VALERO ENERGY CORPORATION SAN ANTONIO, Oct. 30, 2015 /PRNewswire/ -- Valero Energy Partners LP (NYSE: VLP, the "Partnership"), today reported third quarter 2015 net income attributable to partners of $31.4 million, or $0.51 per common limited partner unit. The Partnership generated earnings before interest, income taxes, depreciation, and amortization ("EBITDA") of $43.6 million and distributable cash flow of $41.9 million. VLP's coverage ratio for the third quarter of 2015 was 2.08x.
VLP's acquisition of the Corpus Christi Terminal Services Business from subsidiaries of its sponsor, Valero Energy Corporation (NYSE: VLO, "Valero"), closed on October 1, 2015. The Partnership expects this business to contribute toward achieving annual distribution growth of about 25 percent for the next couple of years.
On October 15, the board of directors of VLP's general partner declared a third quarter 2015 cash distribution of $0.3075 per unit. This distribution represents an increase of 5.1 percent from the second quarter of 2015 and an increase of 28.1 percent from the third quarter of 2014.
"We exceeded our target to complete $1 billion of acquisitions from Valero in 2015," said Joe Gorder, Chairman and Chief Executive Officer of VLP's general partner. "Our distribution growth plans remain intact."
Financial Results
Third quarter 2015 revenues were $62.0 million, an increase of $28.4 million versus third quarter 2014 revenues. Revenues generated from the Houston and St. Charles terminals acquired in March 2015 primarily contributed to the increase.
Operating expenses in the third quarter of 2015 were $15.0 million, general and administrative expenses were $3.4 million, and depreciation expense was $10.7 million.
Liquidity and Financial Position
As of September 30, 2015, the Partnership had $176 million of total liquidity consisting of $51 million in cash and cash equivalents and $125 million available on its revolving credit facility. Capital expenditures attributable to the Partnership in the third quarter of 2015 were $1.2 million, including $0.3 million for maintenance and $0.9 million for expansion. For 2015, capital expenditures attributable to the Partnership are expected to total approximately $12 million, of which $6 million is for maintenance.
Conference Call
The Partnership's senior management will host a conference call at 11 a.m. ET today to discuss this earnings release. A live broadcast of the conference call will be available on the Partnership's website at www.valeroenergypartners.com.
About Valero Energy Partners LP
Valero Energy Partners LP is a fee-based master limited partnership formed by Valero Energy Corporation to own, operate, develop and acquire crude oil and refined products pipelines, terminals, and other transportation and logistics assets. With headquarters in San Antonio, the Partnership's assets include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the United States that are integral to the operations of nine of Valero's refineries. Please visit www.valeroenergypartners.com for more information.
Contacts
Investors:
John Locke, Vice President - Investor Relations, 210-345-3077
Karen Ngo, Manager - Investor Relations, 210-345-4574
Media:
Bill Day, Vice President - Communications, 210-345-2928
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Safe-Harbor Statement
This release contains forward-looking statements within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. You can identify forward-looking statements by words such as "anticipate," "believe," "estimate," "expect," "forecast," "project," "could," "may," "should," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Partnership's control and are difficult to predict. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of the Partnership. Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in the Partnership's filings with the SEC, including the Partnership's annual reports on Form 10-K and quarterly reports on Form 10-Q, available on the Partnership's website at www.valeroenergypartners.com. These risks could cause the Partnership's actual results to differ materially from those contained in any forward-looking statement.
