CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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Basis of Presentation
General
The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole.
These unaudited financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
The balance sheet as of December 31, 2018 has been derived from our audited financial statements as of that date. For further information, refer to our financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2018.
Reclassifications
Effective January 1, 2019, we revised our reportable segments to reflect a new reportable segment — renewable diesel. The renewable diesel segment includes the operations of Diamond Green Diesel Holdings LLC (DGD), our consolidated joint venture as discussed in Note 8, which were transferred from the refining segment. Also effective January 1, 2019, we no longer have a VLP segment, and we now include the operations of Valero Energy Partners LP and its consolidated subsidiaries (VLP) in our refining segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation. See Note 2 regarding our merger with VLP, which occurred on January 10, 2019, and Note 11 for segment information.
Certain prior year amounts in the consolidated statement of cash flows have been reclassified to conform to the 2019 presentation.
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.
Leases
Background
We adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, “Leases,” (Topic 842) on January 1, 2019, as described below in “Accounting Pronouncements Adopted on January 1, 2019.” Accordingly, our lease accounting policy has been revised to reflect the adoption of this standard.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revised Policy
We evaluate if a contract is or contains a lease at inception of the contract. If we determine that a contract is or contains a lease, we recognize a right-of-use (ROU) asset and lease liability at the commencement date of the lease based on the present value of lease payments over the lease term. The present value of the lease payments is determined by using the implicit rate when readily determinable, or if not, our incremental borrowing rate for a term similar to the duration of the lease based on information available at the commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options.
We recognize ROU assets and lease liabilities for leasing arrangements with terms greater than one year. Except for the marine transportation asset class, we account for lease and non-lease components in a contract as a single lease component for all classes of underlying assets. Our marine transportation contracts include non-lease components such as maintenance and crew costs. We allocate the consideration in these contracts based on pricing information provided by the third-party broker.
Expense for an operating lease is recognized as a single lease cost on a straight-line basis over the lease term and reflected in the appropriate income statement line item based on the leased asset’s function. Amortization expense of a finance lease ROU asset is recognized on a straight-line basis over the lesser of the useful life of the leased asset or the lease term and is reflected in “depreciation and amortization expense.” Interest expense is incurred based on the carrying value of the lease liability and is reflected in “interest and debt expense, net of capitalized interest.”
Accounting Pronouncements Adopted on January 1, 2019
Topic 842
As previously noted, we adopted the provisions of Topic 842 on January 1, 2019. Topic 842 increases the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 supersedes previous lease accounting requirements under FASB ASC Topic 840, “Leases,” (Topic 840). We adopted Topic 842 using the optional transition method that permits us to apply the new disclosure requirements beginning in 2019 and continue to present comparative period information as required under Topic 840; however, we did not have a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption.
In addition, we elected the transition practical expedient package that permits us to not reassess our prior conclusions about lease identification, lease classification, and initial direct costs under the new standard, as well as the practical expedient that permits us to not assess existing land easements under the new standard. See “Leases” above for a discussion of our accounting policy affected by our adoption of Topic 842. Also see Note 4 for information on our leases.
In preparation for the adoption of Topic 842, we enhanced our contracting and lease evaluation systems and related processes, and we developed a new lease accounting system to capture our leases and support the required disclosures. We integrated our lease accounting system with our general ledger and modified our related procurement and payment processes.
Adoption of this standard resulted in (i) the recognition of ROU assets and lease liabilities for our operating leases of $1.3 billion, (ii) the derecognition of existing assets under construction of $539 million related to
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a build-to-suit lease arrangement with respect to the MVP Terminal (see Note 6 under “Commitments—MVP Terminal”), and (iii) the presentation of new disclosures about our leasing activities beginning in the first quarter of 2019. Adoption of this standard did not impact our results of operations or liquidity, and our accounting for finance leases is substantially unchanged.
Other
In addition to the adoption of Topic 842 discussed above, we adopted the following Accounting Standards Update (ASU) during the nine months ended September 30, 2019. Our adoption of this ASU did not affect our financial statements or related disclosures.
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ASU
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Adoption Date
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Basis of
Adoption
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2017-12
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Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities
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January 1, 2019
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Cumulative
effect
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Accounting Pronouncements Not Yet Adopted
The following ASUs have not yet been adopted and are not expected to have a material impact on our financial statements or related disclosures.
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ASU
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Expected
Adoption Date
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Basis of
Adoption
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2016-13
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Financial Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Financial
Instruments
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January 1, 2020
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Cumulative
effect
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2018-15
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Intangibles—Goodwill and Other—Internal-Use
Software (Subtopic 350-40): Customer’s Accounting
for Implementation Costs Incurred in a Cloud
Computing Arrangement That Is a Service Contract
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January 1, 2020
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Prospectively
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2018-17
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Consolidation (Topic 810): Targeted Improvements to
Related Party Guidance for Variable Interest
Entities
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January 1, 2020
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Cumulative
effect
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2.
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MERGER AND ACQUISITION
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Merger with VLP
On January 10, 2019, we completed our acquisition of all of the outstanding publicly held common units of VLP pursuant to a definitive Agreement and Plan of Merger (Merger Agreement, and together with the transactions contemplated thereby, the Merger Transaction) with VLP. Upon completion of the Merger Transaction, each outstanding publicly held common unit was converted into the right to receive $42.25 per common unit in cash without any interest thereon, and all such publicly traded common units were automatically canceled and ceased to exist. Upon completion of the Merger Transaction, we paid aggregate merger consideration of $950 million, which was funded with available cash on hand.
Prior to the completion of the Merger Transaction, we consolidated the financial statements of VLP (see Note 8) and reflected noncontrolling interests on our balance sheet for the portion of VLP’s partners’ capital held by VLP’s public common unitholders. Upon completion of the Merger Transaction, VLP became our indirect wholly owned subsidiary and, as a result, we no longer reflect noncontrolling interests on our balance
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
sheet with respect to VLP. In addition, we no longer attribute a portion of VLP’s net income to noncontrolling interests. Because we had a controlling financial interest in VLP before the Merger Transaction and retained our controlling financial interest in VLP after the Merger Transaction, the change in our ownership interest in VLP as a result of the merger was accounted for as an equity transaction. Accordingly, we did not recognize a gain or loss on the Merger Transaction.
Peru Acquisition
On May 14, 2018, we acquired 100 percent of the issued and outstanding equity interests in Pure Biofuels del Peru S.A.C. (Pure Biofuels) from Pegasus Capital Advisors L.P. and various minority equity holders. Pure Biofuels markets refined petroleum products through its logistics assets in Peru. This acquisition, which is referred to as the Peru Acquisition, was accounted for as a business acquisition.
We paid $466 million from available cash on hand, of which $130 million was for working capital. During the third and fourth quarters of 2018, we recognized immaterial adjustments to the preliminary amounts recorded for the Peru Acquisition with a corresponding adjustment to goodwill due to the completion of an independent appraisal in the fourth quarter of 2018. The assets acquired and the liabilities assumed were recognized at their acquisition-date fair values, as disclosed in Note 2 of Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2018.
Inventories consisted of the following (in millions):
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September 30,
2019
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December 31,
2018
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Refinery feedstocks
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$
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2,051
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$
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2,265
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Refined petroleum products and blendstocks
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3,746
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3,653
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Ethanol feedstocks and products
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253
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298
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Renewable diesel feedstocks and products
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53
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52
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Materials and supplies
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273
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264
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Inventories
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$
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6,376
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$
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6,532
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As of September 30, 2019 and December 31, 2018, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by $2.6 billion and $1.5 billion, respectively. Our non-LIFO inventories accounted for $1.1 billion of our total inventories as of September 30, 2019 and December 31, 2018.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
General
We have entered into long-term leasing arrangements for the right to use various classes of underlying assets as follows:
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•
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Pipelines, Terminals, and Tanks includes facilities and equipment used in the storage, transportation, production, and sale of refinery feedstock, refined petroleum product, and corn inventories;
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•
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Marine Transportation includes time charters for ocean-going tankers and coastal vessels;
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•
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Rail Transportation includes railcars and related storage facilities;
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•
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Feedstock Processing Equipment includes machinery, equipment, and various facilities used in our refining, ethanol, and renewable diesel operations;
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•
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Energy and Gases includes facilities and equipment related to industrial gases and power used in our operations;
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•
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Real Estate includes land and rights-of-way associated with our refineries and pipelines, as well as office facilities; and
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•
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Other includes equipment primarily used at our corporate offices, such as printers and copiers.
