VALERO ENERGY PARTNERS LP SAN ANTONIO, Jan. 28, 2016 /PRNewswire/ -- Valero Energy Corporation (NYSE: VLO, "Valero") today reported adjusted net income from continuing operations attributable to Valero stockholders of $862 million, or $1.79 per share, for the fourth quarter of 2015 compared to $952 million, or $1.83 per share, for the fourth quarter of 2014. Actual net income from continuing operations attributable to Valero stockholders was $298 million, or $0.62 per share, for the fourth quarter of 2015 compared to $1.2 billion, or $2.22 per share, for the fourth quarter of 2014.
For the year ended December 31, 2015, adjusted net income from continuing operations attributable to Valero stockholders was $4.6 billion, or $9.24 per share, compared to $3.5 billion, or $6.68 per share, for 2014. Actual net income from continuing operations attributable to Valero stockholders was $4.0 billion, or $7.99 per share, in 2015 compared to $3.7 billion, or $6.97 per share, for 2014.
Reconciliations of actual to adjusted amounts are shown in the accompanying financial tables.
"In 2015, we had solid operations, completed multiple strategic refinery projects, and expanded our logistics system," said Joe Gorder, Valero Chairman, President and Chief Executive Officer. "We invested over $2.4 billion into our business and returned 80 percent of our adjusted net income to stockholders."
Refining
The refining segment reported adjusted operating income for the fourth quarter of 2015 of $1.5 billion, which was in line with $1.5 billion in the fourth quarter of 2014.
Fourth quarter 2015 refining throughput volumes averaged 2.9 million barrels per day, an increase of 34,000 barrels per day from the fourth quarter of 2014. Valero's refineries operated at 97 percent throughput capacity utilization in the fourth quarter of 2015.
Ethanol
The ethanol segment reported adjusted operating income for the fourth quarter of 2015 of $37 million compared to $154 million in the fourth quarter of 2014. The $117 million decrease was mainly due to lower gross margin per gallon driven by a decline in ethanol prices versus relatively stable corn prices. Ethanol production volumes were 3.9 million gallons per day in the fourth quarter of 2015, an increase of 131,000 gallons per day versus the fourth quarter of 2014. The increase in production compared to the fourth quarter of 2014 was due to ongoing optimization and plant improvements.
Corporate and Other
General and administrative expenses were $206 million in the fourth quarter of 2015 compared to $214 million in the fourth quarter of 2014. The effective tax rate was 28 percent in the fourth quarter of 2015.
Capital Investments
In the fourth quarter of 2015, capital investment was $732 million, of which $164 million was for turnarounds and catalyst and $136 million was for joint venture investments. In 2015, capital investment was $2.4 billion for turnarounds, catalyst, strategic, and joint venture investments consisting of $1.4 billion for stay-in-business capital and $1.0 billion to advance Valero's growth strategies. Approximately 40 percent of the 2015 growth capital spending was allocated to investments in logistics assets that support Valero's operations and potential drop-down transactions to Valero Energy Partners LP ("VLP").
Stockholder Distributions
Valero paid $240 million in dividends and purchased 11.1 million shares of its common stock for $767 million, resulting in total cash returned to stockholders of $1 billion in the fourth quarter of 2015. In 2015, Valero returned $3.7 billion to stockholders, or 80 percent of adjusted net income from continuing operations attributable to Valero stockholders, consisting of $848 million in dividends and $2.8 billion in stock buybacks. The company is targeting a payout ratio of 75 percent of net income in 2016. Valero defines total payout ratio as the sum of dividends plus stock buybacks divided by adjusted net income from continuing operations attributable to Valero stockholders.
On January 21, Valero announced a 20 percent increase in its quarterly common stock dividend from $0.50 per share to $0.60 per share, payable on March 3, 2016, to holders of record on February 9, 2016.
"This latest increase in our dividend further demonstrates our confidence in Valero's earnings power, which is anchored by our high quality portfolio concentrated in the U.S. Gulf Coast," said Gorder. "Having a dividend among the top of our peer group is an important part of our team's core objectives to deliver significant, sustainable value to our stockholders while maintaining safe and reliable operations and disciplined capital allocation."
