and current liabilities |
$ | 60 | $ | 381 | ||||
| the amounts shown above exclude changes in cash and temporary cash investments, deferred
income taxes, and current portion of long-term debt and capital lease obligations, as well
as the effect of certain noncash investing and financing activities discussed below; |
||
| previously accrued capital expenditures, deferred turnaround and catalyst costs, and
contingent earn-out payments, as well as advance proceeds related to the sale of the Lima
Refinery, are reflected in investing activities in the consolidated statements of cash
flows; |
||
| changes in assets held for sale and liabilities related to assets held for sale in the
consolidated balance sheets are reflected in the line item to which the changes relate in
the table above and in the consolidated statements of cash flows; and |
||
| certain differences between consolidated balance sheet changes and consolidated
statement of cash flow changes reflected above result from translating foreign currency
denominated amounts at different exchange rates. |
15
Six Months Ended June 30, |
||||||||
2007 |
2006 |
|||||||
Interest paid (net of amount capitalized) |
$ | 139 | $ | 164 | ||||
Income taxes paid (net of tax refunds received) |
811 | 569 |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Fair value hedges |
$ | (1 | ) | $ | (3 | ) | $ | (2 | ) | $ | (6 | ) | ||||
Cash flow hedges |
(7 | ) | 5 | (6 | ) | 5 |
16
Refining | Retail | Corporate | Total |
|||||||||||||
Three months ended June 30, 2007: |
||||||||||||||||
Operating revenues from external
customers |
$ | 21,883 | $ | 2,319 | $ | - | $ | 24,202 | ||||||||
Intersegment revenues |
1,654 | - | - | 1,654 | ||||||||||||
Operating income (loss) |
3,327 | 56 | (190 | ) | 3,193 | |||||||||||
Three months ended June 30, 2006: |
||||||||||||||||
Operating revenues from external
customers |
23,361 | 2,231 | - | 25,592 | ||||||||||||
Intersegment revenues |
1,601 | - | - | 1,601 | ||||||||||||
Operating income (loss) |
2,873 | 46 | (181 | ) | 2,738 | |||||||||||
Six months ended June 30, 2007: |
||||||||||||||||
Operating revenues from external
customers |
38,732 | 4,225 | - | 42,957 | ||||||||||||
Intersegment revenues |
2,963 | - | - | 2,963 | ||||||||||||
Operating income (loss) |
5,103 | 109 | (346 | ) | 4,866 | |||||||||||
Six months ended June 30, 2006: |
||||||||||||||||
Operating revenues from external
customers |
41,445 | 4,122 | - | 45,567 | ||||||||||||
Intersegment revenues |
2,912 | - | - | 2,912 | ||||||||||||
Operating income (loss) |
4,311 | 67 | (341 | ) | 4,037 |
June 30, | December 31, | |||||||
2007 |
2006 |
|||||||
Refining |
$ | 35,583 | $ | 34,275 | ||||
Retail |
1,919 | 1,826 | ||||||
Corporate |
2,848 | 1,652 | ||||||
Total consolidated assets |
$ | 40,350 | $ | 37,753 | ||||
17
Other Postretirement | ||||||||||||||||
Pension Plans | Benefit Plans | |||||||||||||||
2007 |
2006 |
2007 |
2006 |
|||||||||||||
Three months ended June 30: |
||||||||||||||||
Components of net periodic benefit cost: |
||||||||||||||||
Service cost |
$ | 24 | $ | 25 | $ | 4 | $ | 4 | ||||||||
Interest cost |
17 | 16 | 6 | 6 | ||||||||||||
Expected return on plan assets |
(21 | ) | (15 | ) | - | - | ||||||||||
Amortization of: |
||||||||||||||||
Prior service cost (credit) |
- | - | (2 | ) | (3 | ) | ||||||||||
Net loss |
3 | 4 | 1 | 1 | ||||||||||||
Net periodic
benefit cost before special charges |
23 | 30 | 9 | 8 | ||||||||||||
Charge for
special termination benefits |
7 | | 1 | | ||||||||||||
Net periodic
benefit cost |
$ | 30 | $ | 30 | $ | 10 | $ | 8 | ||||||||
Six months ended June 30: |
||||||||||||||||
Components of net periodic benefit cost: |
||||||||||||||||
Service cost |
$ | 48 | $ | 50 | $ | 7 | $ | 7 | ||||||||
Interest cost |
35 | 32 | 13 | 12 | ||||||||||||
Expected return on plan assets |
(42 | ) | (29 | ) | - | - | ||||||||||
Amortization of: |
||||||||||||||||
Prior service cost (credit) |
1 | 1 | (5 | ) | (5 | ) | ||||||||||
Net loss |
5 | 7 | 3 | 3 | ||||||||||||
Net periodic
benefit cost before special charges |
47 | 61 | 18 | 17 | ||||||||||||
Charge for
special termination benefits |
7 | | 1 | | ||||||||||||
Net periodic benefit cost |
$ | 54 | $ | 61 | $ | 19 | $ | 17 | ||||||||
18
Aggregate | ||||||||||||
Payments | Annual | |||||||||||
Made Through | Maximum | Aggregate | ||||||||||
June 30, 2007 |
Limit |
Limit |
||||||||||
St. Charles Refinery |
$ | 150 | $ | 50 | $ | 175 | ||||||
Delaware City Refinery |
50 | 25 | 50 |
19
20
| 6.75% senior notes due February 2011, |
||
| 6.125% senior notes due May 2011, |
||
| 9.5% senior notes due February 2013, |
||
| 6.75% senior notes due May 2014, and |
||
| 7.5% senior notes due June 2015. |
21
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and temporary cash investments |
$ | 1,364 | $ | - | $ | 972 | $ | - | $ | 2,336 | ||||||||||
Restricted cash |
22 | 2 | 7 | - | 31 | |||||||||||||||
Receivables, net |
2 | 94 | 4,597 | - | 4,693 | |||||||||||||||
Inventories |
- | 441 | 4,137 | - | 4,578 | |||||||||||||||
Income taxes receivable |
- | 4 | - | (4 | ) | - | ||||||||||||||
Deferred income taxes |
- | - | 183 | - | 183 | |||||||||||||||
Prepaid expenses and other |
- | 8 | 125 | - | 133 | |||||||||||||||
Assets held for sale |
- | 935 | 1,613 | (935 | ) | 1,613 | ||||||||||||||
Total current assets |
1,388 | 1,484 | 11,634 | (939 | ) | 13,567 | ||||||||||||||
Property, plant and equipment, at cost |
- | 6,530 | 17,922 | - | 24,452 | |||||||||||||||
Accumulated depreciation |
- | (311 | ) | (3,356 | ) | - | (3,667 | ) | ||||||||||||
Property, plant and equipment, net |
- | 6,219 | 14,566 | - | 20,785 | |||||||||||||||
Intangible assets, net |
- | 2 | 291 | - | 293 | |||||||||||||||
Goodwill |
- | 1,819 | 2,273 | - | 4,092 | |||||||||||||||
Investment in Valero Energy affiliates |
6,515 | 856 | 801 | (8,172 | ) | - | ||||||||||||||
Long-term notes receivable from affiliates |
17,999 | - | - | (17,999 | ) | - | ||||||||||||||
Deferred charges and other assets, net |
216 | 166 | 1,231 | - | 1,613 | |||||||||||||||
Total assets |
$ | 26,118 | $ | 10,546 | $ | 30,796 | $ | (27,110 | ) | $ | 40,350 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Current portion of long-term debt
and capital lease obligations |
$ | 63 | $ | - | $ | 3 | $ | - | $ | 66 | ||||||||||
Accounts payable |
77 | 269 | 7,002 | - | 7,348 | |||||||||||||||
Accrued expenses |
80 | 43 | 413 | - | 536 | |||||||||||||||
Taxes other than income taxes |
- | 16 | 587 | - | 603 | |||||||||||||||
Income taxes payable |
524 | - | 2 | (4 | ) | 522 | ||||||||||||||
Deferred income taxes |
65 | 272 | - | - | 337 | |||||||||||||||
Liabilities related to assets held for sale |
- | - | 53 | - | 53 | |||||||||||||||
Total current liabilities |
809 | 600 | 8,060 | (4 | ) | 9,465 | ||||||||||||||
Long-term debt and capital lease obligations,
less current portion |
5,524 | 1,290 | 41 | - | 6,855 | |||||||||||||||
Long-term notes payable to affiliates |
- | 7,656 | 10,343 | (17,999 | ) | - | ||||||||||||||
Deferred income taxes |
841 | 7 | 3,298 | - | 4,146 | |||||||||||||||
Other long-term liabilities |
829 | 192 | 748 | - | 1,769 | |||||||||||||||
Stockholders equity: |
||||||||||||||||||||
Common stock |
6 | - | 2 | (2 | ) | 6 | ||||||||||||||
Additional paid-in capital |
7,446 | 100 | 4,113 | (4,213 | ) | 7,446 | ||||||||||||||
Treasury stock |
(4,876 | ) | - | - | - | (4,876 | ) | |||||||||||||
Retained earnings |
15,204 | 700 | 4,249 | (4,949 | ) | 15,204 | ||||||||||||||
Accumulated other comprehensive income (loss) |
335 | 1 | (58 | ) | 57 | 335 | ||||||||||||||
Total stockholders equity |