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In addition to fixed lease payments, some arrangements contain provisions for variable lease payments. Certain leases for pipelines, terminals, and tanks provide for variable lease payments based on, among other things, throughput volumes in excess of a base amount. Certain marine transportation leases contain provisions for payments that are contingent on usage. Additionally, if the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered variable lease payments. In all instances, variable lease payments are recognized in the period in which the obligation for those payments is incurred.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Lease Costs and Other Supplemental Information
In accordance with Topic 842, our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):
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Pipelines,
Terminals,
and Tanks
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Transportation
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Feedstock
Processing
Equipment
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Energy
and
Gases
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Real
Estate
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Other
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Total
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Marine
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Rail
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Three months ended
September 30, 2019:
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Finance lease cost:
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Amortization of ROU assets
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$
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12
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$
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—
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$
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—
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$
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2
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$
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—
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$
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—
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$
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—
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$
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14
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Interest on lease liabilities
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13
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—
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—
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—
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—
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—
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—
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13
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Operating lease cost
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46
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39
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14
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4
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3
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7
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1
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114
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Variable lease cost
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20
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4
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—
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1
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—
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1
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—
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26
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Short-term lease cost
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1
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13
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—
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8
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—
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—
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—
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22
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Sublease income
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—
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(8
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)
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—
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—
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—
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(1
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)
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—
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(9
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)
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Total lease cost
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$
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92
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$
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48
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$
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14
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$
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15
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$
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3
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$
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7
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$
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1
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$
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180
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Nine months ended
September 30, 2019:
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Finance lease cost:
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Amortization of ROU assets
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$
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32
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$
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—
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$
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—
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$
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4
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$
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2
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$
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—
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$
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—
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$
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38
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Interest on lease liabilities
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35
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—
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—
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1
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2
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—
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—
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38
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Operating lease cost
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140
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107
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38
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16
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7
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21
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3
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332
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Variable lease cost
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53
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21
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—
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1
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—
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1
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—
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76
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Short-term lease cost
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8
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39
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—
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22
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—
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—
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—
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69
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Sublease income
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—
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(24
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)
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—
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—
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—
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(3
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)
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—
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(27
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)
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Total lease cost
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$
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268
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$
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143
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$
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38
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$
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44
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$
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11
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$
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19
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$
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3
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$
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526
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In accordance with Topic 840, “rental expense, net of sublease rental income” was as follows (in millions):
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Three Months
Ended
September 30, 2018
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Nine Months
Ended
September 30, 2018
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Minimum rental expense
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$
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126
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$
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377
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Contingent rental expense
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5
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14
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Total rental expense
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131
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391
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Less sublease rental income
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8
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24
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Rental expense, net of sublease rental income
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$
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123
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$
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367
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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):
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September 30, 2019
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Operating
Leases
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Finance
Leases
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Supplemental balance sheet information:
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ROU assets, net reflected in the following
balance sheet line items:
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Property, plant, and equipment, net
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$
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—
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$
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787
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Deferred charges and other assets, net
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1,338
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—
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Total ROU assets, net
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$
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1,338
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$
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787
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Current lease liabilities reflected in the following
balance sheet line items:
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Current portion of debt and finance lease obligations
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$
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—
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$
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41
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Accrued expenses
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333
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—
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Noncurrent lease liabilities reflected in the following
balance sheet line items:
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Debt and finance lease obligations, less current portion
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—
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744
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Other long-term liabilities
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970
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—
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Total lease liabilities
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$
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1,303
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$
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785
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Other supplemental information:
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Weighted-average remaining lease term
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7.7 years
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20.0 years
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Weighted-average discount rate
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5.0
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%
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5.2
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%
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Supplemental cash flow information related to our operating and finance leases is presented in Note 12.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Maturity Analysis
The remaining minimum lease payments due under our long-term leases were as follows (in millions):
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September 30, 2019
|
|
December 31, 2018
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Operating
Leases
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Finance
Leases
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Operating
Leases
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Capital
Leases
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2019 (a)
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$
|
108
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$
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22
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$
|
359
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$
|
69
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2020
|
349
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|
87
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|
|
245
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65
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2021
|
236
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|
85
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|
|
178
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|
62
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2022
|
183
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|
85
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|
|
146
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|
64
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2023
|
150
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|
89
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|
123
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|
65
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Thereafter
|
598
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1,078
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|
514
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|
957
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Total undiscounted lease payments
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1,624
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1,446
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$
|
1,565
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1,282
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Less amount associated with discounting
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321
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|
|
661
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|
|
|
676
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Total lease liabilities
|
$
|
1,303
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|
|
$
|
785
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|
|
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$
|
606
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____________________
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(a)
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The amounts as of September 30, 2019 are for the remaining three months of 2019.
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Future Lease Commencement
As described and defined in Note 6, we have a terminaling agreement with MVP to utilize the MVP Terminal upon completion of phase two, which is expected to occur in late 2019. We expect to recognize an ROU asset and lease liability of approximately $1.1 billion in 2020 in connection with this agreement.
Public Debt
During the nine months ended September 30, 2019, the following activity occurred:
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•
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We issued $1.0 billion of 4.00 percent Senior Notes due April 1, 2029 (4.00 percent Senior Notes). Proceeds from this debt issuance totaled $992 million before deducting the underwriting discount and other debt issuance costs. The proceeds were used to redeem our 6.125 percent Senior Notes due February 1, 2020 (6.125 percent Senior Notes) for $871 million, or 102.48 percent of stated value, which includes an early redemption fee of $21 million that is reflected in “other income, net” in our statement of income for the nine months ended September 30, 2019.
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•
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In connection with the completion of the Merger Transaction as described in Note 2, Valero entered into a guarantee agreement to fully and unconditionally guarantee the prompt payment, when due, of any amount owed to the holders of VLP’s 4.375 percent Senior Notes due December 15, 2026 and 4.5 percent Senior Notes due March 15, 2028. See Note 15 for condensed consolidating financial statements.
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During the nine months ended September 30, 2018, the following activity occurred:
|
|
•
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We issued $750 million of 4.35 percent Senior Notes due June 1, 2028. Proceeds from this debt issuance totaled $749 million before deducting the underwriting discount and other debt issuance
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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
costs. The proceeds were used to redeem our 9.375 percent Senior Notes due March 15, 2019 (9.375 percent Senior Notes) for $787 million, or 104.9 percent of stated value, which included an early redemption fee of $37 million that is reflected in “other income, net” in our statement of income for the nine months ended September 30, 2018.
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•
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VLP issued $500 million of 4.5 percent Senior Notes due March 15, 2028. Proceeds from this debt issuance totaled $498 million before deducting the underwriting discount and other debt issuance costs. The proceeds were available only to the operations of VLP and were used to repay the outstanding balance of $410 million on the VLP Revolver (defined below) and $85 million of VLP’s notes payable to us, which were eliminated in consolidation.
|
Other Debt
During the nine months ended September 30, 2018, we retired $137 million of debt assumed in connection with the Peru Acquisition with available cash on hand.