Use of Non-GAAP Financial Information
This earnings release includes the terms "EBITDA," "distributable cash flow," and "coverage ratio." These terms are supplemental financial measures that are not defined under United States generally accepted accounting principles (GAAP). We reconcile these non-GAAP measures to the most directly comparable GAAP measures in the tables that accompany this release. In note (k) to the tables that accompany this release, we disclose the reasons why we believe our use of the non-GAAP financial measures in this release provides useful information.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Statement of income data (a):
Operating revenues - related party
(b) $62,037 $33,666 $164,168 $94,998
------- ------- -------- -------
Costs and expenses:
Operating expenses (c) 15,042 17,510 47,280 50,062
General and administrative expenses
(d) 3,444 3,133 10,169 9,591
Depreciation expense (e) 10,684 7,178 25,887 19,226
------ ----- ------ ------
Total costs and expenses 29,170 27,821 83,336 78,879
------ ------ ------ ------
Operating income 32,867 5,845 80,832 16,119
Other income, net (f) 29 156 166 1,315
Interest and debt expense, net of
capitalized interest (g) (1,353) (214) (3,365) (663)
------ ---- ------ ----
Income before income taxes 31,543 5,787 77,633 16,771
Income tax expense (benefit) (h) 115 129 (62) 436
--- --- --- ---
Net income 31,428 5,658 77,695 16,335
Less: Net loss attributable to
Predecessor - (11,885) (9,516) (23,890)
--- ------- ------ -------
Net income attributable to partners 31,428 17,543 87,211 40,225
Less: General partner's interest
in net income 1,612 351 3,821 805
----- --- ----- ---
Limited partners' interest in net
income $29,816 $17,192 $83,390 $39,420
======= ======= ======= =======
Net income per limited partner
unit(basic and diluted):
Common units $0.51 $0.30 $1.43 $0.68
Subordinated units $0.49 $0.30 $1.40 $0.68
Weighted-average limited partner
units outstanding:
Common units - public (basic) 17,250 17,250 17,250 17,250
Common units - public (diluted) 17,250 17,251 17,250 17,251
Common units - Valero (basic and
diluted) 13,448 11,540 13,029 11,540
Subordinated units - Valero (basic
and diluted) 28,790 28,790 28,790 28,790
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Operating highlights (a):
Pipeline transportation:
Pipeline transportation revenues
(b) $21,322 $20,602 $61,164 $51,842
======= ======= ======= =======
Pipeline transportation throughput
(BPD) (i) 960,410 955,285 964,380 879,192
Average pipeline transportation
revenue per barrel (j) $0.24 $0.23 $0.23 $0.22
Terminaling:
Terminaling revenues (b) $40,580 $12,827 $102,599 $42,343
======= ======= ======== =======
Terminaling throughput (BPD) 1,335,659 479,923 1,176,216 560,139
Average terminaling revenue per
barrel (j) $0.33 $0.29 $0.32 $0.28
Storage revenues $135 $237 $405 $813
==== ==== ==== ====
Total operating revenues - related
party $62,037 $33,666 $164,168 $94,998
======= ======= ======== =======
Capital expenditures (a):
Maintenance $326 $3,870 $4,549 $12,218
Expansion 868 8,729 2,697 42,582
--- ----- ----- ------
Total capital expenditures 1,194 12,599 7,246 54,800
Less: Capital expenditures
attributable to Predecessor - 9,574 3,693 48,551
Capital expenditures attributable
to Partnership $1,194 $3,025 $3,553 $6,249
====== ====== ====== ======
Other financial information:
Distribution declared per unit $0.3075 $0.2400 $0.8775 $0.6750
EBITDA attributable to Partnership
(k) $43,580 $22,204 $114,127 $51,627
Distributable cash flow (k) $41,880 $21,131 $109,383 $50,346
Distribution declared:
Limited partner units - public $5,307 $4,141 $15,145 $11,647
Limited partner units - Valero 13,471 9,679 37,547 27,223
General partner units - Valero 1,386 282 3,194 793
Total distribution declared $20,164 $14,102 $55,886 $39,663
======= ======= ======= =======
Coverage ratio (k) 2.08x 1.50x 1.96x 1.27x
September 30, December 31,
2015 2014
---- ----
Balance sheet data (a):
Cash and cash equivalents $50,563 $236,579
Total assets 706,188 891,764
Current portion of debt and
capital lease obligations 1,183 1,200
Debt and capital lease