Liquidity and Financial Position
Valero ended the fourth quarter of 2015 with $7.4 billion in total debt and $4.1 billion of cash and temporary cash investments, of which $81 million was held by VLP. The company's debt to capital ratio, net of $2 billion in cash, was 20 percent.
Strategic Update
In the fourth quarter of 2015, the company commissioned its new crude unit at the Corpus Christi refinery, completed the hydrocracker expansion at the Port Arthur refinery, and completed the crude unit expansion at the McKee refinery. Valero also acquired a 50 percent interest in the Diamond Pipeline that will connect Cushing, OK to Memphis, TN and began receiving crude oil at the Quebec City refinery from Enbridge's Line 9B pipeline. The company expects the new crude unit under construction at the Houston refinery to be completed in the second quarter of 2016.
In January 2016, Valero's Board of Directors approved the construction of a 13,000 barrel per day alkylation unit at the Houston refinery. The unit will upgrade low-cost natural gas liquids into premium priced alkylate. Management expects the project to be completed in the first half of 2019 for an estimated cost of $300 million.
Valero expects 2016 capital investments, including turnarounds, catalyst, and joint venture investments, to be $2.6 billion, which includes $1.6 billion for stay-in-business capital and $1.0 billion for growth investments. Approximately 55 percent of planned growth investment in 2016 is allocated for logistics projects and 45 percent for refining asset optimization. The company believes that most of the logistics investments will be eligible for future drop-down transactions to VLP.
Conference Call
Valero's senior management will hold a conference call at 11 a.m. ET today to discuss this earnings release and to provide an update on company operations and strategy.
About Valero
Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Valero subsidiaries employ approximately 10,000 people, and its assets include 15 petroleum refineries with a combined throughput capacity of approximately 3.0 million barrels per day, 11 ethanol plants with a combined production capacity of 1.3 billion gallons per year, a 50-megawatt wind farm, and renewable diesel production from a joint venture. Through subsidiaries, Valero owns the general partner of Valero Energy Partners LP (NYSE: VLP), a midstream master limited partnership. Approximately 7,500 outlets carry the Valero, Diamond Shamrock, Shamrock, and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland. Valero is a Fortune 500 company based in San Antonio. Please visit www.valero.com for more information.
Valero Contacts
Investors:
John Locke, Vice President - Investor Relations, 210-345-3077
Karen Ngo, Manager - Investor Relations, 210-345-4574
Media:
Steve Lee, Manager - Corporate Communications, 210-345-4137
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Safe-Harbor Statement
Statements contained in this release that state the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "believe," "expect," "should," "estimates," "intend," and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and on Valero's website at www.valero.com, and VLP's annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and on VLP's website at www.valeroenergypartners.com.
Use of Non-GAAP Financial Information
This earnings release includes references to financial measures that are not defined under U.S. generally accepted accounting principles ("GAAP"). These non-GAAP measures include adjusted net income, adjusted net income per share, adjusted refining segment operating income, and adjusted ethanol segment operating income. However, these non-GAAP financial measures have been included in this earnings release to help facilitate the comparison of operating results between periods. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Statement of Income Data:
Operating revenues $18,777 $27,859 $87,804 $130,844