Credit Facilities
Summary of Credit Facilities
We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (amounts in millions and currency in U.S. dollars, except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
Facility
Amount
|
|
Maturity Date
|
|
Outstanding
Borrowings
|
|
Letters of Credit
Issued (a)
|
|
Availability
|
Committed facilities:
|
|
|
|
|
|
|
|
|
|
|
Valero Revolver
|
|
$
|
4,000
|
|
|
March 2024
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
3,966
|
|
Canadian Revolver (b)
|
|
C$
|
150
|
|
|
November 2019
|
|
C$
|
—
|
|
|
C$
|
5
|
|
|
C$
|
145
|
|
Accounts receivable
sales facility
|
|
$
|
1,300
|
|
|
July 2020
|
|
$
|
100
|
|
|
n/a
|
|
|
$
|
1,200
|
|
Letter of credit
facility (c)
|
|
$
|
100
|
|
|
November 2019
|
|
n/a
|
|
|
$
|
—
|
|
|
$
|
100
|
|
Committed facilities of
VIE (d):
|
|
|
|
|
|
|
|
|
|
|
IEnova Revolver
|
|
$
|
340
|
|
|
February 2028
|
|
$
|
257
|
|
|
n/a
|
|
|
$
|
83
|
|
Uncommitted facilities:
|
|
|
|
|
|
|
|
|
|
|
Letter of credit facilities
|
|
n/a
|
|
|
n/a
|
|
n/a
|
|
|
$
|
129
|
|
|
n/a
|
|
____________
|
|
(a)
|
Letters of credit issued as of September 30, 2019 expire at various times in 2019 through 2020.
|
|
|
(b)
|
The Canadian Revolver was amended in November 2019 to extend the maturity date from November 2019 to November 2020.
|
|
|
(c)
|
The letter of credit facility was amended in November 2019 to reduce the facility from $100 million to $50 million and to extend the maturity date from November 2019 to November 2020.
|
|
|
(d)
|
Creditors of our VIE do not have recourse against us.
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Valero Revolver
In March 2019, we amended our revolving credit facility (the Valero Revolver) to increase the borrowing capacity from $3 billion to $4 billion and to extend the maturity date from November 2020 to March 2024. The Valero Revolver also provides for the issuance of letters of credit of up to $2.4 billion.
VLP Revolver
As of December 31, 2018, VLP had a $750 million senior unsecured revolving credit facility (the VLP Revolver) with a group of lenders that was scheduled to mature in November 2020. However, on January 10, 2019, in connection with the completion of the Merger Transaction as described in Note 2, the VLP Revolver was terminated.
Accounts Receivable Sales Facility
During the nine months ended September 30, 2019, we sold and repaid $900 million of eligible receivables under our accounts receivable sales facility. As of September 30, 2019 and December 31, 2018, the variable interest rate on the accounts receivable sales facility was 2.7836 percent and 3.0618 percent, respectively.
IEnova Revolver
During the nine months ended September 30, 2019 and 2018, Central Mexico Terminals (as described in Note 8) borrowed $148 million and $71 million, respectively, and had no repayments under a combined $340 million unsecured revolving credit facility (IEnova Revolver) with IEnova (defined in Note 8). As of September 30, 2019 and December 31, 2018, the variable interest rate was 5.969 percent and 6.046 percent, respectively.
Other Disclosures
“Interest and debt expense, net of capitalized interest” is comprised of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest and debt expense
|
$
|
133
|
|
|
$
|
134
|
|
|
$
|
405
|
|
|
$
|
417
|
|
Less capitalized interest
|
22
|
|
|
23
|
|
|
70
|
|
|
61
|
|
Interest and debt expense, net of
capitalized interest
|
$
|
111
|
|
|
$
|
111
|
|
|
$
|
335
|
|
|
$
|
356
|
|
|
|
6.
|
COMMITMENTS AND CONTINGENCIES
|
Commitments
MVP Terminal
We have a 50 percent membership interest in MVP Terminalling, LLC (MVP), a Delaware limited liability company formed in September 2017 with a subsidiary of Magellan Midstream Partners LP (Magellan), to construct, own, and operate the Magellan Valero Pasadena marine terminal (MVP Terminal) located adjacent to the Houston Ship Channel in Pasadena, Texas. Construction of phases one and two of the project began in 2017 with a total estimated cost of approximately $840 million, of which we have committed to contribute 50 percent (approximately $420 million). The project could expand up to four phases with a total project cost of approximately $1.4 billion if warranted by additional demand and agreed to by Magellan and us.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Since inception, we have contributed $362 million to MVP, of which $115 million was contributed during the nine months ended September 30, 2019.
Concurrent with the formation of MVP, we entered into a terminaling agreement with MVP to utilize the MVP Terminal upon completion of phase two, which is expected to occur in late 2019. The terminaling agreement has an initial term of 12 years with two five-year automatic renewals, and year-to-year renewals thereafter.
Prior to our adoption of Topic 842 as described in Note 1, we were considered the accounting owner of the MVP Terminal during the construction period due to our membership interest in MVP and because we determined that the terminaling agreement was a capital lease. Accordingly, as of December 31, 2018, we had recorded an asset of $539 million in property, plant, and equipment representing 100 percent of the construction costs incurred by MVP, as well as capitalized interest incurred by us, and a long-term liability of $292 million payable to Magellan. The amounts recorded for the portion of the construction costs associated with the payable to Magellan were noncash investing and financing items, respectively.
On January 1, 2019, as a result of our adoption of Topic 842, we derecognized the asset and liability related to MVP discussed above and recorded our equity investment in MVP of $247 million, which is included in “deferred charges and other assets, net.” The amounts derecognized are noncash investing and financing items, respectively. As of September 30, 2019, our equity investment in MVP was $362 million.
Central Texas Pipeline
We committed to a 40 percent undivided interest in a project with a subsidiary of Magellan to jointly build a 135-mile, 20-inch refined petroleum products pipeline with a capacity of up to 150,000 barrels per day from Houston to Hearne, Texas. The pipeline was placed in service in the third quarter of 2019. The cost of our 40 percent undivided interest in the pipeline was $160 million, of which $65 million was spent during the nine months ended September 30, 2019.
Share Activity
Activity in the number of shares of common stock and treasury stock was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
Common
Stock
|
|
Treasury
Stock
|
|
Common
Stock
|
|
Treasury
Stock
|
Balance as of beginning of period
|
673
|
|
|
(256
|
)
|
|
673
|
|
|
(240
|
)
|
Transactions in connection with
stock-based compensation plans
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Stock purchases under purchase programs
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(8
|
)
|
Balance as of end of period
|
673
|
|
|
(263
|
)
|
|
673
|
|
|
(249
|
)
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Common Stock Dividends
On October 30, 2019, our board of directors declared a quarterly cash dividend of $0.90 per common share payable on December 11, 2019 to holders of record at the close of business on November 20, 2019.
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2019
|
|
2018
|
|
Foreign
Currency
Translation
Adjustment
|
|
Defined
Benefit
Plans
Items
|
|
Gains
(Losses) on
Cash Flow
Hedges
|
|
Total
|
|
Foreign
Currency
Translation
Adjustment
|
|
Defined
Benefit
Plans
Items
|
|
Total
|
Balance as of beginning
of period
|
$
|
(870
|
)
|
|
$
|
(481
|
)
|
|
$
|
1
|
|
|
$
|
(1,350
|
)
|
|
$
|
(751
|
)
|
|
$
|
(511
|
)
|
|
$
|
(1,262
|
)
|
Other comprehensive
income (loss) before
reclassifications
|
(180
|
)
|
|
—
|
|
|
1
|
|
|
(179
|
)
|
|
20
|
|
|
—
|
|
|
20
|
|
Amounts reclassified from
accumulated other
comprehensive
income (loss)
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
Other comprehensive
income (loss)
|
(180
|
)
|
|
2
|
|
|
(1
|
)
|
|
(179
|
)
|
|
20
|
|
|
7
|
|
|
27
|
|
Balance as of end of period
|
$
|
(1,050
|
)
|
|
$
|
(479
|
)
|
|
$
|
—
|
|
|
$
|
(1,529
|
)
|
|
$
|
(731
|
)
|
|
$
|
(504
|
)
|
|
$
|
(1,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2019
|
|
2018
|
|
Foreign
Currency
Translation
Adjustment
|
|
Defined
Benefit
Plans
Items
|
|
Gains
(Losses) on
Cash Flow
Hedges
|
|
Total
|
|
Foreign
Currency
Translation
Adjustment
|
|
Defined
Benefit
Plans
Items
|
|
Total
|
Balance as of beginning
of period
|
$
|
(1,022
|
)
|
|
$
|
(485
|
)
|
|
$
|
—
|
|
|
$
|
(1,507
|
)
|
|
$
|
(507
|
)
|
|
$
|
(433
|
)
|
|
$
|
(940
|
)
|
Other comprehensive
income (loss) before
reclassifications
|
(28
|
)
|
|
—
|
|
|
2
|
|
|
(26
|
)
|
|
(224
|
)
|
|
—
|
|
|
(224
|
)
|
Amounts reclassified from
accumulated other
comprehensive
income (loss)
|
—
|
|
|
6
|
|
|
(2
|
)
|
|
4
|
|
|
—
|
|
|
20
|
|
|
20
|
|
Other comprehensive
income (loss)
|
(28
|
)
|
|
6
|
|
|
—
|
|
|
(22
|
)
|
|
(224
|
)
|
|
20
|
|
|
(204
|
)
|
Reclassification of
stranded income tax
effects of Tax Reform
to retained earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(91
|
)
|
|
(91
|
)
|
Balance as of end of period
|
$
|
(1,050
|
)
|
|
$
|
(479
|
)
|
|
$
|
—
|
|
|
$
|
(1,529
|
)
|
|
$
|
(731
|
)
|
|
$
|
(504
|
)
|
|
$
|
(1,235
|
)
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
8.