18,115 | 801 | 8,306 | (9,107 | ) | 18,115 | ||||||||||||||
Total liabilities and stockholders equity |
$ | 26,118 | $ | 10,546 | $ | 30,796 | $ | (27,110 | ) | $ | 40,350 | |||||||||
22
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and temporary cash investments |
$ | 712 | $ | - | $ | 878 | $ | - | $ | 1,590 | ||||||||||
Restricted cash |
22 | 2 | 7 | - | 31 | |||||||||||||||
Receivables, net |
1 | 76 | 4,307 | - | 4,384 | |||||||||||||||
Inventories |
- | 377 | 3,602 | - | 3,979 | |||||||||||||||
Income tax receivable |
- | 5 | 32 | (5 | ) | 32 | ||||||||||||||
Deferred income taxes |
- | - | 143 | - | 143 | |||||||||||||||
Prepaid expenses and other |
- | 12 | 133 | - | 145 | |||||||||||||||
Assets held for sale |
- | 977 | 550 | - | 1,527 | |||||||||||||||
Total current assets |
735 | 1,449 | 9,652 | (5 | ) | 11,831 | ||||||||||||||
Property, plant and equipment, at cost |
- | 6,481 | 16,940 | - | 23,421 | |||||||||||||||
Accumulated depreciation |
- | (231 | ) | (3,010 | ) | - | (3,241 | ) | ||||||||||||
Property, plant and equipment, net |
- | 6,250 | 13,930 | - | 20,180 | |||||||||||||||
Intangible assets, net |
- | 3 | 300 | - | 303 | |||||||||||||||
Goodwill |
- | 1,826 | 2,277 | - | 4,103 | |||||||||||||||
Investment in Valero Energy affiliates |
2,114 | 705 | 101 | (2,920 | ) | - | ||||||||||||||
Long-term notes receivable from affiliates |
20,920 | - | - | (20,920 | ) | - | ||||||||||||||
Deferred income taxes |
- | 111 | - | (111 | ) | - | ||||||||||||||
Deferred charges and other assets, net |
196 | 184 | 956 | - | 1,336 | |||||||||||||||
Total assets |
$ | 23,965 | $ | 10,528 | $ | 27,216 | $ | (23,956 | ) | $ | 37,753 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Current portion of long-term debt
and capital lease obligations |
$ | 285 | $ | 187 | $ | 3 | $ | - | $ | 475 | ||||||||||
Accounts payable |
80 | 281 | 6,480 | - | 6,841 | |||||||||||||||
Accrued expenses |
76 | 76 | 355 | - | 507 | |||||||||||||||
Taxes other than income taxes |
- | 19 | 565 | - | 584 | |||||||||||||||
Income taxes payable |
21 | - | 7 | (5 | ) | 23 | ||||||||||||||
Deferred income taxes |
91 | 272 | - | - | 363 | |||||||||||||||
Liabilities related to assets held for sale |
- | 67 | - | - | 67 | |||||||||||||||
Total current liabilities |
553 | 902 | 7,410 | (5 | ) | 8,860 | ||||||||||||||
Long-term debt and capital lease obligations,
less current portion |
3,281 | 1,295 | 43 | - | 4,619 | |||||||||||||||
Long-term notes payable to affiliates |
- | 8,003 | 12,917 | (20,920 | ) | - | ||||||||||||||
Deferred income taxes |
868 | - | 3,290 | (111 | ) | 4,047 | ||||||||||||||
Other long-term liabilities |
658 | 227 | 737 | - | 1,622 | |||||||||||||||
Stockholders equity: |
||||||||||||||||||||
Common stock |
6 | - | 2 | (2 | ) | 6 | ||||||||||||||
Additional paid-in capital |
7,779 | 100 | 1,458 | (1,558 | ) | 7,779 | ||||||||||||||
Treasury stock |
(1,396 | ) | - | - | - | (1,396 | ) | |||||||||||||
Retained earnings |
11,951 | - | 1,322 | (1,322 | ) | 11,951 | ||||||||||||||
Accumulated other comprehensive income |
265 | 1 | 37 | (38 | ) | 265 | ||||||||||||||
Total stockholders equity |
18,605 | 101 | 2,819 | (2,920 | ) | 18,605 | ||||||||||||||
Total liabilities and stockholders equity |
$ | 23,965 | $ | 10,528 | $ | 27,216 | $ | (23,956 | ) | $ | 37,753 | |||||||||
23
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
Operating revenues |
$ | - | $ | 6,080 | $ | 24,936 | $ | (6,814 | ) | $ | 24,202 | |||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales |
- | 5,116 | 21,008 | (6,814 | ) | 19,310 | ||||||||||||||
Refining operating expenses |
- | 209 | 776 | - | 985 | |||||||||||||||
Retail selling expenses |
- | - | 200 | - | 200 | |||||||||||||||
General and administrative expenses |
- | 4 | 173 | - | 177 | |||||||||||||||
Depreciation and amortization expense |
- | 77 | 260 | - | 337 | |||||||||||||||
Total costs and expenses |
- | 5,406 | 22,417 | (6,814 | ) | 21,009 | ||||||||||||||
Operating income |
- | 674 | 2,519 | - | 3,193 | |||||||||||||||
Equity in earnings of subsidiaries |
2,095 | 276 | 540 | (2,911 | ) | - | ||||||||||||||
Other income (expense), net |
342 | (99 | ) | 247 | (483 | ) | 7 | |||||||||||||
Interest and debt expense: |
||||||||||||||||||||
Incurred |
(120 | ) | (143 | ) | (330 | ) | 483 | (110 | ) | |||||||||||
Capitalized |
- | 1 | 26 | - | 27 | |||||||||||||||
Income from continuing operations
before income tax expense |
2,317 | 709 | 3,002 | (2,911 | ) | 3,117 | ||||||||||||||
Income tax expense (1) |
68 | 169 | 818 | - | 1,055 | |||||||||||||||
Income from continuing operations |
2,249 | 540 | 2,184 | (2,911 | ) | 2,062 | ||||||||||||||
Income from discontinued operations,
net of income tax expense |
- | - | 187 | - | 187 | |||||||||||||||
Net income |
$ | 2,249 | $ | 540 | $ | 2,371 | $ | (2,911 | ) | $ | 2,249 | |||||||||
(1) | The income tax expense reflected in each column does not include any tax effect of the equity
in earnings of subsidiaries. |
24
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
Operating revenues |
$ | - | $ | 7,227 | $ | 25,273 | $ | (6,908 | ) | $ | 25,592 | |||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales |
- | 6,671 | 21,548 | (6,908 | ) | 21,311 | ||||||||||||||
Refining operating expenses |
- | 195 | 716 | - | 911 | |||||||||||||||
Retail selling expenses |
- | - | 182 | - | 182 | |||||||||||||||
General and administrative expenses |
2 | 11 | 158 | - | 171 | |||||||||||||||
Depreciation and amortization expense |
- | 90 | 189 | - | 279 | |||||||||||||||
Total costs and expenses |
2 | 6,967 | 22,793 | (6,908 | ) | 22,854 | ||||||||||||||
Operating income (loss) |
(2 | ) | 260 | 2,480 | - | 2,738 | ||||||||||||||
Equity in earnings of subsidiaries |
1,747 | 176 | 284 | (2,207 | ) | - | ||||||||||||||
Equity in earnings of NuStar Energy L.P. |
- | - | 10 | - | 10 | |||||||||||||||
Other income (expense), net |
410 | (23 | ) | 437 | (829 | ) | (5 | ) | ||||||||||||
Interest and debt expense: |
||||||||||||||||||||
Incurred |
(190 | ) | (237 | ) | (495 | ) | 829 | (93 | ) | |||||||||||
Capitalized |
- | 15 | 30 | - | 45 | |||||||||||||||
Income from continuing operations
before income tax expense (benefit) |
1,965 | 191 | 2,746 | (2,207 | ) | 2,695 | ||||||||||||||
Income tax expense (benefit) (1) |
68 | (15 | ) | 823 | - | 876 | ||||||||||||||
Income from continuing operations |
1,897 | 206 | 1,923 | (2,207 | ) | 1,819 | ||||||||||||||
Income from discontinued operations,
net of income tax expense |
- | 78 | - | - | 78 | |||||||||||||||
Net income |
1,897 | 284 | 1,923 | (2,207 | ) | 1,897 | ||||||||||||||
Preferred stock dividends |
1 | - | - | - | 1 | |||||||||||||||
Net income applicable to common stock |
$ | 1,896 | $ | 284 | $ | 1,923 | $ | (2,207 | ) | $ | 1,896 | |||||||||
(1) | The income tax expense (benefit) reflected in each column does not include any tax effect of
the equity in earnings of subsidiaries. |
25
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
Operating revenues |
$ | - | $ | 10,952 | $ | 41,266 | $ | (9,261 | ) | $ | 42,957 | |||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales |
- | 9,397 | 34,684 | (9,261 | ) | 34,820 | ||||||||||||||
Refining operating expenses |
- | 408 | 1,511 | - | 1,919 | |||||||||||||||
Retail selling expenses |
- | - | 371 | - | 371 | |||||||||||||||
General and administrative expenses |
- | 7 | 315 | - | 322 | |||||||||||||||
Depreciation and amortization expense |
- | 150 | 509 | - | 659 | |||||||||||||||
Total costs and expenses |
- | 9,962 | 37,390 | (9,261 | ) | 38,091 | ||||||||||||||
Operating income |