------- ------- ------- --------
Costs and expenses:
Cost of sales (excluding the lower
of cost or market inventory
valuation adjustment) (a) (b) 15,627 24,321 73,861 118,141
Lower of cost or market inventory
valuation adjustment (c) 790 - 790 -
Operating expenses 1,014 1,103 4,243 4,387
General and administrative
expenses 206 214 710 724
Depreciation and amortization
expense 494 425 1,842 1,690
Total costs and expenses 18,131 26,063 81,446 124,942
------ ------ ------ -------
Operating income 646 1,796 6,358 5,902
Other income, net 11 9 46 47
Interest and debt expense, net of
capitalized interest (107) (101) (433) (397)
---- ----
Income from continuing operations
before income tax expense 550 1,704 5,971 5,552
Income tax expense (d) 155 484 1,870 1,777
--- --- ----- -----
Income from continuing operations 395 1,220 4,101 3,775
Loss from discontinued operations - - - (64)
--- ---
Net income 395 1,220 4,101 3,711
Less: Net income attributable to
noncontrolling interests (e) 97 65 111 81
--- ---
Net income attributable to Valero
Energy Corporation stockholders $298 $1,155 $3,990 $3,630
==== ====== ====== ======
Net income attributable to Valero
Energy Corporation stockholders:
Continuing operations $298 $1,155 $3,990 $3,694
Discontinued operations - - - (64)
Total $298 $1,155 $3,990 $3,630
==== ====== ====== ======
Earnings per common share:
Continuing operations $0.62 $2.22 $8.00 $7.00
Discontinued operations - - - (0.12)
--- -----
Total $0.62 $2.22 $8.00 $6.88
===== ===== ===== =====
Weighted-average common shares
outstanding (in millions) 479 517 497 526
Earnings per common share -
assuming dilution:
Continuing operations $0.62 $2.22 $7.99 $6.97
Discontinued operations - - - (0.12)
--- -----
Total $0.62 $2.22 $7.99 $6.85
===== ===== ===== =====
Weighted-average common shares
outstanding - assuming dilution
(in millions) 481 521 500 530
Dividends per common share $0.500 $0.275 $1.700 $1.050
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Operating income by business segment:
Refining $876 $1,861 $6,973 $5,884
Ethanol (13) 158 142 786
Corporate (217) (223) (757) (768)
Total $646 $1,796 $6,358 $5,902
==== ====== ====== ======
Operating expenses by business segment:
Refining $910 $974 $3,795 $3,900
Ethanol 104 129 448 487
Total $1,014 $1,103 $4,243 $4,387
====== ====== ====== ======
Depreciation and amortization expense by
business segment:
Refining $465 $403 $1,745 $1,597
Ethanol 18 13 50 49
Corporate 11 9 47 44
Total $494 $425 $1,842 $1,690
==== ==== ====== ======
Operating highlights:
Refining:
Throughput margin per barrel (a) (b) (c) $10.87 $11.17 $12.97 $11.05
------ ------ ------ ------
Operating costs per barrel:
Operating expenses 3.47 3.76 3.71 3.87
Depreciation and amortization expense 1.76 1.55 1.71 1.58
---- ----
Total operating costs per barrel 5.23 5.31 5.42 5.45
Operating income per barrel $5.64 $5.86 $7.55 $5.60
===== ===== ===== =====
Throughput volumes (thousand barrels per
day):
Feedstocks:
Heavy sour crude oil 475 447 438 457
Medium/light sour crude oil 466 420 428 466
Sweet crude oil 1,184 1,239 1,208 1,149
Residuals 277 243 274 230
Other feedstocks 136 133 140 134
--- --- --- ---
Total feedstocks 2,538 2,482 2,488 2,436
Blendstocks and other 316 338 311 329
Total throughput volumes 2,854 2,820 2,799 2,765
===== ===== ===== =====
Yields (thousand barrels per day):
Gasolines and blendstocks 1,384 1,365 1,364 1,329
Distillates 1,085 1,041 1,066 1,047
Other products (f) 427 450 408 423
Total yields 2,896 2,856 2,838 2,799
===== ===== ===== =====
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Refining operating highlights by
region (a) (b) (c) (g):
U.S. Gulf Coast:
Operating income $851 $795 $3,978 $3,368
Throughput volumes (thousand
barrels per day) 1,657 1,633 1,592 1,600
Throughput margin per barrel $10.70 $10.43 $12.27 $11.03
------ ------ ------ ------
Operating costs per barrel:
Operating expenses 3.29 3.56 3.64 3.66
Depreciation and amortization