|
VARIABLE INTEREST ENTITIES
|
Consolidated VIEs
We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of September 30, 2019, our significant consolidated VIEs included:
|
|
•
|
DGD, a joint venture with a subsidiary of Darling Ingredients Inc., which owns and operates a plant that processes animal fats, used cooking oils, and other vegetable oils into renewable diesel; and
|
|
|
•
|
Central Mexico Terminals, which is a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.B. de C.V. (IEnova), a Mexican company and subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests. We do not have an ownership interest in Central Mexico Terminals.
|
The VIEs’ assets can only be used to settle their own obligations and the VIEs’ creditors have no recourse to our assets. We do not provide financial guarantees to our VIEs. Although we have provided credit facilities to some of our VIEs in support of their construction or acquisition activities, these transactions are eliminated in consolidation. Our financial position, results of operations, and cash flows are impacted by our consolidated VIEs’ performance, net of intercompany eliminations, to the extent of our ownership interest in each VIE.
The following tables present summarized balance sheet information for the significant assets and liabilities of our VIEs, which are included in our balance sheets (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
DGD
|
|
Central
Mexico
Terminals
|
|
Other
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
97
|
|
Other current assets
|
110
|
|
|
26
|
|
|
94
|
|
|
230
|
|
Property, plant, and equipment, net
|
646
|
|
|
284
|
|
|
107
|
|
|
1,037
|
|
Liabilities
|
|
|
|
|
|
|
|
Current liabilities, including current portion
of debt and finance lease obligations
|
$
|
40
|
|
|
$
|
307
|
|
|
$
|
19
|
|
|
$
|
366
|
|
Debt and finance lease obligations,
less current portion
|
1
|
|
|
—
|
|
|
31
|
|
|
32
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
VLP (a)
|
|
DGD
|
|
Central
Mexico
Terminals
|
|
Other
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
152
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
235
|
|
Other current assets
|
2
|
|
|
112
|
|
|
20
|
|
|
64
|
|
|
198
|
|
Property, plant, and equipment, net
|
1,409
|
|
|
576
|
|
|
156
|
|
|
113
|
|
|
2,254
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current liabilities, including current portion
of debt and finance lease obligations
|
$
|
27
|
|
|
$
|
28
|
|
|
$
|
118
|
|
|
$
|
9
|
|
|
$
|
182
|
|
Debt and finance lease obligations,
less current portion
|
990
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
1,024
|
|
____________________
|
|
(a)
|
Prior to the completion of the Merger Transaction with VLP on January 10, 2019 as discussed in Note 2, VLP was a publicly traded master limited partnership that we had determined was a VIE. VLP was formed by us to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. As of December 31, 2018, we owned a 66.2 percent limited partner interest and a 2.0 percent general partner interest in VLP, and public unitholders owned a 31.8 percent limited partner interest. Upon completion of the Merger Transaction, VLP became our indirect wholly owned subsidiary and, as a result, was no longer a VIE.
|
Non-Consolidated VIEs
We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. These non-consolidated VIEs are not material to our financial position or results of operations and are accounted for as equity investments.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
9.
|
EMPLOYEE BENEFIT PLANS
|
The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
Other Postretirement
Benefit Plans
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Three months ended September 30:
|
|
|
|
|
|
|
|
Service cost
|
$
|
29
|
|
|
$
|
33
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Interest cost
|
25
|
|
|
22
|
|
|
2
|
|
|
2
|
|
Expected return on plan assets
|
(41
|
)
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
Amortization of:
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
10
|
|
|
16
|
|
|
—
|
|
|
(1
|
)
|
Prior service credit
|
(5
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(2
|
)
|
Special charges
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
18
|
|
|
$
|
28
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30:
|
|
|
|
|
|
|
|
Service cost
|
$
|
89
|
|
|
$
|
100
|
|
|
$
|
3
|
|
|
$
|
5
|
|
Interest cost
|
74
|
|
|
68
|
|
|
8
|
|
|
7
|
|
Expected return on plan assets
|
(124
|
)
|
|
(122
|
)
|
|
—
|
|
|
—
|
|
Amortization of:
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
30
|
|
|
49
|
|
|
(2
|
)
|
|
(2
|
)
|
Prior service credit
|
(14
|
)
|
|
(14
|
)
|
|
(6
|
)
|
|
(8
|
)
|
Special charges
|
2
|
|
|
7
|
|
|
1
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
57
|
|
|
$
|
88
|
|
|
$
|
4
|
|
|
$
|
2
|
|
The components of net periodic benefit cost other than the service cost component (i.e., the non-service cost components) are included in “other income, net” in the statements of income.
During the nine months ended September 30, 2019 and 2018, we contributed $120 million and $132 million, respectively, to our pension plans and $13 million and $15 million, respectively, to our other postretirement benefit plans. Of the $120 million contributed to our pension plans during the nine months ended September 30, 2019, $85 million was discretionary and was contributed during the third quarter of 2019.
Our expected contribution to our pension plans has increased to approximately $125 million for 2019 primarily as a result of the discretionary pension contribution discussed above. Our expected contribution of approximately $21 million to our other postretirement benefit plans during 2019 has not changed.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
10.
|
EARNINGS PER COMMON SHARE
|
Earnings per common share were computed as follows (dollars and shares in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Earnings per common share:
|
|
|
|
|
|
|
|
Net income attributable to Valero stockholders
|
$
|
609
|
|
|
$
|
856
|
|
|
$
|
1,362
|
|
|
$
|
2,170
|
|
Less income allocated to participating securities
|
1
|
|
|
2
|
|
|
3
|
|
|
6
|
|
Net income available to common stockholders
|
$
|
608
|
|
|
$
|
854
|
|
|
$
|
1,359
|
|
|
$
|
2,164
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
412
|
|
|
425
|
|
|
415
|
|
|
428
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
$
|
1.48
|
|
|
$
|
2.01
|
|
|
$
|
3.28
|
|
|
$
|
5.05
|
|
|
|
|
|
|
|
|
|
Earnings per common share – assuming dilution:
|
|
|
|
|
|
|
|
Net income attributable to Valero stockholders
|
$
|
609
|
|
|
$
|
856
|
|
|
$
|
1,362
|
|
|
$
|
2,170
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
412
|
|
|
425
|
|
|
415
|
|
|
428
|
|
Effect of dilutive securities
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
Weighted-average common shares outstanding –
assuming dilution
|
413
|
|
|
427
|
|
|
416
|
|
|
430
|
|
|
|
|
|
|
|
|
|
Earnings per common share – assuming dilution
|
$
|
1.48
|
|
|
$
|
2.01
|
|
|
$
|
3.28
|
|
|
$
|
5.05
|
|
Participating securities include restricted stock and performance awards granted under our 2011 Omnibus Stock Incentive Plan. Dilutive securities include participating securities as well as outstanding stock options granted under our 2011 Omnibus Stock Incentive Plan.
|
|
11.
|
REVENUES AND SEGMENT INFORMATION
|
Revenue from Contracts with Customers
Disaggregation of Revenue
Revenue is presented in the table below under “Segment Information” disaggregated by product because this is the level of disaggregation that management has determined to be beneficial to users of our financial statements.
Receivables from Contracts with Customers
Our receivables from contracts with customers are included in “receivables, net” and totaled $5.3 billion and $4.7 billion as of September 30, 2019 and December 31, 2018, respectively.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Remaining Performance Obligations
We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of September 30, 2019, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.