- | 990 | 3,876 | - | 4,866 | |||||||||||||||
Equity in earnings of subsidiaries |
3,022 | 342 | 703 | (4,067 | ) | - | ||||||||||||||
Other income (expense), net |
699 | (131 | ) | 436 | (992 | ) | 12 | |||||||||||||
Interest and debt expense: |
||||||||||||||||||||
Incurred |
(214 | ) | (305 | ) | (672 | ) | 992 | (199 | ) | |||||||||||
Capitalized |
- | 2 | 56 | - | 58 | |||||||||||||||
Income from continuing operations
before income tax expense |
3,507 | 898 | 4,399 | (4,067 | ) | 4,737 | ||||||||||||||
Income tax expense (1) |
114 | 259 | 1,214 | - | 1,587 | |||||||||||||||
Income from continuing operations |
3,393 | 639 | 3,185 | (4,067 | ) | 3,150 | ||||||||||||||
Income from discontinued operations,
net of income tax expense |
- | 64 | 179 | - | 243 | |||||||||||||||
Net income |
$ | 3,393 | $ | 703 | $ | 3,364 | $ | (4,067 | ) | $ | 3,393 | |||||||||
(1) | The income tax expense reflected in each column does not include any tax effect of the equity
in earnings of subsidiaries. |
26
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
Operating revenues |
$ | - | $ | 11,885 | $ | 45,025 | $ | (11,343 | ) | $ | 45,567 | |||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales |
- | 10,941 | 38,927 | (11,343 | ) | 38,525 | ||||||||||||||
Refining operating expenses |
- | 376 | 1,419 | - | 1,795 | |||||||||||||||
Retail selling expenses |
- | - | 354 | - | 354 | |||||||||||||||
General and administrative expenses |
2 | 26 | 294 | - | 322 | |||||||||||||||
Depreciation and amortization expense |
- | 128 | 406 | - | 534 | |||||||||||||||
Total costs and expenses |
2 | 11,471 | 41,400 | (11,343 | ) | 41,530 | ||||||||||||||
Operating income (loss) |
(2 | ) | 414 | 3,625 | - | 4,037 | ||||||||||||||
Equity in earnings of subsidiaries |
2,470 | 328 | 488 | (3,286 | ) | - | ||||||||||||||
Equity in earnings of NuStar Energy L.P. |
- | - | 22 | - | 22 | |||||||||||||||
Other income (expense), net |
721 | (4 | ) | 578 | (1,300 | ) | (5 | ) | ||||||||||||
Interest and debt expense: |
||||||||||||||||||||
Incurred |
(278 | ) | (396 | ) | (815 | ) | 1,300 | (189 | ) | |||||||||||
Capitalized |
- | 28 | 53 | - | 81 | |||||||||||||||
Income from continuing operations
before income tax expense (benefit) |
2,911 | 370 | 3,951 | (3,286 | ) | 3,946 | ||||||||||||||
Income tax expense (benefit) (1) |
165 | (19 | ) | 1,153 | - | 1,299 | ||||||||||||||
Income from continuing operations |
2,746 | 389 | 2,798 | (3,286 | ) | 2,647 | ||||||||||||||
Income from discontinued operations,
net of income tax expense |
- | 99 | - | - | 99 | |||||||||||||||
Net income |
2,746 | 488 | 2,798 | (3,286 | ) | 2,746 | ||||||||||||||
Preferred stock dividends |
2 | - | - | - | 2 | |||||||||||||||
Net income applicable to common stock |
$ | 2,744 | $ | 488 | $ | 2,798 | $ | (3,286 | ) | $ | 2,744 | |||||||||
(1) | The income tax expense (benefit) reflected in each column does not include any tax effect of
the equity in earnings of subsidiaries. |
27
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG
(1) |
Subsidiaries
(1) |
Eliminations |
Consolidated |
||||||||||||||||
Net cash provided by operating activities |
$ | 985 | $ | 591 | $ | 2,775 | $ | - | $ | 4,351 | ||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Capital expenditures |
- | (168 | ) | (874 | ) | - | (1,042 | ) | ||||||||||||
Deferred turnaround and catalyst costs |
- | (24 | ) | (206 | ) | - | (230 | ) | ||||||||||||
Investment in Cameron Highway Oil Pipeline
Company, net |
- | - | (215 | ) | - | (215 | ) | |||||||||||||
Advance proceeds related to sale of Lima Refinery |
- | - | 96 | - | 96 | |||||||||||||||
Contingent payments in connection with acquisitions |
- | (25 | ) | (50 | ) | - | (75 | ) | ||||||||||||
Investments in subsidiaries |
(3,658 | ) | (58 | ) | - | 3,716 | - | |||||||||||||
Return of investment |
2,222 | - | 3 | (2,225 | ) | - | ||||||||||||||
Net intercompany loan repayments |
3,100 | - | - | (3,100 | ) | - | ||||||||||||||
Other investing activities, net |
- | 5 | 10 | - | 15 | |||||||||||||||
Net cash provided by (used in) investing activities |
1,664 | (270 | ) | (1,236 | ) | (1,609 | ) | (1,451 | ) | |||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Long-term notes: |
||||||||||||||||||||
Borrowings |
2,245 | - | - | - | 2,245 | |||||||||||||||
Repayments |
(230 | ) | (183 | ) | - | - | (413 | ) | ||||||||||||
Bank credit agreements: |
||||||||||||||||||||
Borrowings |
3,000 | - | - | - | 3,000 | |||||||||||||||
Repayments |
(3,000 | ) | - | - | - | (3,000 | ) | |||||||||||||
Purchase of treasury stock |
(4,181 | ) | - | - | - | (4,181 | ) | |||||||||||||
Benefit from tax deduction in excess of recognized
stock-based compensation cost |
215 | - | - | - | 215 | |||||||||||||||
Dividends to parent |
- | (3 | ) | (2,222 | ) | 2,225 | - | |||||||||||||
Capital contributions from parent |
- | - | 3,716 | (3,716 | ) | - | ||||||||||||||
Net intercompany repayments |
- | (135 | ) | (2,965 | ) | 3,100 | - | |||||||||||||
Other financing activities, net |
(47 | ) | - | (2 | ) | - | (49 | ) | ||||||||||||
Net cash used in financing activities |
(1,998 | ) | (321 | ) | (1,473 | ) | 1,609 | (2,183 | ) | |||||||||||
Effect of foreign exchange rate changes on cash |
- | - | 29 | - | 29 | |||||||||||||||
Net increase in cash and temporary cash investments |
651 | - | 95 | - | 746 | |||||||||||||||
Cash and temporary cash investments
at beginning of period |
712 | - | 878 | - | 1,590 | |||||||||||||||
Cash and temporary cash investments at end of period |
$ | 1,363 | $ | - | $ | 973 | $ | - | $ | 2,336 | ||||||||||
(1) | The information presented herein excludes a $686 million noncash capital contribution of property and other assets, net of certain liabilities, from PRG to Lima Refining Company (included in Other Non-Guarantor Subsidiaries) on April 1, 2007, in anticipation of the pending sale of the Lima Refinery as discussed in Note 3. |
28
Valero | Other Non- | |||||||||||||||||||
Energy | Guarantor | |||||||||||||||||||
Corporation |
PRG |
Subsidiaries |
Eliminations |
Consolidated |
||||||||||||||||
Net cash provided by operating activities |
$ | 897 | $ | 370 | $ | 2,556 | $ | - | $ | 3,823 | ||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Capital expenditures |
- | (513 | ) | (1,075 | ) | - | (1,588 | ) | ||||||||||||
Deferred turnaround and catalyst costs |
- | (118 | ) | (269 | ) | - | (387 | ) | ||||||||||||
Contingent payments in connection with acquisitions |
- | - | (76 | ) | - | (76 | ) | |||||||||||||
Net intercompany loan repayments |
1,030 | - | - | (1,030 | ) | - | ||||||||||||||
Other investing activities, net |
- | - | 18 | - | 18 | |||||||||||||||
Net cash provided by (used in) investing activities |
1,030 | (631 | ) | (1,402 | ) | (1,030 | ) | (2,033 | ) | |||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Long-term note repayments |
(220 | ) | (1 | ) | - | - | (221 | ) | ||||||||||||
Bank credit agreements: |
||||||||||||||||||||
Borrowings |
8 | - | 493 | - | 501 | |||||||||||||||
Repayments |
(8 | ) | - | (431 | ) | - | (439 | ) | ||||||||||||
Termination of interest rate swaps |
(54 | ) | - | - | - | (54 | ) | |||||||||||||
Purchase of treasury stock |
(1,187 | ) | - | - | - | (1,187 | ) | |||||||||||||
Benefit from tax deduction in excess of recognized
stock-based compensation cost |
130 | - | - | - | 130 | |||||||||||||||
Net intercompany borrowings (repayments) |
- | 258 | (1,288 | ) | 1,030 | - | ||||||||||||||
Other financing activities, net |
(22 | ) | - | (1 | ) | - | (23 | ) | ||||||||||||
Net cash provided by (used in) financing activities |
(1,353 | ) | 257 | (1,227 | ) | 1,030 | (1,293 | ) | ||||||||||||