expense 1.83 1.57 1.78 1.60
---- ----
Total operating costs per barrel 5.12 5.13 5.42 5.26
Operating income per barrel $5.58 $5.30 $6.85 $5.77
===== ===== ===== =====
U.S. Mid-Continent:
Operating income $216 $368 $1,434 $1,323
Throughput volumes (thousand
barrels per day) 449 490 447 446
Throughput margin per barrel $10.34 $13.19 $14.09 $13.63
------ ------ ------ ------
Operating costs per barrel:
Operating expenses 3.34 3.56 3.59 3.90
Depreciation and amortization
expense 1.78 1.50 1.71 1.61
---- ----
Total operating costs per barrel 5.12 5.06 5.30 5.51
Operating income per barrel $5.22 $8.13 $8.79 $8.12
===== ===== ===== =====
North Atlantic:
Operating income $279 $329 $1,446 $911
Throughput volumes (thousand
barrels per day) 503 430 494 457
Throughput margin per barrel $10.09 $12.98 $12.06 $10.02
------ ------ ------ ------
Operating costs per barrel:
Operating expenses 2.89 3.39 2.88 3.40
Depreciation and amortization
expense 1.16 1.24 1.17 1.16
---- ----
Total operating costs per barrel 4.05 4.63 4.05 4.56
Operating income per barrel $6.04 $8.35 $8.01 $5.46
===== ===== ===== =====
U.S. West Coast:
Operating income $134 $29 $855 $53
Throughput volumes (thousand
barrels per day) 245 267 266 262
Throughput margin per barrel $14.62 $9.12 $17.00 $8.60
------ ----- ------ -----
Operating costs per barrel:
Operating expenses 6.07 5.89 5.92 5.91
Depreciation and amortization
expense 2.58 2.06 2.26 2.14
---- ----
Total operating costs per barrel 8.65 7.95 8.18 8.05
Operating income per barrel $5.97 $1.17 $8.82 $0.55
===== ===== ===== =====
Operating income for regions above $1,480 $1,521 $7,713 5,655
Lower of cost or market inventory
valuation adjustment (c) (740) - (740) -
LIFO gain (b) - 229 - 229
Blender's tax credit (a) 136 111 - -
--- ---
Total refining operating income $876 $1,861 $6,973 $5,884
==== ====== ====== ======
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Average market reference prices
and differentials:
Feedstocks (dollars per barrel):
Brent crude oil $44.73 $77.35 $53.62 $99.57
Brent less West Texas
Intermediate (WTI) crude oil 2.67 3.95 4.91 6.40
Brent less Alaska North Slope
(ANS) crude oil 0.94 2.59 0.67 1.73
Brent less Louisiana Light Sweet
(LLS) crude oil 2.21 1.77 2.37 2.79
Brent less Mars crude oil 6.95 5.62 6.54 6.75
Brent less Maya crude oil 10.42 10.09 9.54 13.73
LLS crude oil 42.52 75.58 51.25 96.78
LLS less Mars crude oil 4.74 3.85 4.17 3.96
LLS less Maya crude oil 8.21 8.32 7.17 10.94
WTI crude oil 42.06 73.40 48.71 93.17
Natural gas (dollars per million
British Thermal Units) 2.12 3.69 2.58 4.36
Products (dollars per barrel,
unless otherwise noted):
U.S. Gulf Coast:
CBOB gasoline less Brent 6.45 (1.00) 9.83 3.54
Ultra-low-sulfur diesel less
Brent 9.29 15.21 12.64 14.28
Propylene less Brent (11.90) 21.27 (5.94) 5.57
CBOB gasoline less LLS 8.66 0.77 12.20 6.33
Ultra-low-sulfur diesel less
LLS 11.50 16.98 15.01 17.07
Propylene less LLS (9.69) 23.04 (3.57) 8.36
U.S. Mid-Continent:
CBOB gasoline less WTI 13.06 6.05 17.59 12.28
Ultra-low-sulfur diesel less
WTI 15.02 27.60 19.02 24.05
North Atlantic:
CBOB gasoline less Brent 10.95 7.63 12.85 9.07
Ultra-low-sulfur diesel less
Brent 11.44 20.98 16.05 18.25
U.S. West Coast:
CARBOB 87 gasoline less ANS 20.60 6.20 25.56 13.40
CARB diesel less ANS 15.45 21.75 16.90 19.14
CARBOB 87 gasoline less WTI 22.33 7.56 29.80 18.07
CARB diesel less WTI 17.18 23.11 21.14 23.81
New York Harbor corn crush
(dollars per gallon) 0.23 0.71 0.22 0.85
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Ethanol (b) (c):
Operating income $37 $154 $192 $782
Production (thousand gallons per
day) 3,883 3,752 3,827 3,422
Gross margin per gallon of
production $0.45 $0.86 $0.49 $1.06
----- ----- ----- -----
Operating costs per gallon of
production:
Operating expenses 0.29 0.37 0.32 0.39
Depreciation and amortization
expense 0.05 0.04 0.03 0.04
---- ----
Total operating costs per gallon
of production 0.34 0.41 0.35 0.43
----