Segment Information
Effective January 1, 2019, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, we created a new reportable segment — renewable diesel — because of the growing importance of renewable fuels in the market and the growth of our investments in renewable fuels production. The renewable diesel segment includes the operations of DGD, which were transferred from the refining segment on January 1, 2019. Also effective January 1, 2019, we no longer have a VLP segment, and we include the operations of VLP in our refining segment. This change was made because of the Merger Transaction with VLP, as described in Note 2, and the resulting change in how we manage VLP’s operations. We no longer manage VLP as a business but as logistics assets that support the operations of our refining segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.
We have three reportable segments — refining, ethanol, and renewable diesel. Each segment is a strategic business unit that offers different products and services by employing unique technologies and marketing strategies and whose operations and operating performance are managed and evaluated separately. Operating performance is measured based on the operating income generated by the segment, which includes revenues and expenses that are directly attributable to the management of the respective segment. Intersegment sales are generally derived from transactions made at prevailing market rates. The following is a description of each segment’s business operations.
|
|
•
|
The refining segment includes the operations of our 15 petroleum refineries, the associated marketing activities, and logistics assets that support our refining operations. The principal products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.
|
|
|
•
|
The ethanol segment includes the operations of our 14 ethanol plants, the associated marketing activities, and logistics assets that support our ethanol operations. The principal products manufactured by our ethanol plants are ethanol and distillers grains. This segment sells some ethanol to the refining segment for blending into gasoline, which is sold to that segment’s customers as a finished gasoline product.
|
|
|
•
|
The renewable diesel segment includes the operations of DGD, our consolidated joint venture as discussed in Note 8. The principal product manufactured by DGD and sold by this segment is renewable diesel. This segment sells some renewable diesel to the refining segment, which is then sold to that segment’s customers.
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operations that are not included in any of the reportable segments are included in the corporate category.
The following tables reflect information about our operating income (loss) by reportable segment (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refining
|
|
Ethanol
|
|
Renewable
Diesel
|
|
Corporate
and
Eliminations
|
|
Total
|
Three months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
26,145
|
|
|
$
|
891
|
|
|
$
|
212
|
|
|
$
|
1
|
|
|
$
|
27,249
|
|
Intersegment revenues
|
2
|
|
|
57
|
|
|
50
|
|
|
(109
|
)
|
|
—
|
|
Total revenues
|
26,147
|
|
|
948
|
|
|
262
|
|
|
(108
|
)
|
|
27,249
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
23,432
|
|
|
847
|
|
|
164
|
|
|
(108
|
)
|
|
24,335
|
|
Operating expenses (excluding depreciation
and amortization expense reflected below)
|
1,100
|
|
|
121
|
|
|
18
|
|
|
—
|
|
|
1,239
|
|
Depreciation and amortization expense
|
518
|
|
|
23
|
|
|
15
|
|
|
—
|
|
|
556
|
|
Total cost of sales
|
25,050
|
|
|
991
|
|
|
197
|
|
|
(108
|
)
|
|
26,130
|
|
Other operating expenses
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
|
—
|
|
|
—
|
|
|
—
|
|
|
217
|
|
|
217
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Operating income (loss) by segment
|
$
|
1,087
|
|
|
$
|
(43
|
)
|
|
$
|
65
|
|
|
$
|
(228
|
)
|
|
$
|
881
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
29,894
|
|
|
$
|
864
|
|
|
$
|
90
|
|
|
$
|
1
|
|
|
$
|
30,849
|
|
Intersegment revenues
|
5
|
|
|
68
|
|
|
15
|
|
|
(88
|
)
|
|
—
|
|
Total revenues
|
29,899
|
|
|
932
|
|
|
105
|
|
|
(87
|
)
|
|
30,849
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
26,928
|
|
|
776
|
|
|
85
|
|
|
(88
|
)
|
|
27,701
|
|
Operating expenses (excluding depreciation
and amortization expense reflected below)
|
1,058
|
|
|
116
|
|
|
19
|
|
|
—
|
|
|
1,193
|
|
Depreciation and amortization expense
|
479
|
|
|
19
|
|
|
6
|
|
|
—
|
|
|
504
|
|
Total cost of sales
|
28,465
|
|
|
911
|
|
|
110
|
|
|
(88
|
)
|
|
29,398
|
|
Other operating expenses
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
|
—
|
|
|
—
|
|
|
—
|
|
|
209
|
|
|
209
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
Operating income (loss) by segment
|
$
|
1,424
|
|
|
$
|
21
|
|
|
$
|
(5
|
)
|
|
$
|
(221
|
)
|
|
$
|
1,219
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refining
|
|
Ethanol
|
|
Renewable
Diesel
|
|
Corporate
and
Eliminations
|
|
Total
|
Nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
77,109
|
|
|
$
|
2,648
|
|
|
$
|
686
|
|
|
$
|
2
|
|
|
$
|
80,445
|
|
Intersegment revenues
|
12
|
|
|
162
|
|
|
174
|
|
|
(348
|
)
|
|
—
|
|
Total revenues
|
77,121
|
|
|
2,810
|
|
|
860
|
|
|
(346
|
)
|
|
80,445
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
69,769
|
|
|
2,396
|
|
|
577
|
|
|
(346
|
)
|
|
72,396
|
|
Operating expenses (excluding depreciation
and amortization expense reflected below)
|
3,197
|
|
|
378
|
|
|
54
|
|
|
—
|
|
|
3,629
|
|
Depreciation and amortization expense
|
1,539
|
|
|
68
|
|
|
38
|
|
|
—
|
|
|
1,645
|
|
Total cost of sales
|
74,505
|
|
|
2,842
|
|
|
669
|
|
|
(346
|
)
|
|
77,670
|
|
Other operating expenses
|
13
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
14
|
|
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
|
—
|
|
|
—
|
|
|
—
|
|
|
625
|
|
|
625
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
39
|
|
Operating income (loss) by segment
|
$
|
2,603
|
|
|
$
|
(33
|
)
|
|
$
|
191
|
|
|
$
|
(664
|
)
|
|
$
|
2,097
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
$
|
85,371
|
|
|
$
|
2,625
|
|
|
$
|
304
|
|
|
$
|
3
|
|
|
$
|
88,303
|
|
Intersegment revenues
|
20
|
|
|
156
|
|
|
103
|
|
|
(279
|
)
|
|
—
|
|
Total revenues
|
85,391
|
|
|
2,781
|
|
|
407
|
|
|
(276
|
)
|
|
88,303
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
77,195
|
|
|
2,279
|
|
|
122
|
|
|
(279
|
)
|
|
79,317
|
|
Operating expenses (excluding depreciation
and amortization expense reflected below)
|
3,057
|
|
|
336
|
|
|
46
|
|
|
—
|
|
|
3,439
|
|
Depreciation and amortization expense
|
1,423
|
|
|
57
|
|
|
19
|
|
|
—
|
|
|
1,499
|
|
Total cost of sales
|
81,675
|
|
|
2,672
|
|
|
187
|
|
|
(279
|
)
|
|
84,255
|
|
Other operating expenses
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
|
—
|
|
|
—
|
|
|
—
|
|
|
695
|
|
|
695
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
39
|
|
Operating income by segment
|
$
|
3,675
|
|
|
$
|
109
|
|
|
$
|
220
|
|
|
$
|
(731
|
)
|
|
$
|
3,273
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides a disaggregation of revenues from external customers for our principal products by reportable segment (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Refining:
|
|
|
|
|
|
|
|
Gasolines and blendstocks
|
$
|
10,978
|
|
|
$
|
12,660
|
|
|
$
|
31,882
|
|
|
$
|
35,803
|
|
Distillates
|
12,861
|
|
|
13,963
|
|
|
38,254
|
|
|
40,866
|
|
Other product revenues
|
2,306
|
|
|
3,271
|
|
|
6,973
|
|
|
8,702
|
|
Total refining revenues
|
26,145
|
|
|
29,894
|
|
|
77,109
|
|
|
85,371
|
|
Ethanol:
|
|
|
|
|
|
|
|
Ethanol
|
714
|
|
|
695
|
|
|
2,108
|
|
|
2,092
|
|
Distillers grains
|
177
|
|
|
169
|
|
|
540
|
|
|
533
|
|
Total ethanol revenues
|
891
|
|
|
864
|
|
|
2,648
|
|
|
2,625
|
|
Renewable diesel:
|
|
|
|
|
|
|
|
Renewable diesel
|
212
|
|
|
90
|
|
|
686
|
|
|
304
|
|
Corporate – other revenues
|
1
|
|
|
1
|
|
|
2
|
|
|
3
|
|
Revenues
|
$
|
27,249
|
|
|
$
|
30,849
|
|
|
$
|
80,445
|
|
|
$
|