Effect of foreign exchange rate changes on cash |
- | - | 4 | - | 4 | |||||||||||||||
Net increase (decrease) in cash and temporary cash
investments |
574 | (4 | ) | (69 | ) | - | 501 | |||||||||||||
Cash and temporary cash investments
at beginning of period |
11 | 5 | 420 | - | 436 | |||||||||||||||
Cash and temporary cash investments at end of period |
$ | 585 | $ | 1 | $ | 351 | $ | - | $ | 937 | ||||||||||
29
| future refining margins, including gasoline and distillate margins; |
||
| future retail margins, including gasoline, diesel, home heating oil, and convenience
store merchandise margins; |
||
| expectations regarding feedstock costs, including crude oil differentials, and operating
expenses; |
||
| anticipated levels of crude oil and refined product inventories; |
||
| our anticipated level of capital investments, including deferred refinery turnaround and
catalyst costs and capital expenditures for environmental and other purposes, and the
effect of those capital investments on our results of operations; |
||
| anticipated trends in the supply of and demand for crude oil and other feedstocks and
refined products in the United States, Canada, and elsewhere; |
||
| expectations regarding environmental, tax, and other regulatory initiatives; and |
||
| the effect of general economic and other conditions on refining and retail industry
fundamentals. |
| acts of terrorism aimed at either our facilities or other facilities that could impair
our ability to produce or transport refined products or receive feedstocks; |
||
| political and economic conditions in nations that consume refined products, including
the United States, and in crude oil producing regions, including the Middle East and South
America; |
||
| the domestic and foreign supplies of refined products such as gasoline, diesel fuel, jet
fuel, home heating oil, and petrochemicals; |
||
| the domestic and foreign supplies of crude oil and other feedstocks; |
||
| the ability of the members of the Organization of Petroleum Exporting Countries (OPEC)
to agree on and to maintain crude oil price and production controls; |
||
| the level of consumer demand, including seasonal fluctuations; |
||
| refinery overcapacity or undercapacity; |
||
| the actions taken by competitors, including both pricing and the expansion and
retirement of refining capacity in response to market conditions; |
||
| environmental, tax, and other regulations at the municipal, state, and federal levels
and in foreign countries; |
30
| the level of foreign imports of refined products; |
||
| accidents or other unscheduled shutdowns affecting our refineries, machinery, pipelines,
or equipment, or those of our suppliers or customers; |
||
| changes in the cost or availability of transportation for feedstocks and refined products; |
||
| the price, availability, and acceptance of alternative fuels and alternative-fuel vehicles; |
||
| delay of, cancellation of, or failure to implement planned capital projects and realize
the various assumptions and benefits projected for such projects or cost overruns in
constructing such planned capital projects; |
||
| earthquakes, hurricanes, tornadoes, and irregular weather, which can unforeseeably
affect the price or availability of natural gas, crude oil and other feedstocks, and
refined products; |
||
| rulings, judgments, or settlements in litigation or other legal or regulatory matters,
including unexpected environmental remediation costs, in excess of any reserves or
insurance coverage; |
||
| legislative or regulatory action, including the introduction or enactment of federal,
state, municipal, or foreign legislation or rulemakings, which may adversely affect our
business or operations; |
||
| changes in the credit ratings assigned to our debt securities and trade credit; |
||
| changes in currency exchange rates, including the value of the Canadian dollar relative
to the U.S. dollar; and |
||
| overall economic conditions. |
31
32
Three Months Ended June 30, | ||||||||||||
2007 (a) |
2006 (a) |
Change |
||||||||||
Operating revenues (b) |
$ | 24,202 | $ | 25,592 | $ | (1,390 | ) | |||||
Costs and expenses: |
||||||||||||
Cost of sales (b) |
19,310 | 21,311 | (2,001 | ) | ||||||||
Refining operating expenses |
985 | 911 | 74 | |||||||||
Retail selling expenses (b) |
200 | 182 | 18 | |||||||||
General and administrative expenses |
177 | 171 | 6 | |||||||||
Depreciation and amortization expense: |
||||||||||||
Refining |
302 | 248 | 54 | |||||||||
Retail |
22 | 21 | 1 | |||||||||
Corporate |
13 | 10 | 3 | |||||||||
Total costs and expenses |
21,009 | 22,854 | (1,845 | ) | ||||||||
Operating income |
3,193 | 2,738 | 455 | |||||||||
Equity in earnings of NuStar Energy L.P. (c) |
- | 10 | (10 | ) | ||||||||
Other income (expense), net |
7 | (5 | ) | 12 | ||||||||
Interest and debt expense: |
||||||||||||
Incurred |
(110 | ) | (93 | ) | (17 | ) | ||||||
Capitalized |
27 | 45 | (18 | ) | ||||||||
Income from continuing operations before
income tax expense |
3,117 | 2,695 | 422 | |||||||||
Income tax expense |
1,055 | 876 | 179 | |||||||||
Income from continuing operations |
2,062 | 1,819 | 243 | |||||||||
Income from discontinued operations, net of
income tax expense |
187 | 78 | 109 | |||||||||
Net income |
2,249 | 1,897 | 352 | |||||||||
Preferred stock dividends |
- | 1 | (1 | ) | ||||||||
Net income applicable to common stock |
$ | 2,249 | $ | 1,896 | $ | 353 | ||||||
Earnings per common share assuming dilution: |
||||||||||||
Continuing operations |
$ | 3.57 | $ | 2.86 | $ | 0.71 | ||||||
Discontinued operations |
0.32 | 0.12 | 0.20 | |||||||||
Total |
$ | 3.89 | $ | 2.98 | $ | 0.91 | ||||||
33
Three Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Refining (a): |
||||||||||||
Operating income |
$ | 3,327 | $ | 2,873 | $ | 454 | ||||||
Throughput margin per barrel (d) |
$ | 18.14 | $ | 15.59 | $ | 2.55 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.87 | $ | 3.52 | $ | 0.35 | ||||||
Depreciation and amortization |
1.19 | 0.96 | 0.23 | |||||||||
Total operating costs per barrel |
$ | 5.06 | $ | 4.48 | $ | 0.58 | ||||||
Throughput volumes (thousand barrels per day): |
||||||||||||
Feedstocks: |
||||||||||||
Heavy sour crude |
618 | 674 | (56 | ) | ||||||||
Medium/light sour crude |
650 | 641 | 9 | |||||||||
Acidic sweet crude |
86 | 51 | 35 | |||||||||
Sweet crude |
717 | 736 | (19 | ) | ||||||||
Residuals |
273 | 278 | (5 | ) | ||||||||
Other feedstocks |
150 | 151 | (1 | ) | ||||||||
Total feedstocks |
2,494 | 2,531 | (37 | ) | ||||||||
Blendstocks and other |
300 | 312 | (12 | ) | ||||||||
Total throughput volumes |
2,794 | 2,843 | (49 | ) | ||||||||
Yields (thousand barrels per day): |
||||||||||||
Gasolines and blendstocks |
1,277 | 1,354 | (77 | ) | ||||||||
Distillates |
913 | 879 | 34 | |||||||||
Petrochemicals |
81 | 74 | 7 | |||||||||
Other products (e) |
517 | 530 | (13 | ) | ||||||||
Total yields |
2,788 | 2,837 | (49 | ) | ||||||||
Retail U.S.: |
||||||||||||
Operating income |
$ | 37 | $ | 24 | $ | 13 | ||||||
Company-operated fuel sites (average) |
958 | 988 | (30 | ) | ||||||||
Fuel volumes (gallons per day per site) |
5,006 | 4,916 | 90 | |||||||||
Fuel margin per gallon |
$ | 0.202 | $ | 0.145 | $ | 0.057 | ||||||
Merchandise sales |
$ | 269 | $ | 251 | $ | 18 | ||||||
Merchandise margin (percentage of sales) |
29.8 | % | 30.5 | % | (0.7 | )% | ||||||
Margin on miscellaneous sales (b) |
$ | 24 | $ | 22 | $ | 2 | ||||||
Retail selling expenses (b) |
$ | 139 | $ | 123 | $ | 16 | ||||||
Depreciation and amortization expense |
$ | 16 | $ | 15 | $ | 1 | ||||||
Retail Canada: |