Operating income per gallon of
production $0.11 $0.45 $0.14 $0.63
===== ===== ===== =====
Operating income from above $37 $154 $192 $782
Lower of cost or market
inventory valuation adjustment
(c) (50) - (50) -
LIFO gain (b) - 4 - 4
--- --- --- ---
Total ethanol operating income
(loss) $(13) $158 $142 $786
==== ==== ==== ====
December 31,
------------
2015 2014
---- ----
Balance Sheet Data:
Current assets $14,805 $16,614
Cash and temporary cash investments, including $81 and $237, respectively, held by Valero Energy Partners LP, included in
current assets 4,114 3,689
Inventories included in current assets 5,898 6,623
Current liabilities 7,193 9,980
Current portion of debt and capital lease obligations included in current liabilities 127 606
Debt and capital lease obligations, less current portion 7,250 5,780
Total debt and capital lease obligations 7,377 6,386
Valero Energy Corporation stockholders' equity 20,527 20,677
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Valero Energy Partners LP:
Weighted-average limited partner units
outstanding:
Common units -public (basic and
diluted) 19 17 18 17
Common units -Valero (basic and
diluted) 15 12 14 12
Subordinated units -Valero
(basic and diluted) 29 29 29 29
Distributions declared:
Limited partner units - public $7 $4 $22 $16
Limited partner units - Valero 14 11 52 38
General partner units - Valero 2 - 5 1
--- --- --- ---
Total distribution declared $23 $15 $79 $55
=== === === ===
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Millions of Dollars, Except per Share Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Reconciliation of operating income
by business segment to adjusted
operating income by business
segment:
Refining:
Operating income $876 $1,861 $6,973 $5,884
Adjustments:
Lower of cost or market inventory
valuation adjustment (c) 740 - 740 -
LIFO gain (b) - (229) - (229)
Blender's tax credit (a) (136) (111) - -
Adjusted refining operating income 1,480 1,521 7,713 5,655
----- ----- ----- -----
Ethanol:
Operating income (13) 158 142 786
Adjustments:
Lower of cost or market inventory
valuation adjustment (c) 50 - 50 -
LIFO gain (b) - (4) - (4)
---
Adjusted ethanol operating income 37 154 192 782
Corporate (217) (223) (757) (768)
---- ---- ---- ----
Total adjusted operating income $1,300 $1,452 $7,148 $5,669
====== ====== ====== ======
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Reconciliation of net income from
continuing operations to adjusted
net income from continuing
operations:
Net income from continuing
operations attributable to Valero
Energy Corporation stockholders $298 $1,155 $3,990 $3,694
Adjustments (after taxes and
excluding the portion of the
blender's tax credit attributable
to the holder of the noncontrolling
interest in Diamond Green Diesel
Holdings LLC):
Lower of cost or market inventory
valuation adjustment (c) 624 - 624 -
LIFO gain (b) - (151) - (151)
Blender's tax credit (a) (60) (52) - -
Adjusted net income from continuing
operations attributable to Valero
Energy Corporation stockholders $862 $952 $4,614 $3,543
==== ==== ====== ======
Earnings per common share - assuming
dilution from continuing
operations:
Actual $0.62 $2.22 $7.99 $6.97
Adjusted 1.79 1.83 9.24 6.68
See Notes to Earnings Release.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO EARNINGS RELEASE
(a) Cost of sales for the three months and year
ended December 31, 2015 and 2014 reflects a
benefit of $174 million and $155 million,
respectively, for biodiesel blender's tax
credits attributable to volumes blended
throughout both years. The annual benefit
was recorded during the three months ended
December 31, 2015 and 2014 (as opposed to
throughout the year as volumes were blended)
because the legislation authorizing the
credit was not passed and signed into law
until December of each year. Of these annual
amounts, $136 million and $111 million,
respectively, relate to volumes blended
during the first nine months of each year.