88,303
|
|
Total assets by reportable segment were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
Refining
|
$
|
45,646
|
|
|
$
|
43,488
|
|
Ethanol
|
1,617
|
|
|
1,691
|
|
Renewable diesel
|
878
|
|
|
787
|
|
Corporate and eliminations
|
3,088
|
|
|
4,189
|
|
Total assets
|
$
|
51,229
|
|
|
$
|
50,155
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
12.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
Decrease (increase) in current assets:
|
|
|
|
Receivables, net
|
$
|
(669
|
)
|
|
$
|
(1,307
|
)
|
Inventories
|
126
|
|
|
(1,134
|
)
|
Prepaid expenses and other
|
373
|
|
|
(65
|
)
|
Increase (decrease) in current liabilities:
|
|
|
|
Accounts payable
|
914
|
|
|
1,890
|
|
Accrued expenses
|
(92
|
)
|
|
(168
|
)
|
Taxes other than income taxes payable
|
(25
|
)
|
|
(32
|
)
|
Income taxes payable
|
101
|
|
|
(358
|
)
|
Changes in current assets and current liabilities
|
$
|
728
|
|
|
$
|
(1,174
|
)
|
Cash flows related to interest and income taxes were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
Interest paid in excess of amount capitalized,
including interest on finance leases
|
$
|
303
|
|
|
$
|
344
|
|
Income taxes paid (received), net
|
(184
|
)
|
|
1,116
|
|
Supplemental cash flow information related to our operating and finance leases was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2019
|
|
Operating
Leases
|
|
Finance
Leases
|
Cash paid for amounts included in the
measurement of lease liabilities:
|
|
|
|
Operating cash flows
|
$
|
329
|
|
|
$
|
38
|
|
Investing cash flows
|
1
|
|
|
—
|
|
Financing cash flows
|
—
|
|
|
24
|
|
Changes in lease balances resulting from new
and modified leases (a)
|
1,673
|
|
|
221
|
|
___________________
|
|
(a)
|
Includes noncash activity of $1.3 billion for ROU assets for operating leases recorded on January 1, 2019 upon adoption of Topic 842.
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Noncash investing and financing activities during the nine months ended September 30, 2019 also included the derecognition of the property, plant, and equipment and long-term liability related to previous owner accounting and the recognition of our investment in joint venture associated with a build-to-suit lease arrangement as described in Note 6.
Noncash investing and financing activities during the nine months ended September 30, 2018 included the recognition of terminal assets and related obligation under owner accounting as described in Note 6.
|
|
13.
|
FAIR VALUE MEASUREMENTS
|
Recurring Fair Value Measurements
The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of September 30, 2019 and December 31, 2018.
We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the following tables on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
Total
Gross
Fair
Value
|
|
Effect of
Counter-
party
Netting
|
|
Effect of
Cash
Collateral
Netting
|
|
Net
Carrying
Value on
Balance
Sheet
|
|
Cash
Collateral
Paid or
Received
Not Offset
|
|
Fair Value Hierarchy
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative
contracts
|
$
|
634
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
634
|
|
|
$
|
(620
|
)
|
|
$
|
(9
|
)
|
|
$
|
5
|
|
|
$
|
—
|
|
Physical purchase
contracts
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
|
2
|
|
|
n/a
|
|
Foreign currency
contracts
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
|
2
|
|
|
n/a
|
|
Investments of certain
benefit plans
|
62
|
|
|
—
|
|
|
9
|
|
|
71
|
|
|
n/a
|
|
|
n/a
|
|
|
71
|
|
|
n/a
|
|
Total
|
$
|
698
|
|
|
$
|
2
|
|
|
$
|
9
|
|
|
$
|
709
|
|
|
$
|
(620
|
)
|
|
$
|
(9
|
)
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative
contracts
|
$
|
729
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
729
|
|
|
$
|
(620
|
)
|
|
$
|
(109
|
)
|
|
$
|
—
|
|
|
$
|
(50
|
)
|
Environmental credit
obligations
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
n/a
|
|
|
n/a
|
|
|
3
|
|
|
n/a
|
|
Physical purchase
contracts
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
n/a
|
|
|
n/a
|
|
|
4
|
|
|
n/a
|
|
Foreign currency
contracts
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
n/a
|
|
|
n/a
|
|
|
6
|
|
|
n/a
|
|
Total
|
$
|
735
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
742
|
|
|
$
|
(620
|
)
|
|
$
|
(109
|
)
|
|
$
|
13
|
|
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
Total
Gross
Fair
Value
|
|
Effect of
Counter-
party
Netting
|
|
Effect of
Cash
Collateral
Netting
|
|
Net
Carrying
Value on
Balance
Sheet
|
|
Cash
Collateral
Paid or
Received
Not Offset
|
|
Fair Value Hierarchy
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative
contracts
|
$
|
2,792
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,792
|
|
|
$
|
(2,669
|
)
|
|
$
|
(34
|
)
|
|
$
|
89
|
|
|
$
|
—
|
|
Foreign currency
contracts
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
n/a
|
|
|
n/a
|
|
|
4
|
|
|
n/a
|
|
Investments of certain
benefit plans
|
60
|
|
|
—
|
|
|
9
|
|
|
69
|
|
|
n/a
|
|
|
n/a
|
|
|
69
|
|
|
n/a
|
|
Total
|
$
|
2,856
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
2,865
|
|
|
$
|
(2,669
|
)
|
|
$
|
(34
|
)
|
|
$
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative
contracts
|
$
|
2,681
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,681
|
|
|
$
|
(2,669
|
)
|
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
(136
|
)
|
Environmental credit
obligations
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
n/a
|
|
|
n/a
|
|
|
13
|
|
|
n/a
|
|
Physical purchase
contracts
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
n/a
|
|
|
n/a
|
|
|
5
|
|
|
n/a
|
|
Foreign currency
contracts
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
n/a
|
|
|
n/a
|
|
|
1
|
|
|
n/a
|
|
Total
|
$
|
2,682
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
2,700
|
|
|
$
|
(2,669
|
)
|
|
$
|
(12
|
)
|
|
$
|
19
|
|
|
|
|
A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:
|
|
•
|
Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note 14. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.
|
|
|
•
|
Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
|
|
|
•
|
Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
•
|
Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our international operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.
|
|
|
•
|
Environmental credit obligations represent our liability for the purchase of (i) biofuel credits (primarily Renewable Identification Numbers (RINs) in the U.S.) needed to satisfy our obligation to blend biofuels into the products we produce and (ii) emission credits under the California Global Warming Solutions Act (the California cap-and-trade system, also known as AB 32) and similar programs (collectively, the cap-and-trade systems). To the degree we are unable to blend biofuels (such as ethanol and biodiesel) at percentages required under the biofuel programs, we must purchase biofuel credits to comply with these programs. Under the cap-and-trade systems, we must purchase emission credits to comply with these systems. The liability for environmental credits is based on our deficit for such credits as of the balance sheet date, if any, after considering any credits acquired or under contract, and is equal to the product of the credits deficit and the market price of these credits as of the balance sheet date. The environmental credit obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using the market approach based on quoted prices from an independent pricing service.
|
There were no transfers into or out of Level 3 for assets and liabilities held as of September 30, 2019 and December 31, 2018 that were measured at fair value on a recurring basis.
There was no significant activity during the three and nine months ended September 30, 2019 and 2018 related to the fair value amounts categorized in Level 3 as of September 30, 2019 and December 31, 2018.
Nonrecurring Fair Value Measurements
There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of September 30, 2019 and December 31, 2018.