||||||||||||
Operating income |
$ | 19 | $ | 22 | $ | (3 | ) | |||||
Fuel volumes (thousand gallons per day) |
3,144 | 3,114 | 30 | |||||||||
Fuel margin per gallon |
$ | 0.222 | $ | 0.237 | $ | (0.015 | ) | |||||
Merchandise sales |
$ | 47 | $ | 43 | $ | 4 | ||||||
Merchandise margin (percentage of sales) |
28.3 | % | 28.0 | % | 0.3 | % | ||||||
Margin on miscellaneous sales |
$ | 9 | $ | 7 | $ | 2 | ||||||
Retail selling expenses |
$ | 61 | $ | 59 | $ | 2 | ||||||
Depreciation and amortization expense |
$ | 6 | $ | 6 | $ | - |
34
Three Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Gulf Coast: |
||||||||||||
Operating income |
$ | 1,935 | $ | 1,715 | $ | 220 | ||||||
Throughput volumes (thousand barrels per day) |
1,543 | 1,589 | (46 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 18.52 | $ | 15.92 | $ | 2.60 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.65 | $ | 3.28 | $ | 0.37 | ||||||
Depreciation and amortization |
1.09 | 0.78 | 0.31 | |||||||||
Total operating costs per barrel |
$ | 4.74 | $ | 4.06 | $ | 0.68 | ||||||
Mid-Continent (a): |
||||||||||||
Operating income |
$ | 483 | $ | 456 | $ | 27 | ||||||
Throughput volumes (thousand barrels per day) |
373 | 430 | (57 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 19.96 | $ | 15.70 | $ | 4.26 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 4.42 | $ | 2.97 | $ | 1.45 | ||||||
Depreciation and amortization |
1.34 | 1.06 | 0.28 | |||||||||
Total operating costs per barrel |
$ | 5.76 | $ | 4.03 | $ | 1.73 | ||||||
Northeast: |
||||||||||||
Operating income |
$ | 523 | $ | 291 | $ | 232 | ||||||
Throughput volumes (thousand barrels per day) |
577 | 520 | 57 | |||||||||
Throughput margin per barrel (d) |
$ | 14.83 | $ | 11.73 | $ | 3.10 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.62 | $ | 4.34 | $ | (0.72 | ) | |||||
Depreciation and amortization |
1.25 | 1.26 | (0.01 | ) | ||||||||
Total operating costs per barrel |
$ | 4.87 | $ | 5.60 | $ | (0.73 | ) | |||||
West Coast: |
||||||||||||
Operating income |
$ | 386 | $ | 411 | $ | (25 | ) | |||||
Throughput volumes (thousand barrels per day) |
301 | 304 | (3 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 20.35 | $ | 20.29 | $ | 0.06 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 4.81 | $ | 4.20 | $ | 0.61 | ||||||
Depreciation and amortization |
1.42 | 1.24 | 0.18 | |||||||||
Total operating costs per barrel |
$ | 6.23 | $ | 5.44 | $ | 0.79 | ||||||
35
Three Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Feedstocks: |
||||||||||||
West Texas Intermediate (WTI) crude oil |
$ | 64.89 | $ | 70.40 | $ | (5.51 | ) | |||||
WTI less sour crude oil at U.S. Gulf Coast (h) |
3.08 | 7.24 | (4.16 | ) | ||||||||
WTI less Mars crude oil |
2.70 | 6.67 | (3.97 | ) | ||||||||
WTI less Alaska North Slope (ANS) crude oil |
(0.86 | ) | 1.62 | (2.48 | ) | |||||||
WTI less Maya crude oil |
9.60 | 15.68 | (6.08 | ) | ||||||||
Products: |
||||||||||||
U.S. Gulf Coast: |
||||||||||||
Conventional 87 gasoline less WTI |
28.95 | 20.01 | 8.94 | |||||||||
No. 2 fuel oil less WTI |
14.95 | 11.78 | 3.17 | |||||||||
Ultra-low-sulfur diesel less WTI (i) |
22.26 | 19.31 | 2.95 | |||||||||
Propylene less WTI |
16.67 | 10.54 | 6.13 | |||||||||
U.S. Mid-Continent: |
||||||||||||
Conventional 87 gasoline less WTI |
34.09 | 19.03 | 15.06 | |||||||||
Low-sulfur diesel less WTI |
25.61 | 20.73 | 4.88 | |||||||||
U.S. Northeast: |
||||||||||||
Conventional 87 gasoline less WTI |
26.15 | 16.94 | 9.21 | |||||||||
No. 2 fuel oil less WTI |
15.41 | 11.73 | 3.68 | |||||||||
Lube oils less WTI |
53.25 | 49.81 | 3.44 | |||||||||
U.S. West Coast: |
||||||||||||
CARBOB 87 gasoline less ANS |
37.36 | 33.11 | 4.25 | |||||||||
CARB diesel less ANS |
26.16 | 28.14 | (1.98 | ) |
(a) | On May 2, 2007, we entered into an agreement to sell our Lima Refinery to Husky. Therefore,
the results of operations of the Lima Refinery are reported as discontinued operations for the
three months ended June 30, 2007 and 2006, and all refining operating highlights, both
consolidated and for the Mid-Continent region, exclude the Lima Refinery for the three months
ended June 30, 2007 and 2006. The sale of the Lima Refinery was consummated effective July 1,
2007. |
|
(b) | Certain amounts previously reported in 2006 for operating revenues, cost of sales, and retail
selling expenses have been reclassified for comparability with amounts reported in 2007. |
|
(c) | On December 22, 2006, we sold our remaining ownership interest in NuStar GP Holdings, LLC
(formerly Valero GP Holdings, LLC), which indirectly owns the general partner interest, the
incentive distribution rights, and a 21.4% limited partner interest in NuStar Energy L.P.
(formerly Valero L.P.). As a result, the financial highlights reflect no equity in earnings
of NuStar Energy L.P. subsequent to December 21, 2006. |
|
(d) | Throughput margin per barrel represents operating revenues less cost of sales divided by
throughput volumes. |
|
(e) | Other products primarily include gas oils, No. 6 fuel oil, petroleum coke, and asphalt. |
|
(f) | The regions reflected herein contain the following refineries: the Gulf Coast refining region
includes the Corpus Christi East, Corpus Christi West, Texas City, Houston, Three Rivers,
Krotz Springs, St. Charles, Aruba, and Port Arthur Refineries; the Mid-Continent refining
region includes the McKee, Ardmore, and Memphis Refineries; the Northeast refining region
includes the Quebec City, Paulsboro, and Delaware City Refineries; and the West Coast refining
region includes the Benicia and Wilmington Refineries. |
|
(g) | The average market reference prices and differentials, with the exception of the propylene
and lube oil differentials, are based on posted prices from Platts Oilgram. The propylene
differential is based on posted propylene prices in Chemical Market Associates, Inc. and the
lube oil differential is based on Exxon Mobil Corporation postings provided by Independent
Commodity Information Services-London Oil Reports. The average market reference prices and
differentials are presented to provide users of the consolidated financial statements with
economic indicators that significantly affect our operations and profitability. |
|
(h) | The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab
Light posted prices. |
|
(i) | The market reference differential for ultra-low-sulfur diesel for the three months ended June
30, 2006 represents only the months of May and June, since the ultra-low-sulfur diesel less
WTI market reference was not available prior to May 1, 2006. |
36
| Overall gasoline and distillate margins increased in the second quarter of 2007 compared
to the second quarter of 2006. The improvement in refined product margins for the second
quarter of 2007 was primarily due to an increase in demand combined with a decline in
refined product inventory levels resulting from various factors, including lower imports,
more stringent product specifications and regulations, and unplanned refinery outages. |
||
| Sour crude oil feedstock differentials to WTI crude oil during the second quarter of
2007 were lower than the differentials in the second quarter of 2006. However, other
light, sweet crude oils priced at a premium to WTI in the second quarter of 2007; thus,
sour crude oil feedstock differentials relative to those other light, sweet crude oils in
the second quarter of 2007 were comparable to the wide differentials experienced in the
second quarter of 2006. These wide differentials are attributable to continued ample
supplies of sour crude oils and heavy sour residual fuel oils on the world market.
