VALERO ENERGY CORPORATION 
SAN ANTONIO, Feb. 4, 2016 /PRNewswire/ -- Valero Energy Partners LP (NYSE: VLP, the "Partnership") today reported fourth quarter 2015 net income attributable to partners of $45 million, or $0.69 per common limited partner unit. The Partnership generated earnings before interest, income taxes, depreciation, and amortization ("EBITDA") of $57 million and distributable cash flow of $53 million. VLP's coverage ratio for the fourth quarter was 2.33x.
For the year ended December 31, 2015, net income attributable to partners was $132 million, or $2.12 per common limited partner unit. EBITDA was $171 million and distributable cash flow was $162 million.
"With solid operations, a strong balance sheet, and a healthy coverage ratio, VLP is well positioned to achieve our distribution growth target," said Joe Gorder, Chairman and Chief Executive Officer of VLP's general partner.
The Partnership expects to grow distributions at an annual rate of 25 percent through 2017.
On January 25, the board of directors of VLP's general partner declared a fourth quarter 2015 cash distribution of $0.32 per unit. This distribution represents a 4 percent increase from the third quarter of 2015 and results in a 27 percent annual increase.
Financial Results
Revenues were $79 million for the fourth quarter of 2015 and $244 million for 2015. Operating expenses in the fourth quarter of 2015 were $19 million, general and administrative expenses were $3 million, and depreciation expense was $9 million. For 2015, operating expenses were $84 million, general and administrative expenses were $14 million, and depreciation expense was $38 million. Revenues for the Partnership were higher in 2015 compared to 2014 primarily due to the acquisition of the Houston, St. Charles, and Corpus Christi terminals in 2015.
Liquidity and Financial Position
In November, VLP expanded its revolving credit facility from $300 million to $750 million and completed its first equity offering subsequent to its initial public offering, issuing 4.25 million common units. The offering generated gross proceeds of $197 million, of which $185 million was used to pay down a subordinated loan with Valero Energy Corporation (NYSE: VLO). As of December 31, 2015, the Partnership had $656 million of total liquidity consisting of $81 million in cash and cash equivalents and $575 million available on its revolving credit facility. Capital expenditures attributable to the Partnership in the fourth quarter of 2015 were $5 million, including $3 million for expansion and $2 million for maintenance. For 2015, capital expenditures attributable to the Partnership were $8 million, including $4 million for expansion and $4 million for maintenance.
The Partnership expects 2016 capital expenditures to be approximately $16 million, which includes $11 million for maintenance and $5 million for expansion.
Conference Call
The Partnership's senior management will host a conference call at 3 p.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:
Lillian Riojas, Director - Media Relations and Communications, 210-345-5002
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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 Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Statement of income data (a):
Operating revenues - related party (b) $79,456 $34,182 $243,624 $129,180
Costs and expenses:
Operating expenses (c) 19,312 25,285 83,681 88,200
General and administrative expenses (d) 3,322 3,089 13,758 12,921
Depreciation expense (e) 9,151 8,583 38,203 30,098
Total costs and expenses 31,785 36,957 135,642 131,219
------ ------ ------- -------
Operating income (loss) 47,671 (2,775) 107,982 (2,039)
Other income, net (f) 57 189 223 1,504
Interest and debt expense, net of capitalized interest (g) (2,748) (209) (6,113) (872)
Income (loss) before income taxes 44,980 (2,795) 102,092 (1,407)
Income tax expense (h) 313 112 251 548
Net income (loss) 44,667 (2,907) 101,841 (1,955)
Less: Net loss attributable to Predecessor - (21,963) (30,037) (61,236)
Net income attributable to partners 44,667 19,056 131,878 59,281
Less: General partner's interest in net income 2,248 574 6,069 1,379
Limited partners' interest in net income $42,419 $18,482 $125,809 $57,902
------- ------- -------- -------
Net income per limited partner unit
(basic and diluted):
Common units $0.69 $0.32 $2.12 $1.01
Subordinated units $0.66 $0.32 $2.07 $1.01
Weighted-average limited partner units outstanding:
Common units - public (basic) 19,005 17,250 17,692 17,250
Common units - public (diluted) 19,005 17,251 17,692 17,251
Common units - Valero (basic and diluted) 15,019 11,540 13,530 11,540
Subordinated units - Valero (basic and diluted) 28,790 28,790 28,790 28,790
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Operating highlights (a):
Pipeline transportation:
Pipeline transportation revenues (b) $20,271 $20,895 $81,435 $72,737