obligations, less current portion 335,381 1,519
Total debt and capital lease
obligations 336,564 2,719
Partners' capital 360,389 880,910
Working capital 55,866 238,365
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Reconciliation of net income to
EBITDA and distributable cash flow
(a)(k):
Net income $31,428 $5,658 $77,695 $16,335
Plus:
Depreciation expense 10,684 7,178 25,887 19,226
Interest and debt expense, net of
capitalized interest 1,353 214 3,365 663
Income tax expense (benefit) 115 129 (62) 436
--- ---
EBITDA 43,580 13,179 106,885 36,660
Less: EBITDA attributable to
Predecessor - (9,025) (7,242) (14,967)
--- ------ ------ -------
EBITDA attributable to Partnership 43,580 22,204 114,127 51,627
Plus:
Adjustments related to minimum
throughput commitments - (235) 4 272
Projects prefunded by Valero - 418 589 2,046
Other - - 384 -
Less:
Cash interest paid 1,374 221 2,952 686
Income taxes paid - - 441 9
Maintenance capital expenditures 326 1,035 2,328 2,904
Distributable cash flow $41,880 $21,131 $109,383 $50,346
======= ======= ======== =======
Reconciliation of net cash provided
by operating activities to EBITDA
and distributable cash flow (a)(k):
Net cash provided by operating
activities $43,419 $10,326 $98,880 $33,625
Plus:
Changes in current assets and current
liabilities (1,430) 2,515 4,643 1,935
Changes in deferred charges and
credits and other operating
activities, net 118 (10) (341) 44
Interest and debt expense, net of
capitalized interest 1,353 214 3,365 663
Current income tax expense 120 134 338 393
EBITDA 43,580 13,179 106,885 36,660
Less: EBITDA attributable to
Predecessor - (9,025) (7,242) (14,967)
--- ------ ------ -------
EBITDA attributable to Partnership 43,580 22,204 114,127 51,627
Plus:
Adjustments related to minimum
throughput commitments - (235) 4 272
Projects prefunded by Valero - 418 589 2,046
Other - - 384 -
Less:
Cash interest paid 1,374 221 2,952 686
Income taxes paid - - 441 9
Maintenance capital expenditures 326 1,035 2,328 2,904
Distributable cash flow $41,880 $21,131 $109,383 $50,346
======= ======= ======== =======
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Comparison of ratio of net
income attributable to
partners divided by total
distribution declared to
coverage ratio (k):
Net income attributable to
partners $31,428 $17,543 $87,211 $40,225
Total distribution declared $20,164 $14,102 $55,886 $39,663
Ratio of net income
attributable to partners
divided by total
distribution declared 1.56x 1.24x 1.56x 1.01x
Coverage ratio:
Distributable cash flow
divided by total
distribution declared 2.08x 1.50x 1.96x 1.27x
The following tables present our consolidated statements of income for the nine months ended September 30, 2015 and the three and nine months ended September 30, 2014, giving effect to the acquisition of the Houston and St. Charles Terminal Services Business for periods prior to March 1, 2015. See Note (a) of Notes to Earnings Release for a discussion of the basis of this presentation.
Nine Months Ended September 30, 2015
------------------------------------
Valero Energy Houston and Valero Energy
Partners LP St. Charles
Terminal Partners LP
Services (Currently
Business Reported)
(January 1,
2015 to
February 28,
2015)
------------
Operating revenues - related
party (b) $164,168 $ - $164,168
-------- --- --- --------
Costs and expenses:
Operating expenses 40,085 7,195 47,280
General and administrative
expenses 10,122 47 10,169
Depreciation expense 23,613 2,274 25,887
------ -----
Total costs and expenses 73,820 9,516 83,336
------ ----- ------
Operating income (loss) 90,348 (9,516) 80,832
Other income, net 166 - 166
Interest and debt expense, net of
capitalized interest (3,365) - (3,365)
------ --- ------
Income (loss) before income taxes 87,149 (9,516) 77,633
Income tax benefit (62) - (62)
--- --- ---
Net income (loss) 87,211 (9,516) 77,695
Less: Net loss attributable to
Predecessor - (9,516) (9,516)
--- ------ ------
Net income attributable to
partners $87,211 $ - $87,211
======= === === =======
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended September 30, 2014
-------------------------------------