Differentials on sour crude oil feedstocks also continued to benefit from increased demand
for sweet crude oil resulting from lower sulfur specifications for gasoline and diesel and
a global increase in refined product demand. |
||
| Margins on other refined products such as propylene, petroleum coke, and sulfur improved
from the second quarter of 2006 to the second quarter of 2007 due to a decrease in the
price of crude oil between the periods. |
||
| Throughput volumes declined by 49,000 barrels per day in the second quarter of 2007
compared to the second quarter of 2006 due mainly to a continuing reduction in throughput
volumes at our McKee Refinery as a result of a fire originating in its propane deasphalting
unit in February 2007. |
37
38
Six Months Ended June 30, | ||||||||||||
2007 (a) |
2006 (a) |
Change |
||||||||||
Operating revenues (b) |
$ | 42,957 | $ | 45,567 | $ | (2,610 | ) | |||||
Costs and expenses: |
||||||||||||
Cost of sales (b) |
34,820 | 38,525 | (3,705 | ) | ||||||||
Refining operating expenses |
1,919 | 1,795 | 124 | |||||||||
Retail selling expenses (b) |
371 | 354 | 17 | |||||||||
General and administrative expenses |
322 | 322 | - | |||||||||
Depreciation and amortization expense: |
||||||||||||
Refining |
595 | 474 | 121 | |||||||||
Retail |
40 | 41 | (1 | ) | ||||||||
Corporate |
24 | 19 | 5 | |||||||||
Total costs and expenses |
38,091 | 41,530 | (3,439 | ) | ||||||||
Operating income |
4,866 | 4,037 | 829 | |||||||||
Equity in earnings of NuStar Energy L.P. (c) |
- | 22 | (22 | ) | ||||||||
Other income (expense), net |
12 | (5 | ) | 17 | ||||||||
Interest and debt expense: |
||||||||||||
Incurred |
(199 | ) | (189 | ) | (10 | ) | ||||||
Capitalized |
58 | 81 | (23 | ) | ||||||||
Income from continuing operations before
income tax expense |
4,737 | 3,946 | 791 | |||||||||
Income tax expense |
1,587 | 1,299 | 288 | |||||||||
Income from continuing operations |
3,150 | 2,647 | 503 | |||||||||
Income from discontinued operations, net of
income tax expense |
243 | 99 | 144 | |||||||||
Net income |
3,393 | 2,746 | 647 | |||||||||
Preferred stock dividends |
- | 2 | (2 | ) | ||||||||
Net income applicable to common stock |
$ | 3,393 | $ | 2,744 | $ | 649 | ||||||
Earnings per common share assuming dilution: |
||||||||||||
Continuing operations |
$ | 5.28 | $ | 4.13 | $ | 1.15 | ||||||
Discontinued operations |
0.40 | 0.16 | 0.24 | |||||||||
Total |
$ | 5.68 | $ | 4.29 | $ | 1.39 | ||||||
39
Six Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Refining (a): |
||||||||||||
Operating income |
$ | 5,103 | $ | 4,311 | $ | 792 | ||||||
Throughput margin per barrel (d) |
$ | 15.19 | $ | 13.02 | $ | 2.17 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.83 | $ | 3.55 | $ | 0.28 | ||||||
Depreciation and amortization |
1.18 | 0.94 | 0.24 | |||||||||
Total operating costs per barrel |
$ | 5.01 | $ | 4.49 | $ | 0.52 | ||||||
Throughput volumes (thousand barrels per day): |
||||||||||||
Feedstocks: |
||||||||||||
Heavy sour crude |
654 | 719 | (65 | ) | ||||||||
Medium/light sour crude |
632 | 597 | 35 | |||||||||
Acidic sweet crude |
85 | 58 | 27 | |||||||||
Sweet crude |
711 | 737 | (26 | ) | ||||||||
Residuals |
259 | 217 | 42 | |||||||||
Other feedstocks |
151 | 167 | (16 | ) | ||||||||
Total feedstocks |
2,492 | 2,495 | (3 | ) | ||||||||
Blendstocks and other |
278 | 296 | (18 | ) | ||||||||
Total throughput volumes |
2,770 | 2,791 | (21 | ) | ||||||||
Yields (thousand barrels per day): |
||||||||||||
Gasolines and blendstocks |
1,263 | 1,337 | (74 | ) | ||||||||
Distillates |
912 | 870 | 42 | |||||||||
Petrochemicals |
82 | 77 | 5 | |||||||||
Other products (e) |
513 | 506 | 7 | |||||||||
Total yields |
2,770 | 2,790 | (20 | ) | ||||||||
Retail U.S.: |
||||||||||||
Operating income |
$ | 61 | $ | 24 | $ | 37 | ||||||
Company-operated fuel sites (average) |
961 | 992 | (31 | ) | ||||||||
Fuel volumes (gallons per day per site) |
4,994 | 4,899 | 95 | |||||||||
Fuel margin per gallon |
$ | 0.163 | $ | 0.122 | $ | 0.041 | ||||||
Merchandise sales |
$ | 502 | $ | 470 | $ | 32 | ||||||
Merchandise margin (percentage of sales) |
29.9 | % | 30.1 | % | (0.2 | )% | ||||||
Margin on miscellaneous sales (b) |
$ | 49 | $ | 42 | $ | 7 | ||||||
Retail selling expenses (b) |
$ | 252 | $ | 239 | $ | 13 | ||||||
Depreciation and amortization expense |
$ | 27 | $ | 28 | $ | (1 | ) | |||||
Retail Canada: |
||||||||||||
Operating income |
$ | 48 | $ | 43 | $ | 5 | ||||||
Fuel volumes (thousand gallons per day) |
3,257 | 3,199 | 58 | |||||||||
Fuel margin per gallon |
$ | 0.234 | $ | 0.231 | $ | 0.003 | ||||||
Merchandise sales |
$ | 84 | $ | 79 | $ | 5 | ||||||
Merchandise margin (percentage of sales) |
28.8 | % | 28.0 | % | 0.8 | % | ||||||
Margin on miscellaneous sales |
$ | 18 | $ | 15 | $ | 3 | ||||||
Retail selling expenses |
$ | 119 | $ | 115 | $ | 4 | ||||||
Depreciation and amortization expense |
$ | 13 | $ | 13 | $ | - |
40
Six Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Gulf Coast: |
||||||||||||
Operating income |
$ | 3,018 | $ | 2,718 | $ | 300 | ||||||
Throughput volumes (thousand barrels per day) |
1,534 | 1,550 | (16 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 15.47 | $ | 13.73 | $ | 1.74 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.55 | $ | 3.23 | $ | 0.32 | ||||||
Depreciation and amortization |
1.05 | 0.81 | 0.24 | |||||||||
Total operating costs per barrel |
$ | 4.60 | $ | 4.04 | $ | 0.56 | ||||||
Mid-Continent (a): |
||||||||||||
Operating income |
$ | 574 | $ | 523 | $ | 51 | ||||||
Throughput volumes (thousand barrels per day) |
363 | 391 | (28 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 14.81 | $ | 11.72 | $ | 3.09 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 4.57 | $ | 3.37 | $ | 1.20 | ||||||
Depreciation and amortization |
1.50 | 0.96 | 0.54 | |||||||||
Total operating costs per barrel |
$ | 6.07 | $ | 4.33 | $ | 1.74 | ||||||
Northeast: |
||||||||||||
Operating income |
$ | 812 | $ | 470 | $ | 342 | ||||||
Throughput volumes (thousand barrels per day) |
575 | 548 | 27 | |||||||||
Throughput margin per barrel (d) |
$ | 12.73 | $ | 10.05 | $ | 2.68 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 3.69 | $ | 4.22 | $ | (0.53 | ) | |||||
Depreciation and amortization |
1.24 | 1.08 | 0.16 | |||||||||
Total operating costs per barrel |
$ | 4.93 | $ | 5.30 | $ | (0.37 | ) | |||||
West Coast: |
||||||||||||
Operating income |
$ | 699 | $ | 600 | $ | 99 | ||||||
Throughput volumes (thousand barrels per day) |
298 | 302 | (4 | ) | ||||||||
Throughput margin per barrel (d) |
$ | 18.97 | $ | 16.50 | $ | 2.47 | ||||||
Operating costs per barrel: |
||||||||||||
Refining operating expenses |
$ | 4.60 | $ | 4.24 | $ | 0.36 | ||||||
Depreciation and amortization |
1.41 | 1.28 | 0.13 | |||||||||
Total operating costs per barrel |
$ | 6.01 | $ | 5.52 | $ | 0.49 | ||||||
41
Six Months Ended June 30, | ||||||||||||
2007 |
2006 |
Change |
||||||||||
Feedstocks: |
||||||||||||
WTI crude oil |
$ | 61.45 | $ | 66.84 | $ | (5.39 | ) | |||||
WTI less sour crude oil at U.S. Gulf Coast (h) |
4.50 | 7.61 | (3.11 | ) | ||||||||
WTI less Mars crude oil |
3.81 | 7.19 | (3.38 | ) | ||||||||
WTI less ANS crude oil |
0.72 | 2.02 | (1.30 | ) | ||||||||
WTI less Maya crude oil |
11.11 | 15.65 | (4.54 | ) | ||||||||
Products: |
||||||||||||
U.S. Gulf Coast: |
||||||||||||
Conventional 87 gasoline less WTI |
19.58 | 14.00 | 5.58 | |||||||||
No. 2 fuel oil less WTI |
12.38 | 10.32 | 2.06 | |||||||||
Ultra-low-sulfur diesel less WTI (i) |
19.81 | N.A. | N.A. | |||||||||
Propylene less WTI |
16.44 | 8.84 | 7.60 | |||||||||
U.S. Mid-Continent: |
||||||||||||
Conventional 87 gasoline less WTI |
23.11 | 13.56 | 9.55 | |||||||||
Low-sulfur diesel less WTI |
22.97 | 17.00 | 5.97 | |||||||||
U.S. Northeast: |
||||||||||||
Conventional 87 gasoline less WTI |
19.08 | 11.85 | 7.23 | |||||||||
No. 2 fuel oil less WTI |
13.38 | 10.38 | 3.00 | |||||||||
Lube oils less WTI |
58.53 | 48.36 | 10.17 | |||||||||
U.S. West Coast: |
||||||||||||
CARBOB 87 gasoline less ANS |
33.67 | 24.16 | 9.51 | |||||||||
CARB diesel less ANS |
26.35 | 24.55 | 1.80 |
(a) | On May 2, 2007, we entered into an agreement to sell our Lima Refinery to Husky. Therefore,
the results of operations of the Lima Refinery are reported as discontinued operations for the
six months ended June 30, 2007 and 2006, and all refining operating highlights, both
consolidated and for the Mid-Continent region, exclude the Lima Refinery for the six months
ended June 30, 2007 and 2006. The sale of the Lima Refinery was consummated effective July 1,
2007. |
|
(b) | Certain amounts previously reported in 2006 for operating revenues, cost of sales, and retail
selling expenses have been reclassified for comparability with amounts reported in 2007. |
|
(c) | On December 22, 2006, we sold our remaining ownership interest in NuStar GP Holdings, LLC
(formerly Valero GP Holdings, LLC), which indirectly owns the general partner interest, the
incentive distribution rights, and a 21.4% limited partner interest in NuStar Energy L.P.