------- ------- ------- -------
Pipeline transportation throughput (BPD) (i) 906,870 993,861 949,884 908,095
Average pipeline transportation revenue per barrel (j)
$0.24 $0.23 $0.23 $0.22
Terminaling:
Terminaling revenues (b) $59,050 $13,152 $161,649 $55,495
------- ------- -------- -------
Terminaling throughput (BPD) 1,827,623 500,612 1,340,407 545,135
Average terminaling revenue per barrel (j) $0.35 $0.29 $0.33 $0.28
Storage revenues $135 $135 $540 $948
---- ---- ---- ----
Total operating revenues - related party $79,456 $34,182 $243,624 $129,180
------- ------- -------- --------
Capital expenditures (a):
Maintenance $1,621 $9,981 $9,490 $28,315
Expansion 3,303 17,906 21,479 75,637
Total capital expenditures 4,924 27,887 30,969 103,952
Less: Capital expenditures attributable to
Predecessor - 23,942 22,492 93,758
Capital expenditures attributable to Partnership $4,924 $3,945 $8,477 $10,194
------ ------ ------ -------
Other financial information:
Distribution declared per unit $0.3200 $0.2660 $1.1975 $0.9410
EBITDA attributable to Partnership (k) $56,879 $23,741 $171,006 $75,368
Distributable cash flow (k) $52,861 $22,606 $162,244 $72,952
Distribution declared:
Limited partner units - public $6,883 $4,591 $22,028 $16,238
Limited partner units - Valero 14,019 10,727 51,566 37,950
General partner units - Valero 1,809 511 5,003 1,304
----- --- ----- -----
Total distribution declared $22,711 $15,829 $78,597 $55,492
------- ------- ------- -------
Coverage ratio (k) 2.33x 1.43x 2.06x 1.31x
December 31,
------------
2015 2014
---- ----
Balance sheet data (a):
Total assets 850,107 975,953
Current portion of debt and capital lease obligations 913 1,200
Debt and capital lease obligations, less current portion 545,246 1,519
Total debt and capital lease obligations 546,159 2,719
Partners' capital 290,153 965,099
Working capital 86,231 238,365
See Notes to Earnings Release on Table Page 6.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31
------------ -----------
2015 2014 2015 2014
---- ---- ---- ----
Reconciliation of net income (loss) to EBITDA and distributable cash flow (a)(k):
Net income (loss) $44,667 $(2,907) $101,841 $(1,955)
Plus:
Depreciation expense 9,151 8,583 38,203 30,098
Interest and debt expense, net of capitalized interest 2,748 209 6,113 872
Income tax expense 313 112 251 548
--- --- --- ---
EBITDA 56,879 5,997 146,408 29,563
Less: EBITDA attributable to Predecessor - (17,744) (24,598) (45,805)
--- ------- ------- -------
EBITDA attributable to Partnership 56,879 23,741 171,006 75,368
Plus:
Adjustments related to minimum throughput commitments 18 (164) 22 108
Projects prefunded by Valero - 865 589 2,911
Other - - 384 -
Less:
Cash interest paid 2,415 213 5,367 899
Income taxes paid - - 441 9
Maintenance capital expenditures 1,621 1,623 3,949 4,527
----- ----- ----- -----
Distributable cash flow $52,861 $22,606 $162,244 $72,952
======= ======= ======== =======
Reconciliation of net cash provided by operating activities to EBITDA and distributable cash
flow (a)(k):
Net cash provided by operating activities $47,584 $6,303 $129,108 $26,834
Plus:
Changes in current assets and current liabilities 4,330 (617) 8,973 1,318
Changes in deferred charges and credits and other operating
activities, net 2,076 (10) 1,735 34
Interest and debt expense, net of capitalized interest 2,748 209 6,113 872
Current income tax expense 141 112 479 505
--- --- --- ---
EBITDA 56,879 5,997 146,408 29,563
Less: EBITDA attributable to Predecessor - (17,744) (24,598) (45,805)
--- ------- ------- -------
EBITDA attributable to Partnership 56,879 23,741 171,006 75,368
Plus:
Adjustments related to minimum throughput commitments
18 (164) 22 108
Projects prefunded by Valero - 865 589 2,911
Other - - 384 -
Less:
Cash interest paid 2,415 213 5,367 899
Income taxes paid - - 441 9
Maintenance capital expenditures 1,621 1,623 3,949 4,527
Distributable cash flow $52,861 $22,606 $162,244 $72,952
------- ------- -------- -------
See Notes to Earnings Release on Table Page 6.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31
------------ -----------
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 $44,667 $19,056 $131,878 $59,281
Total distribution
declared $22,711 $15,829 $78,597 $55,492
Ratio of net income attributable to partners
divided by total distribution declared
1.97x 1.20x 1.68x 1.07x
Coverage ratio:
Distributable cash
flow divided by
total distribution
declared 2.33x 1.43x 2.06x 1.31x
The following tables present our consolidated statements of income for the three months and year ended December 31, 2014. To the extent necessary, financial results have been adjusted for the acquisitions of the Houston and St. Charles Terminal Services Business and the Corpus Christi Terminal Services Business for the periods prior to March 1, 2015 and October 1, 2015, respectively. See Note (a) of Notes to Earnings Release for a discussion of the basis of this presentation.