Valero Energy Houston and Valero Energy
Partners LP St. Charles
Terminal Partners LP
(Previously Services
Business (Currently
Reported) (July 1, 2014 Reported)
to September
30, 2014)
-------------
Operating revenues - related
party (b) $33,666 $ - $33,666
------- --- --- -------
Costs and expenses:
Operating expenses 8,553 8,957 17,510
General and administrative
expenses 3,065 68 3,133
Depreciation expense 4,318 2,860 7,178
-----
Total costs and expenses 15,936 11,885 27,821
------ ------ ------
Operating income (loss) 17,730 (11,885) 5,845
Other income, net 156 - 156
Interest and debt expense, net of
capitalized interest (214) - (214)
---- --- ----
Income (loss) before income taxes 17,672 (11,885) 5,787
Income tax expense 129 - 129
Net income (loss) 17,543 (11,885) 5,658
Less: Net loss attributable to
Predecessor - (11,885) (11,885)
--- ------- -------
Net income attributable to
partners $17,543 $ - $17,543
======= === === =======
Nine Months Ended September 30, 2014
------------------------------------
Valero Energy Houston and Valero Energy
Partners LP
(Previously St. Charles
Terminal Partners LP
Reported)
Services
Business (Currently
(January 1,
2014 Reported)
to September
30, 2014)
-------------
Operating revenues - related
party (b) $94,998 $ - $94,998
------- --- --- -------
Costs and expenses:
Operating expenses 24,027 26,035 50,062
General and administrative
expenses 9,392 199 9,591
Depreciation expense 12,087 7,139 19,226
Total costs and expenses 45,506 33,373 78,879
------ ------ ------
Operating income (loss) 49,492 (33,373) 16,119
Other income, net 1,315 - 1,315
Interest and debt expense, net of
capitalized interest (663) - (663)
---- --- ----
Income (loss) before income taxes 50,144 (33,373) 16,771
Income tax expense 436 - 436
Net income (loss) 49,708 (33,373) 16,335
Less: Net income (loss)
attributable to Predecessor 9,483 (33,373) (23,890)
----- ------- -------
Net income attributable to
partners $40,225 $ - $40,225
======= === === =======
See Notes to Earnings Release.
VALERO ENERGY PARTNERS LP
NOTES TO EARNINGS RELEASE
(a) References to "Partnership," "we," "us," or "our"
refer to Valero Energy Partners LP, one or more of
its subsidiaries, or all of them taken as a whole
for periods after December 16, 2013, the date the
Partnership completed its initial public offering
(IPO). For periods prior to the IPO and effective
dates of subsequent acquisitions from Valero,
those terms refer to Valero Energy Partners LP
Predecessor, our Predecessor for accounting
purposes. References in these notes to "Valero"
may refer to Valero Energy Corporation, one or
more of its subsidiaries, or all of them taken as
a whole, other than Valero Energy Partners LP, any
of its subsidiaries, or its general partner.
Effective March 1, 2015, we acquired the Houston
and St. Charles Terminal Services Business from
Valero for total consideration of $671.2 million
consisting of (i) cash of $571.2 million and (ii)
the issuance of 1,908,100 common units
representing limited partner interests in us and
38,941 general partner units representing general
partner interests in us having an aggregate value,
collectively, of $100.0 million. We funded the
cash distribution to Valero with $211.2 million of
our cash on hand, $200.0 million of borrowings
under our revolving credit facility, and $160.0
million of proceeds from a subordinated credit
agreement with Valero, and began receiving fees
for services provided by this business commencing
on March 1, 2015.
Effective July 1, 2014, we acquired the Texas Crude
Systems Business from Valero for total cash
consideration of $154.0 million, and began
receiving fees for services provided by this
business commencing on July 1, 2014.
The above-mentioned acquisitions were each
accounted for as transfers of a business between
entities under the common control of Valero.
Accordingly, the statement of income data and
operating highlights and capital expenditures data
have been retrospectively adjusted to include the
historical results of operations of the acquired
businesses for periods prior to their dates of
acquisition.