Other Financial Instruments
Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the following table along with their associated fair values (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Fair Value
Hierarchy
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
Level 1
|
|
$
|
2,137
|
|
|
$
|
2,137
|
|
|
$
|
2,982
|
|
|
$
|
2,982
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
Debt (excluding finance leases)
|
Level 2
|
|
8,788
|
|
|
10,336
|
|
|
8,503
|
|
|
8,986
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
14.
|
PRICE RISK MANAGEMENT ACTIVITIES
|
General
We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with various government and regulatory programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 13), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income is summarized below under “Effect of Derivative Instruments on Income.”
Risk Management Activities by Type of Risk
Commodity Price Risk
We are exposed to market risks related to the volatility in the price of crude oil, refined petroleum products (primarily gasoline and distillate), renewable diesel, grain (primarily corn), soybean oil, and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that has been approved by our board of directors.
We primarily use commodity derivative instruments as cash flow hedges and economic hedges. Our objective for entering into each type of hedge is described below.
|
|
•
|
Cash flow hedges – The objective of our cash flow hedges is to lock in the price of forecasted (i) feedstock, refined petroleum product, or natural gas purchases, or (ii) refined petroleum product or renewable diesel sales at existing market prices that we deem favorable.
|
|
|
•
|
Economic hedges – Our objectives for holding economic hedges are to (i) manage price volatility in certain feedstock and refined petroleum product inventories and fixed-price purchase contracts, and (ii) lock in the price of forecasted feedstock, refined petroleum product, or natural gas purchases, or refined petroleum product or renewable diesel sales at existing market prices that we deem favorable.
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of September 30, 2019, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).
|
|
|
|
|
|
|
|
Notional Contract Volumes by
Year of Maturity
|
|
2019
|
|
2020
|
Derivatives designated as cash flow hedges:
|
|
|
|
Renewable diesel:
|
|
|
|
Futures – long
|
906
|
|
|
73
|
|
Futures – short
|
2,571
|
|
|
242
|
|
|
|
|
|
Derivatives designated as economic hedges:
|
|
|
|
Crude oil and refined petroleum products:
|
|
|
|
Futures – long
|
136,760
|
|
|
2,849
|
|
Futures – short
|
134,196
|
|
|
3,063
|
|
Options – long
|
16,634
|
|
|
—
|
|
Options – short
|
15,987
|
|
|
—
|
|
Corn:
|
|
|
|
Futures – long
|
71,555
|
|
|
1,540
|
|
Futures – short
|
88,825
|
|
|
10,345
|
|
Physical contracts – long
|
20,368
|
|
|
8,831
|
|
Foreign Currency Risk
We are exposed to exchange rate fluctuations on transactions related to our international operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of September 30, 2019, we had foreign currency contracts to purchase $436 million of U.S. dollars, $1.8 billion of U.S. dollar equivalent Canadian dollars, and $150 million of U.S. dollar equivalent pounds sterling. All of these commitments matured on or before October 31, 2019.
Environmental Compliance Program Price Risk
We are exposed to market risk related to the volatility in the price of credits needed to comply with various governmental and regulatory environmental compliance programs. To manage this risk, we enter into contracts to purchase these credits when prices are deemed favorable. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. Certain of these programs require us to blend biofuels into the products we produce, and we are subject to such programs in most of the countries in which we operate. These countries set annual quotas for the percentage of biofuels that must be blended into the motor fuels consumed in these countries. As a producer of motor fuels from petroleum, we are obligated to blend biofuels into the products we produce at
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
a rate that is at least equal to the applicable quota. To the degree we are unable to blend at the applicable rate, we must purchase biofuel credits (primarily RINs in the U.S.). We are exposed to the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits when prices are deemed favorable. The cost of meeting our obligations under these compliance programs was $69 million and $94 million for the three months ended September 30, 2019 and 2018, respectively, and $227 million and $431 million for the nine months ended September 30, 2019 and 2018, respectively. These amounts are reflected in cost of materials and other.
Fair Values of Derivative Instruments
The following tables provide information about the fair values of our derivative instruments as of September 30, 2019 and December 31, 2018 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 13 for additional information related to the fair values of our derivative instruments.
As indicated in Note 13, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following tables, however, are presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Location
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Asset
Derivatives
|
|
Liability
Derivatives
|
|
Asset
Derivatives
|
|
Liability
Derivatives
|
Derivatives designated
as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
Receivables, net
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated
as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
Receivables, net
|
|
$
|
628
|
|
|
$
|
723
|
|
|
$
|
2,792
|
|
|
$
|
2,681
|
|
Physical purchase contracts
|
Inventories
|
|
2
|
|
|
4
|
|
|
—
|
|
|
5
|
|
Foreign currency contracts
|
Receivables, net
|
|
2
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Foreign currency contracts
|
Accrued expenses
|
|
—
|
|
|
6
|
|
|
—
|
|
|
1
|
|
Total
|
|
|
$
|
632
|
|
|
$
|
733
|
|
|
$
|
2,796
|
|
|
$
|
2,687
|
|
Market Risk
Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to market risk on a daily basis in accordance with policies approved by our board of directors. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Effect of Derivative Instruments on Income
The following table provides information about the gain (loss) recognized in income on our derivative instruments and the line items in the statements of income in which such gains (losses) are reflected (in millions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated
as Hedging Instruments
|
|
Location of Gain (Loss)
Recognized in Income
on Derivatives
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
2019
|
|
2018
|
2019
|
|
2018
|
Commodity contracts
|
|
Revenues
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
Commodity contracts
|
|
Cost of materials and other
|
|
(26
|
)
|
|
(98
|
)
|
|
(25
|
)
|
|
(125
|
)
|
Foreign currency contracts
|
|
Cost of materials and other
|
|
9
|
|
|
(7
|
)
|
|
2
|
|
|
7
|
|
Foreign currency contracts
|
|
Other income, net
|
|
(19
|
)
|
|
11
|
|
|
36
|
|
|
(6
|
)
|
|
|
15.
|
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
|
In connection with the completion of the Merger Transaction as described in Note 2, Valero Energy Corporation, the parent company, entered into a guarantee agreement to fully and unconditionally guarantee the prompt payment, when due, of the following debt issued by Valero Energy Partners LP, an indirect wholly owned subsidiary of Valero Energy Corporation, that was outstanding as of September 30, 2019:
•4.375 percent Senior Notes due December 15, 2026; and
•4.5 percent Senior Notes due March 15, 2028.
The following condensed consolidating financial information is provided as an alternative to providing separate financial statements for Valero Energy Partners LP, which has no independent assets or operations. The financial position, results of operations, and cash flows of Valero Energy Partners LP’s wholly owned subsidiaries are included in “Other Non-Guarantor Subsidiaries.” The accounts for all companies reflected herein are presented using the equity method of accounting for investments in subsidiaries.