(formerly Valero L.P.). As a result, the financial highlights reflect no equity in earnings
of NuStar Energy L.P. subsequent to December 21, 2006. |
|
(d) | Throughput margin per barrel represents operating revenues less cost of sales divided by
throughput volumes. |
|
(e) | Other products primarily include gas oils, No. 6 fuel oil, petroleum coke, and asphalt. |
|
(f) | The regions reflected herein contain the following refineries: the Gulf Coast refining region
includes the Corpus Christi East, Corpus Christi West, Texas City, Houston, Three Rivers,
Krotz Springs, St. Charles, Aruba, and Port Arthur Refineries; the Mid-Continent refining
region includes the McKee, Ardmore, and Memphis Refineries; the Northeast refining region
includes the Quebec City, Paulsboro, and Delaware City Refineries; and the West Coast refining
region includes the Benicia and Wilmington Refineries. |
|
(g) | The average market reference prices and differentials, with the exception of the propylene
and lube oil differentials, are based on posted prices from Platts Oilgram. The propylene
differential is based on posted propylene prices in Chemical Market Associates, Inc. and the
lube oil differential is based on Exxon Mobil Corporation postings provided by Independent
Commodity Information Services-London Oil Reports. The average market reference prices and
differentials are presented to provide users of the consolidated financial statements with
economic indicators that significantly affect our operations and profitability. |
|
(h) | The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab
Light posted prices. |
|
(i) | The market reference differential for ultra-low-sulfur diesel was not available prior to May
1, 2006, and therefore no market reference differential is presented for the six months ended
June 30, 2006. |
42
| Gasoline and distillate margins improved in all of our refining regions in the first six
months of 2007 compared to the margins in the first six months of 2006. The increase in
refined product margins for the first six months of 2007 was primarily due to stronger
demand combined with a decline in refined product inventory levels resulting from lower
imports, more stringent product specifications and regulations, heavy industry turnaround
activity, and unplanned refinery outages. |
||
| Sour crude oil feedstock differentials to WTI crude oil during the first six months of
2007 were lower than the differentials in the first six months of 2006. However, other
light, sweet crude oils priced at a premium to WTI in the first six months of 2007; thus,
sour crude oil feedstock differentials relative to those other light, sweet crude oils in
the first six months of 2007 were comparable to the wide differentials experienced in the
first six months of 2006. These wide differentials are attributable to continued ample
supplies of sour crude oils and heavy sour residual fuel oils on the world market.
Differentials on sour crude oil feedstocks also continued to benefit from increased demand
for sweet crude oil resulting from lower sulfur specifications for gasoline and diesel and
a global increase in refined product demand. |
||
| Margins on other refined products such as propylene, petroleum coke, and sulfur improved
from the first six months of 2006 to the first six months of 2007 due to a decrease in the
price of crude oil between the periods. |
||
| Throughput volumes declined by 21,000 barrels per day in the first six months of 2007
compared to the first six months of 2006 due mainly to a continuing reduction in throughput
volumes at our McKee Refinery as a result of a fire originating in its propane deasphalting
unit in February 2007. |
43
44
| fund $1.3 billion of capital expenditures and deferred turnaround and catalyst costs; |
||
| purchase 61.9 million shares of treasury stock at a cost of $4.2 billion; |
||
| make an early debt repurchase of $183 million and a scheduled debt repayment of $230
million; |
||
| fund capital contributions of $215 million to Cameron Highway Oil Pipeline Company to
enable the joint venture to redeem all of its outstanding debt; |
||
| fund contingent earn-out payments in connection with the acquisition of the St. Charles
Refinery and the Delaware City Refinery of $50 million and $25 million, respectively; |
||
| pay common stock dividends of $139 million; and |
||
| increase available cash on hand by $746 million. |
| fund $2.0 billion of capital expenditures and deferred turnaround and catalyst costs; |
||
| purchase 20.4 million shares of treasury stock at a cost of $1.2 billion; |
||
| make long-term note repayments of $221 million; |
||
| fund contingent earn-out payments in connection with the acquisition of Basis
Petroleum, Inc. and the St. Charles Refinery of $26 million and $50 million, respectively; |
||
| terminate our interest rate swap contracts for $54 million; |
||
| pay common and preferred stock dividends of $87 million; and |
||
| increase available cash on hand by $501 million. |
45
46
Rating Agency |
Rating |
|
Standard & Poors Ratings Services
|
BBB (stable outlook) | |
Moodys Investors Service
|
Baa3 (positive outlook) | |
Fitch Ratings
|
BBB (stable outlook) |
Borrowing | ||||
Capacity |
Expiration |
|||
Revolving credit facility
|
$2.5 billion | August 2011 | ||
Canadian revolving credit facility
|
Cdn. $115 million | December 2010 |
47
48
49
| fair value hedges which are used to hedge our recognized refining inventories (which had
a carrying amount of $4.3 billion and $3.7 billion as of June 30, 2007 and December 31,
2006, respectively, and a fair value of $9.0 billion and $6.6 billion as of June 30, 2007
and December 31, 2006, respectively) and unrecognized firm commitments (i.e., binding
agreements to purchase inventories in the future); |
||
| cash flow hedges which are used to hedge our forecasted feedstock and product purchases,
refined product sales, and natural gas purchases; |
||
| economic hedges (hedges not designated as fair value or cash flow hedges) which are used to: |
- | manage price volatility in refinery feedstock and refined product inventories, and |
||
- | manage price volatility in forecasted feedstock and product purchases, refined
product sales, and natural gas purchases; and |
| derivative commodity instruments held or issued for trading purposes. |
50
June 30, 2007 | ||||||||||||||||||||||||
Wtd Avg | Wtd Avg | Pre-tax | ||||||||||||||||||||||
Contract | Pay | Receive | Contract | Market | Fair | |||||||||||||||||||
Volumes |
Price |
Price |
Value |
Value |
Value |
|||||||||||||||||||
Fair Value Hedges: |
||||||||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
29,882 | $ | 68.74 | N/A | $ | 2,054 | $ | 2,130 | $ | 76 | ||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
36,082 | N/A | $ | 68.16 | 2,459 | 2,571 | (112 | ) | ||||||||||||||||
Cash Flow Hedges: |
||||||||||||||||||||||||
Swaps long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
22,490 | 67.34 | 71.91 | N/A | 103 | 103 | ||||||||||||||||||
2008 (crude oil and refined products) |
6,975 | 70.39 | 72.00 | N/A | 11 | 11 | ||||||||||||||||||
Swaps short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
22,490 | 85.42 | 77.91 | N/A | (169 | ) | (169 | ) | ||||||||||||||||
2008 (crude oil and refined products) |
6,975 | 84.76 | 81.63 | N/A | (22 | ) | (22 | ) | ||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
4,867 | 82.26 | N/A | 400 | 408 | 8 | ||||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
1,589 | N/A | 79.28 | 126 | 133 | (7 | ) | |||||||||||||||||
Economic Hedges: |
||||||||||||||||||||||||
Swaps long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
9,914 | 26.61 | 28.63 | N/A | 20 | 20 | ||||||||||||||||||
2007 (natural gas) |
543 | 0.21 | 0.26 | N/A | - | - | ||||||||||||||||||
Swaps short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
5,656 | 69.04 | 66.48 | N/A | (14 | ) | (14 | ) | ||||||||||||||||
2007 (natural gas) |
543 | 0.12 | 0.10 | N/A | - | - | ||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
94,286 | 73.73 | N/A | 6,952 | 7,134 | 182 | ||||||||||||||||||
2008 (crude oil and refined products) |
60 | 81.30 | N/A | 5 | 5 | - | ||||||||||||||||||
2007 (natural gas) |
740 | 8.17 | N/A | 6 | 5 | (1 | ) | |||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
91,280 | N/A | 72.96 | 6,660 | 6,840 | (180 | ) | |||||||||||||||||
2007 (natural gas) |
940 | N/A | 8.74 | 8 | 7 | 1 | ||||||||||||||||||
Options long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
3 | 84.14 | N/A | - | - | - | ||||||||||||||||||
2008 (crude oil and refined products) |
1 | 85.68 | N/A | - | - | - | ||||||||||||||||||
Options short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
1,200 | N/A | 15.78 | 3 | - | 3 | ||||||||||||||||||