Three Months Ended December 31, 2014
------------------------------------
Valero Energy Partners LP (Previously Houston and Corpus Christi Terminal Services Business Valero Energy Partners LP (Currently
Reported) Reported)
St. Charles Terminal (September 1, 2014 to December 31, 2014)
Services Business
(September 1, 2014 to December 31, 2014)
---
Operating revenues -
related party (b) $34,182 $ - $ - $34,182
------- --------------------------------- --------------------------------- -------
Costs and expenses:
Operating expenses 7,692 12,753 4,840 25,285
General and
administrative expenses 2,938 68 83 3,089
Depreciation expense 4,364 3,363 856 8,583
----- ----- --- -----
Total costs and expenses 14,994 16,184 5,779 36,957
------ ------ ----- ------
Operating income (loss) 19,188 (16,184) (5,779) (2,775)
Other income, net 189 - - 189
Interest and debt
expense, net of
capitalized interest (209) - - (209)
---- --- --- ----
Income (loss) before
income taxes 19,168 (16,184) (5,779) (2,795)
Income tax expense 112 - - 112
--- --- --- ---
Net income (loss) 19,056 (16,184) (5,779) (2,907)
Less: Net loss attributable to Predecessor
- (16,184) (5,779) (21,963)
--- ------- ------ -------
Net income attributable
to partners $19,056 $ - $ - $19,056
======= ================================= ================================= =======
See Notes to Earnings Release on Table Page 6.
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Year Ended December 31, 2014
----------------------------
Valero Energy Partners LP Corpus Christi Terminal Valero Energy Partners LP
(Previously Reported) Services Business (Currently Reported)
(January 1, 2014 to
December 31, 2014)
---
Operating revenues -
related party (b) $129,180 $ - $129,180
-------- ----------------------------- --------
Costs and expenses:
Operating expenses 70,507 17,693 88,200
General and
administrative
expenses 12,597 324 12,921
Depreciation expense 26,953 3,145 30,098
------ ----- ------
Total costs and
expenses 110,057 21,162 131,219
Operating income
(loss) 19,123 (21,162) (2,039)
Other income, net 1,504 - 1,504
Interest and debt expense, net of capitalized interest
(872) - (872)
---- --- ----
Income (loss) before
income taxes 19,755 (21,162) (1,407)
Income tax expense 548 - 548
--- --- ---
Net income (loss) 19,207 (21,162) (1,955)
Less: Net loss
attributable to
Predecessor (40,074) (21,162) (61,236)
------- ------- -------
Net income
attributable to
partners $59,281 $ - $59,281
------- ----------------------------- -------
The following table presents our balance sheet data as of December 31, 2014, giving effect to the acquisition of the Corpus Christi Terminal Services Business. See Note (a) of Notes to Earnings Release for a discussion of the basis of this presentation.
December 31, 2014
-----------------
Valero Energy Partners LP (Previously Reported) Corpus Christi Terminal Services Business Valero Energy Partners LP (Currently Reported)
---------------------------------------------- ----------------------------------------- ---------------------------------------------
Cash and cash
equivalents $236,579 $ - $236,579
Total assets 891,764 84,189 975,953
Current
portion of
debt and
capital
lease
obligations 1,200 - 1,200
Debt and capital lease
obligations, less current
portion
1,519 - 1,519
Total debt
and capital
lease
obligations 2,719 - 2,719
Partners'
capital 880,910 84,189 965,099
Working
capital 238,365 - 238,365
See Notes to Earnings Release on Table Page 6.