Therefore, we have excluded these nine-
month amounts from the segment and regional
throughput margins per barrel and the
regional operating income amounts for the
refining segment for the three months ended
December 31, 2015 and 2014. We have also
excluded these nine-month amounts for
purposes of computing refining segment
adjusted operating income, adjusted net
income from continuing operations
attributable to Valero stockholders, and
adjusted earnings per common share -
assuming dilution from continuing operations
for the three months ended December 31, 2015
and 2014, as reflected in the reconciliation
of amounts reported under United States
(U.S.) generally accepted accounting
principles (GAAP).
(b) Cost of sales for the three months and year
ended December 31, 2014 reflects a last-in,
first-out (LIFO) gain of $233 million ($151
million after taxes), of which $229 million
is attributable to our refining segment and
$4 million is attributable to our ethanol
segment. These amounts have been excluded
from (1) the segment and regional throughput
margins per barrel and the regional
operating income amounts for the refining
segment, and (2) the operating income and
gross margin per gallon of production
amounts for the ethanol segment,
respectively. We have also excluded the
segment and total amounts for purposes of
computing refining segment and ethanol
segment adjusted operating income, adjusted
net income from continuing operations
attributable to Valero stockholders, and
adjusted earnings per common share -
assuming dilution from continuing operations
for the three months and year ended December
31, 2014, as reflected in the reconciliation
of amounts reported under U.S. GAAP.
(c) In December 2015, we recorded a lower of cost
or market (LCM) inventory valuation
adjustment of $790 million ($624 million
after taxes), of which $740 million is
attributable to our refining segment and $50
million is attributable to our ethanol
segment. In accordance with U.S. GAAP, we
are required to state our inventories at the
lower of cost or market. Cost is primarily
determined using the LIFO inventory
valuation methodology, whereby the most
recently incurred costs are charged to cost
of sales in the statement of income and
inventories are valued at base layer
acquisition costs in the balance sheet.
Market is determined based on an assessment
of the net realizable value of our
inventory. In periods where the market
price of our inventory falls below cost, we
record an inventory valuation adjustment to
write down the value to market in accordance
with U.S. GAAP. The LCM inventory valuation
adjustment for the three months and year
ended December 31, 2015 has been excluded
from (1) the segment and regional throughout
margins per barrel and the regional
operating income amounts for the refining
segment, and (2) the gross operating income
and the gross margin per gallon of
production amounts for the ethanol segment,
respectively. We have also excluded the
segment and total amounts for purposes of
computing refining segment and ethanol
segment adjusted operating income, adjusted
net income from continuing operations
attributable to Valero stockholders, and
adjusted earnings per common share -
assuming dilution from continuing operations
for the three months and year ended December
31, 2015, as reflected in the reconciliation
of amounts reported under U.S. GAAP.
(d) The variation in the customary relationship
between income tax expense and income from
continuing operations for the three months
and year ended December 31, 2015 and 2014 is
due primarily to earnings from our
international operations that are taxed at
statutory tax rates that are lower than in
the U.S. In addition, for the three months
and year ended December 31, 2015, the
variation is due to a change in the tax law
in the United Kingdom (U.K.) that reduced
the U.K. statutory rate and the favorable
settlement of various U.S. income tax
audits.
(e) Net income attributable to noncontrolling
interests for the three months and year
ended December 31, 2015 and 2014 includes
$59 million and $42 million, respectively,
associated with the noncontrolling interest
holder's interest in the biodiesel blender's
tax credit as further discussed in note (a).
(f) Primarily includes petrochemicals, gas oils,
No. 6 fuel oil, petroleum coke, sulfur, and
asphalt.
(g) The regions reflected herein contain the
following refineries: U.S. Gulf Coast-
Corpus Christi East, Corpus Christi West,
Houston, Meraux, Port Arthur, St. Charles,
Texas City, and Three Rivers Refineries;
U.S. Mid-Continent- Ardmore, McKee, and
Memphis Refineries; North Atlantic-
Pembroke and Quebec City Refineries; and
U.S. West Coast- Benicia and Wilmington
Refineries.
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SOURCE Valero Energy Corporation