Trading Activities: |
||||||||||||||||||||||||
Swaps long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
649 | 30.04 | 30.07 | N/A | - | - | ||||||||||||||||||
2008 (crude oil and refined products) |
112 | 12.18 | 11.31 | N/A | - | - | ||||||||||||||||||
Swaps short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
699 | 32.48 | 32.50 | N/A | - | - | ||||||||||||||||||
2008 (crude oil and refined products) |
112 | 11.31 | 12.05 | N/A | - | - | ||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
6,456 | 85.96 | N/A | 555 | 565 | 10 | ||||||||||||||||||
2008 (crude oil and refined products) |
1 | 85.23 | N/A | - | - | - | ||||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
6,456 | N/A | 86.81 | 560 | 565 | (5 | ) | |||||||||||||||||
2008 (crude oil and refined products) |
1 | N/A | 85.05 | - | - | - | ||||||||||||||||||
Total pre-tax fair value of open positions |
$ | (96 | ) | |||||||||||||||||||||
51
December 31, 2006 | ||||||||||||||||||||||||
Wtd Avg | Wtd Avg | Pre-tax | ||||||||||||||||||||||
Contract | Pay | Receive | Contract | Market | Fair | |||||||||||||||||||
Volumes |
Price |
Price |
Value |
Value |
Value |
|||||||||||||||||||
Fair Value Hedges: |
||||||||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
15,261 | $ | 63.66 | N/A | $ | 972 | $ | 949 | $ | (23 | ) | |||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
22,091 | N/A | $ | 64.56 | 1,426 | 1,379 | 47 | |||||||||||||||||
Cash Flow Hedges: |
||||||||||||||||||||||||
Swaps long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
39,125 | 70.14 | 65.16 | N/A | (195 | ) | (195 | ) | ||||||||||||||||
Swaps short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
39,125 | 69.66 | 76.30 | N/A | 260 | 260 | ||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
21,087 | 64.75 | N/A | 1,365 | 1,336 | (29 | ) | |||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
18,356 | N/A | 64.82 | 1,190 | 1,161 | 29 | ||||||||||||||||||
Economic Hedges: |
||||||||||||||||||||||||
Swaps long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
13,244 | 12.02 | 11.02 | N/A | (13 | ) | (13 | ) | ||||||||||||||||
2007 (natural gas) |
893 | 0.76 | 0.78 | N/A | - | - | ||||||||||||||||||
Swaps short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
7,605 | 26.47 | 27.66 | N/A | 9 | 9 | ||||||||||||||||||
2007 (natural gas) |
833 | 0.85 | 0.89 | N/A | - | - | ||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
50,442 | 64.28 | N/A | 3,242 | 3,171 | (71 | ) | |||||||||||||||||
2007 (natural gas) |
400 | 7.33 | N/A | 3 | 3 | - | ||||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
51,623 | N/A | 64.15 | 3,312 | 3,252 | 60 | ||||||||||||||||||
2007 (natural gas) |
400 | N/A | 8.21 | 3 | 3 | - | ||||||||||||||||||
Options long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
31 | 84.29 | N/A | - | - | - | ||||||||||||||||||
Options short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
1,478 | N/A | 61.94 | - | (6 | ) | 6 | |||||||||||||||||
Trading Activities: |
||||||||||||||||||||||||
Futures long: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
801 | 77.29 | N/A | 62 | 59 | (3 | ) | |||||||||||||||||
Futures short: |
||||||||||||||||||||||||
2007 (crude oil and refined products) |
801 | N/A | 84.87 | 68 | 58 | 10 | ||||||||||||||||||
Total pre-tax fair value of open positions |
$ | 87 | ||||||||||||||||||||||
52
June 30, 2007 | ||||||||||||||||||||||||||||||||
Expected Maturity Dates | ||||||||||||||||||||||||||||||||
There- | Fair | |||||||||||||||||||||||||||||||
2007 |
2008 |
2009 |
2010 |
2011 |
after |
Total |
Value |
|||||||||||||||||||||||||
Long-term Debt: |
||||||||||||||||||||||||||||||||
Fixed rate |
$ | 57 | $ | 6 | $ | 209 | $ | 33 | $ | 418 | $ | 6,196 | $ | 6,919 | $ | 7,049 | ||||||||||||||||
Average interest rate |
6.2 | % | 6.0 | % | 3.6 | % | 6.8 | % | 6.4 | % | 6.9 | % | 6.7 | % |
December 31, 2006 | ||||||||||||||||||||||||||||||||
Expected Maturity Dates | ||||||||||||||||||||||||||||||||
There- | Fair | |||||||||||||||||||||||||||||||
2007 |
2008 |
2009 |
2010 |
2011 |
after |
Total |
Value |
|||||||||||||||||||||||||
Long-term Debt: |
||||||||||||||||||||||||||||||||
Fixed rate |
$ | 462 | $ | 6 | $ | 209 | $ | 33 | $ | 418 | $ | 3,946 | $ | 5,074 | $ | 5,361 | ||||||||||||||||
Average interest rate |
7.3 | % | 6.0 | % | 3.6 | % | 6.8 | % | 6.4 | % | 7.1 | % | 6.9 | % |
53
| MTBE Litigation |
||
| Retail Fuel Temperature Litigation |
54
Maximum Number (or | ||||||||||||||||||
Total Number of | Total Number of | Approximate Dollar | ||||||||||||||||
Shares Not | Shares Purchased | Value) of Shares that | ||||||||||||||||
Total | Average | Purchased as Part | as Part of | May Yet Be Purchased | ||||||||||||||
Number of | Price | of Publicly | Publicly | Under the Plans or | ||||||||||||||
Shares | Paid per | Announced Plans | Announced Plans | Programs (at month | ||||||||||||||
Period | Purchased | Share | or Programs (1) | or Programs | end) (2) | |||||||||||||
April 2007 |
46,286,924 | $ | 70.74 | 3,689,364 | 42,597,560 | $2.15 billion | ||||||||||||
May 2007 |
31,207 | $ | 75.05 | 31,207 | 0 | $2.15 billion | ||||||||||||
June 2007 |
7,440 | $ | 75.13 | 7,440 | 0 | $2.15 billion | ||||||||||||
Total |
46,325,571 | $ | 70.74 | 3,728,011 | 42,597,560 |
(1) | The shares reported in this column represent purchases settled in the second
quarter of 2007 relating to: (a) our purchases of shares in open-market transactions to
meet our obligations under employee benefit plans, and (b) our purchases of shares from
our employees and non-employee directors in connection with the exercise of stock
options, the vesting of restricted stock, and other stock compensation transactions in
accordance with the terms of our incentive compensation plans. |
||
(2) | On April 26, 2007, we publicly announced an increase in our common stock
purchase program from $2 billion to $6 billion, including a $3 billion accelerated
share repurchase program, as authorized by our board of directors on April 25, 2007.
The $6 billion common stock purchase program has no expiration date. The $6 billion
common stock purchase program is more fully described above in Note 7 of Condensed
Notes to Consolidated Financial Statements, and we hereby incorporate by reference into
this Item our disclosures made in Note 7. |
55
(a) | Proposal 1: a proposal to elect three Class I directors to serve until the 2010
annual meeting was approved as follows: |
Directors |
For |
Withheld |
Non-Votes |
|||||||
Ruben M. Escobedo |
442,415,493 | 75,812,169 | n/a | |||||||
Bob Marbut |
393,863,274 | 124,364,388 | n/a | |||||||
Robert A. Profusek |
509,791,124 | 8,436,539 | n/a |
Directors whose terms of office continued after the annual meeting were: W.E.
Bill Bradford, Ronald K. Calgaard, Jerry D. Choate, Irl F. Engelhardt, William R.
Klesse, Donald L. Nickles, and Susan Kaufman Purcell. |
|||
(b) | Proposal 2: a proposal to ratify the appointment of KPMG LLP to serve as
Valeros independent registered public accounting firm for the fiscal year ending
December 31, 2007 was approved as follows: |
For |
Against |
Abstain |
Non-Votes |
|||
510,892,465 | 3,412,012 | 3,923,186 | n/a |
(c) | Proposal 3: a shareholder proposal entitled, Director Election Majority Vote
Proposal was approved as follows: |
For |
Against |
Abstain |
Non-Votes |
|||
257,068,863 | 151,060,989 | 4,474,548 | 105,623,262 |
(d) | Proposal 4: a shareholder proposal entitled, Shareholder Ratification of Executive
Compensation Proposal was not approved as follows: |
For |
Against |
Abstain |
Non-Votes |
|||
180,493,489 | 160,221,268 | 71,889,644 | 105,623,262 |
(e) | Proposal 5: a shareholder proposal entitled, Supplemental Executive Retirement
Plan Policy Proposal was not approved as follows: |
For |
Against |
Abstain |
Non-Votes |
|||
137,179,964 | 267,799,325 | 7,625,111 | 105,623,262 |
56
Exhibit No. |
Description |
|
*10.01
|
Amended and Restated Supplemental Executive Retirement Plan, amended July 11, 2007, effective January 1, 2008. | |
*10.02
|
Amended and Restated Restricted Stock Plan for Non-Employee Directors dated July 11, 2007. | |
*12.01
|
Statements of Computations of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges and Preferred Stock Dividends. | |
*31.01
|
Rule 13a-14(a) Certifications (under Section 302 of the Sarbanes-Oxley Act of 2002). | |
*32.01
|
Section 1350 Certifications (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). |
* | Filed herewith. |
57
VALERO ENERGY CORPORATION | ||||||
(Registrant) | ||||||
By: | /s/ Michael S. Ciskowski | |||||
Michael S. Ciskowski | ||||||
Executive Vice President and | ||||||
Chief Financial Officer | ||||||
(Duly Authorized Officer and Principal | ||||||
Financial and Accounting Officer) |
58