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 businesses that we acquired 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 October 1, 2015, we acquired the Corpus
Christi Terminal Services Business from Valero
for total consideration of $465.0 million
consisting of (i) cash of $395.0 million and (ii)
the issuance of 1,570,513 common units
representing limited partner interests in us and
32,051 general partner units representing general
partner interests in us having an aggregate
value, collectively, of $70.0 million. We funded
the cash distribution to Valero with proceeds
from a subordinated credit agreement with Valero,
and began receiving fees for services provided by
this business commencing on October 1, 2015.
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 and the Corpus Christi 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 December 31, 2015 compared to the
three months ended December 31, 2014 was due
primarily to lower maintenance expense of $5.1
million at the St. Charles and Corpus Christi
terminals. Additionally, waste handling costs at
the St. Charles terminal decreased $1.6 million
during the three months ended December 31, 2015.
The decrease in these expenses was partially
offset by an increase in insurance expense of
$1.0 million as a result of the acquired assets
being covered under our own insurance policies.
Prior to the acquisitions, our Predecessor was
allocated a portion of Valero's insurance costs.
The decrease in operating expenses for the year
ended December 31, 2015 compared to the year
ended December 31, 2014 was due primarily to
lower maintenance expense of $8.8 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 $2.7 million as a result of the
acquired assets being covered under our own
insurance policies. Prior to the acquisitions,
our Predecessor was allocated a portion of
Valero's insurance costs. Additionally, salaries,
wages, benefits, and incentive compensation for
seconded employees increased $941,000 during the
year ended December 31, 2015 due to the annual
merit increase.
(d) The increase in general and administrative
expenses for the three months ended December 31,
2015 compared to the three months ended December
31, 2014 was due primarily to incremental costs
of $333,000 related to the management fee charged
to us by Valero as a result of additional
administrative services provided to us in
connection with our acquisitions of the Houston
and St. Charles Terminal Services Business and
the Corpus Christi Terminal Services Business,
partially offset by a decrease of $116,000 in
costs related to being a separate publicly traded
limited partnership.
The increase in general and administrative
expenses for the year ended December 31, 2015
compared to the year ended December 31, 2014 was
due primarily to incremental costs of $620,000
related to the management fee charged to us by
Valero as a result of additional administrative
services provided to us in connection with our
acquisitions of the Houston and St. Charles
Terminal Services Business and the Corpus Christi
Terminal Services Business, and higher
transaction costs of $527,000 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 $438,000 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.
These increases were offset by a decrease of
$313,000 in costs related to being a separate
publicly traded limited partnership.
(e) The increase in depreciation expense for the three
months ended December 31, 2015 compared to the
three months ended December 31, 2014 was due
primarily to additional depreciation expense
associated with assets placed into service in
2015, including the expansion of our Houston and
Corpus Christi terminals.
The increase in depreciation expense for the year
ended December 31, 2015 compared to the year
ended December 31, 2014 was due primarily to the
$2.8 million in accelerated depreciation related
to the retirement of certain assets in the McKee
Crude System, as well as additional depreciation
expense associated with assets placed into
service in the latter part of 2014 and beginning
of 2015, including the expansion of our Houston,
St. Charles, and Corpus Christi terminals.
(f) The decrease in "other income, net" for the three
months and year ended December 31, 2015 compared
to the three months and year ended December 31,
2014 was due primarily to a decrease in interest
income (net of bank fees) of $106,000 and
$651,000, respectively, attributable to a reduced
cash balance during the three months and year
ended December 31, 2015. In addition, scrap metal
sales decreased $436,000 and right-of-way fees
decreased $141,000 during the year ended December
31, 2015 compared to the year ended December 31,
2014.
(g) The increase in "interest and debt expense, net of
capitalized interest" for the three months and
year ended December 31, 2015 compared to the
three months and year ended December 31, 2014 was
due primarily to interest expense incurred on
borrowings under our revolving credit facility
and under the subordinated credit agreements with
Valero as discussed in Note (a). Interest expense
on this indebtedness was $2.5 million and $5.5
million for the three months and year ended
December 31, 2015, respectively.
(h) Our income tax expense is associated with the
Texas margin tax. The decrease in income tax
expense for the year ended December 31, 2015
compared to the year ended December 31, 2014 was
due primarily to a decrease in our deferred
income tax liabilities resulting from 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.
The variation in the customary relationship
between income tax expense and income before
income taxes for the year ended December 31, 2014
was due to the impact of retrospectively
adjusting our results of operations to include
the $61 million net loss attributable to the
acquired businesses for periods prior to their
dates of acquisition.
(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 our initial
public offering (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