(b) Operating revenues include amounts attributable to
our Predecessor. Prior to being acquired by us,
the Texas Crude Systems Business generated
revenues by providing fee-based transportation
and terminaling services to Valero, but the
Houston and St. Charles Terminal Services Business
did not charge Valero for services provided and
did not generate revenues. Effective with the date
of each acquisition, we entered into additional
schedules to our commercial agreements with Valero
with respect to the services we provide to Valero
using the assets of the acquired businesses. This
resulted in changes to pipeline and terminaling
throughput fees previously charged to Valero for
services provided by certain assets and new
charges for terminaling services provided by other
assets.
(c) The decrease in operating expenses for the three
months ended September 30, 2015 compared to the
three months ended September 30, 2014 was due
primarily to lower maintenance expense of $2.9
million at the St. Charles terminal and the Lucas
crude system. The decrease in maintenance expense
was partially offset by an increase in insurance
expense of $596,000 as a result of the acquired
assets being covered under our own insurance
policies. Prior to the acquisition, our
Predecessor was allocated a portion of Valero's
insurance costs.
The decrease in operating expenses for the nine
months ended September 30, 2015 compared to the
nine months ended September 30, 2014 was due
primarily to lower maintenance expense of $5.2
million at the St. Charles and Houston terminals
and the Lucas crude system. The decrease in
maintenance expense was partially offset by an
increase in insurance expense of $1.7 million as a
result of the acquired assets being covered under
our own insurance policies. Prior to the
acquisition, our Predecessor was allocated a
portion of Valero's insurance costs. Additionally,
salaries, wages, and benefits for seconded
employees increased $686,000 during the nine
months ended September 30, 2015 due to the annual
merit increase and higher incentive compensation.
(d) The increase in general and administrative expenses
for the three months ended September 30, 2015
compared to the three months ended September 30,
2014 was due primarily to higher transaction costs
(legal and investment advisor fees) of $274,000
associated with the acquisition of businesses from
Valero. During the three months ended September
30, 2015, we incurred transaction costs of
$423,000 in connection with the October 1, 2015
acquisition of the Corpus Christi Terminal
Services Business. During the three months ended
September 30, 2014, we incurred $149,000 in
transactions costs in connection with the July 1,
2014 acquisition of the Texas Crude Systems
Business.
The increase in general and administrative expenses
for the nine months ended September 30, 2015
compared to the nine months ended September 30,
2014 was due primarily to higher transaction costs
of $512,000 associated with the acquisition of
businesses from Valero. In 2015, we incurred
transaction costs of $546,000 in connection with
the March 1, 2015 acquisition of the Houston and
St. Charles Terminal Services Business and
$423,000 in connection with the October 1, 2015
acquisition of the Corpus Christi Terminal
Services Business. In 2014, we incurred $457,000
in connection with the July 1, 2014 acquisition of
the Texas Crude Systems Business.
(e) The increase in depreciation expense for the three
months ended September 30, 2015 compared to the
three months ended September 30, 2014 was due
primarily to $2.8 million in accelerated
depreciation related to the retirement of certain
assets in the McKee Crude System during the three
months ended September 30, 2015.
The increase in depreciation expense for the nine
months ended September 30, 2015 compared to the
nine months ended September 30, 2014 was due
primarily to the $2.8 million in accelerated
depreciation discussed above, as well as
additional depreciation expense associated with
assets placed into service in the latter part of
2014, including the expansion of our St. Charles
and Houston terminals and Three Rivers crude
system and the interconnection with TransCanada's
Cushing Marketlink pipeline at our Lucas crude
system.
(f) The decrease in "other income, net" for the three
and nine months ended September 30, 2015 compared
to the three and nine months ended September 30,
2014 was due primarily to a decrease in interest
income (net of bank fees) of $127,000 and
$545,000, respectively, attributable to a reduced
cash balance during the three and nine months
ended September 30, 2015. In addition, scrap metal
sales decreased $409,000 and right-of-way fees
decreased $141,000 during the nine months ended
September 30, 2015 compared to the nine months
ended September 30, 2014.
(g) The increase in "interest and debt expense, net of
capitalized interest" for the three and nine
months ended September 30, 2015 compared to the
three and nine months ended September 30, 2014 was
due primarily to interest expense incurred on
borrowings under our revolving credit facility and
under the subordinated credit agreement with
Valero as discussed in Note (a). Interest expense
on this indebtedness was $1.2 million and $3.0
million for the three and nine months ended
September 30, 2015, respectively.
(h) Our income tax expense (benefit) is associated with
the Texas margin tax. During the nine months ended
September 30, 2015, we reduced our deferred income
tax liabilities due to a reduction in the relative
amount of revenue we generate in Texas compared to
our total revenue. This reduction was a result of
the acquisition of the Houston and St. Charles
Terminal Services Business (which includes
operations in Louisiana). In addition, in June
2015, the Texas margin tax rate was reduced from 1
percent to 0.75 percent.
(i) Represents the sum of volumes transported through
each separately tariffed pipeline segment.
(j) Management uses average revenue per barrel to
evaluate performance and compare profitability to
other companies in the industry. There are a
variety of ways to calculate average revenue per
barrel; different companies may calculate it in
different ways. We calculate average revenue per
barrel as revenue divided by throughput for the
period. Throughput can be derived by multiplying
the throughput barrels per day (BPD) by the number
of days in the period. Investors and analysts use
this financial measure to help analyze and compare
companies in the industry on the basis of
operating performance. This financial measure
should not be considered as an alternative to
revenues presented in accordance with U.S.
generally accepted accounting principles (GAAP).
(k) We define EBITDA as net income before income tax
expense, interest expense, and depreciation
expense. We define distributable cash flow as
EBITDA less cash payments during the period for
interest, income taxes, and maintenance capital
expenditures, plus adjustments related to minimum
throughput commitments, capital projects prefunded
by Valero, and certain other items. We define
coverage ratio as the ratio of distributable cash
flow to the total distribution declared.
EBITDA, distributable cash flow, and coverage ratio
are supplemental financial measures that are not
defined under GAAP. They may be used by management
and external users of our financial statements,
such as industry analysts, investors, lenders, and
rating agencies, to:
describe our expectation of forecasted earnings;
assess our operating performance as compared to
other publicly traded limited partnerships in the
transportation and logistics industry, without
regard to historical cost basis or, in the case of
EBITDA, financing methods;
assess the ability of
our business to generate sufficient cash to
support our decision to make distributions to our
unitholders;
assess our ability to incur and
service debt and fund capital expenditures; and
assess the viability of acquisitions and other
capital expenditure projects and the returns on
investment of various investment opportunities.
We believe that the presentation of EBITDA provides
useful information to investors in assessing our
financial condition and results of operations. The
GAAP measures most directly comparable to EBITDA
are net income and net cash provided by operating
activities. EBITDA should not be considered an
alternative to net income or net cash provided by
operating activities presented in accordance with
GAAP. EBITDA has important limitations as an
analytical tool because it excludes some, but not
all, items that affect net income or net cash
provided by operating activities. EBITDA should
not be considered in isolation or as a substitute
for analysis of our results as reported under
GAAP. Additionally, because EBITDA may be defined
differently by other companies in our industry,
our definition of EBITDA may not be comparable to
similarly titled measures of other companies,
thereby diminishing its utility.
We use distributable cash flow to measure whether
we have generated from our operations, or
"earned," an amount of cash sufficient to support
the payment of the minimum quarterly
distributions. Our partnership agreement contains
the concept of "operating surplus" to determine
whether our operations are generating sufficient
cash to support the distributions that we are
paying, as opposed to returning capital to our
partners. Because operating surplus is a
cumulative concept (measured from the IPO date and
compared to cumulative distributions from the IPO
date), we use the term distributable cash flow to
approximate operating surplus on a quarterly or
annual, rather than a cumulative, basis. As a
result, distributable cash flow is not necessarily
indicative of the actual cash we have on hand to
distribute or that we are required to distribute.
We use the coverage ratio to reflect the
relationship between our distributable cash flow
and the total distribution declared. We have also
provided the ratio of net income attributable to
partners, the most directly comparable GAAP
measure to distributable cash flow, to the total
distribution declared.
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SOURCE Valero Energy Partners LP