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
1,928
|
|
|
$
|
—
|
|
|
$
|
2,137
|
|
Receivables, net
|
—
|
|
|
—
|
|
|
7,994
|
|
|
—
|
|
|
7,994
|
|
Receivables from affiliates
|
4,396
|
|
|
—
|
|
|
12,406
|
|
|
(16,802
|
)
|
|
—
|
|
Inventories
|
—
|
|
|
—
|
|
|
6,376
|
|
|
—
|
|
|
6,376
|
|
Prepaid expenses and other
|
64
|
|
|
—
|
|
|
462
|
|
|
—
|
|
|
526
|
|
Total current assets
|
4,669
|
|
|
—
|
|
|
29,166
|
|
|
(16,802
|
)
|
|
17,033
|
|
Property, plant and equipment, at cost
|
—
|
|
|
—
|
|
|
43,539
|
|
|
—
|
|
|
43,539
|
|
Accumulated depreciation
|
—
|
|
|
—
|
|
|
(14,649
|
)
|
|
—
|
|
|
(14,649
|
)
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
28,890
|
|
|
—
|
|
|
28,890
|
|
Investment in affiliates
|
36,327
|
|
|
2,566
|
|
|
383
|
|
|
(39,276
|
)
|
|
—
|
|
Deferred charges and other assets, net
|
552
|
|
|
—
|
|
|
4,754
|
|
|
—
|
|
|
5,306
|
|
Total assets
|
$
|
41,548
|
|
|
$
|
2,566
|
|
|
$
|
63,193
|
|
|
$
|
(56,078
|
)
|
|
$
|
51,229
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of debt and finance lease obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
402
|
|
|
$
|
—
|
|
|
$
|
402
|
|
Accounts payable
|
—
|
|
|
—
|
|
|
9,504
|
|
|
—
|
|
|
9,504
|
|
Accounts payable to affiliates
|
11,223
|
|
|
1,183
|
|
|
4,396
|
|
|
(16,802
|
)
|
|
—
|
|
Accrued expenses
|
155
|
|
|
7
|
|
|
719
|
|
|
—
|
|
|
881
|
|
Taxes other than income taxes payable
|
—
|
|
|
—
|
|
|
1,175
|
|
|
—
|
|
|
1,175
|
|
Income taxes payable
|
83
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
168
|
|
Total current liabilities
|
11,461
|
|
|
1,190
|
|
|
16,281
|
|
|
(16,802
|
)
|
|
12,130
|
|
Debt and finance lease obligations, less current portion
|
7,094
|
|
|
991
|
|
|
1,085
|
|
|
—
|
|
|
9,170
|
|
Deferred income tax liabilities
|
—
|
|
|
2
|
|
|
4,918
|
|
|
—
|
|
|
4,920
|
|
Other long-term liabilities
|
1,886
|
|
|
—
|
|
|
1,535
|
|
|
—
|
|
|
3,421
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Common stock
|
7
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
7
|
|
Additional paid-in capital
|
6,818
|
|
|
—
|
|
|
9,765
|
|
|
(9,765
|
)
|
|
6,818
|
|
Treasury stock, at cost
|
(15,472
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,472
|
)
|
Retained earnings
|
31,283
|
|
|
—
|
|
|
30,286
|
|
|
(30,286
|
)
|
|
31,283
|
|
Partners’ equity
|
—
|
|
|
383
|
|
|
—
|
|
|
(383
|
)
|
|
—
|
|
Accumulated other comprehensive loss
|
(1,529
|
)
|
|
—
|
|
|
(1,159
|
)
|
|
1,159
|
|
|
(1,529
|
)
|
Total stockholders’ equity
|
21,107
|
|
|
383
|
|
|
38,893
|
|
|
(39,276
|
)
|
|
21,107
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
481
|
|
|
—
|
|
|
481
|
|
Total equity
|
21,107
|
|
|
383
|
|
|
39,374
|
|
|
(39,276
|
)
|
|
21,588
|
|
Total liabilities and equity
|
$
|
41,548
|
|
|
$
|
2,566
|
|
|
$
|
63,193
|
|
|
$
|
(56,078
|
)
|
|
$
|
51,229
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
December 31, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
291
|
|
|
$
|
152
|
|
|
$
|
2,539
|
|
|
$
|
—
|
|
|
$
|
2,982
|
|
Receivables, net
|
—
|
|
|
—
|
|
|
7,345
|
|
|
—
|
|
|
7,345
|
|
Receivables from affiliates
|
4,369
|
|
|
2
|
|
|
10,684
|
|
|
(15,055
|
)
|
|
—
|
|
Inventories
|
—
|
|
|
—
|
|
|
6,532
|
|
|
—
|
|
|
6,532
|
|
Prepaid expenses and other
|
466
|
|
|
—
|
|
|
355
|
|
|
(5
|
)
|
|
816
|
|
Total current assets
|
5,126
|
|
|
154
|
|
|
27,455
|
|
|
(15,060
|
)
|
|
17,675
|
|
Property, plant and equipment, at cost
|
—
|
|
|
—
|
|
|
42,473
|
|
|
—
|
|
|
42,473
|
|
Accumulated depreciation
|
—
|
|
|
—
|
|
|
(13,625
|
)
|
|
—
|
|
|
(13,625
|
)
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
28,848
|
|
|
—
|
|
|
28,848
|
|
Investment in affiliates
|
34,696
|
|
|
2,267
|
|
|
(321
|
)
|
|
(36,642
|
)
|
|
—
|
|
Long-term notes receivable from affiliates
|
285
|
|
|
—
|
|
|
—
|
|
|
(285
|
)
|
|
—
|
|
Deferred charges and other assets, net
|
572
|
|
|
1
|
|
|
3,059
|
|
|
—
|
|
|
3,632
|
|
Total assets
|
$
|
40,679
|
|
|
$
|
2,422
|
|
|
$
|
59,041
|
|
|
$
|
(51,987
|
)
|
|
$
|
50,155
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of debt and finance lease obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
238
|
|
Accounts payable
|
14
|
|
|
—
|
|
|
8,580
|
|
|
—
|
|
|
8,594
|
|
Accounts payable to affiliates
|
9,847
|
|
|
837
|
|
|
4,370
|
|
|
(15,054
|
)
|
|
—
|
|
Accrued expenses
|
155
|
|
|
7
|
|
|
468
|
|
|
—
|
|
|
630
|
|
Accrued expenses to affiliates
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
Taxes other than income taxes payable
|
—
|
|
|
—
|
|
|
1,213
|
|
|
—
|
|
|
1,213
|
|
Income taxes payable
|
53
|
|
|
1
|
|
|
—
|
|
|
(5
|
)
|
|
49
|
|
Total current liabilities
|
10,069
|
|
|
846
|
|
|
14,869
|
|
|
(15,060
|
)
|
|
10,724
|
|
Debt and finance lease obligations, less current portion
|
6,955
|
|
|
990
|
|
|
926
|
|
|
—
|
|
|
8,871
|
|
Long-term notes payable to affiliates
|
—
|
|
|
285
|
|
|
—
|
|
|
(285
|
)
|
|
—
|
|
Deferred income tax liabilities
|
—
|
|
|
2
|
|
|
4,960
|
|
|
—
|
|
|
4,962
|
|
Other long-term liabilities
|
1,988
|
|
|
—
|
|
|
879
|
|
|
—
|
|
|
2,867
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Common stock
|
7
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
7
|
|
Additional paid-in capital
|
7,048
|
|
|
—
|
|
|
9,754
|
|
|
(9,754
|
)
|
|
7,048
|
|
Treasury stock, at cost
|
(14,925
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,925
|
)
|
Retained earnings
|
31,044
|
|
|
—
|
|
|
28,305
|
|
|
(28,305
|
)
|
|
31,044
|
|
Partners’ equity
|
—
|
|
|
299
|
|
|
—
|
|
|
(299
|
)
|
|
—
|
|
Accumulated other comprehensive loss
|
(1,507
|
)
|
|
—
|
|
|
(1,097
|
)
|
|
1,097
|
|
|
(1,507
|
)
|
Total stockholders’ equity
|
21,667
|
|
|
299
|
|
|
36,963
|
|
|
(37,262
|
)
|
|
21,667
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
444
|
|
|
620
|
|
|
1,064
|
|
Total equity
|
21,667
|
|
|
299
|
|
|
37,407
|
|
|
(36,642
|
)
|
|
22,731
|
|
Total liabilities and equity
|
$
|
40,679
|
|
|
$
|
2,422
|
|
|
$
|
59,041
|
|
|
$
|
(51,987
|
)
|
|
$
|
50,155
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Income
Three Months Ended September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,249
|
|
|
$
|
—
|
|
|
$
|
27,249
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
—
|
|
|
—
|
|
|
24,335
|
|
|
—
|
|
|
24,335
|
|
Operating expenses (excluding depreciation and amortization expense reflected below)
|
—
|
|
|
—
|
|
|
1,239
|
|
|
—
|
|
|
1,239
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
556
|
|
|
—
|
|
|
556
|
|
Total cost of sales
|
—
|
|
|
—
|
|
|
26,130
|
|
|
—
|
|
|
26,130
|
|
Other operating expenses
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
General and administrative expenses (excluding depreciation and amortization expense reflected below)
|
2
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
217
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
Operating income (loss)
|
(2
|
)
|
|
—
|
|
|
883
|
|
|
—
|
|
|
881
|
|
Equity in earnings of subsidiaries
|
740
|
|
|
112
|
|
|
100
|
|
|
(952
|
)
|
|
—
|
|
Other income, net
|
54
|
|
|
—
|
|
|
158
|
|
|
(178
|
)
|
|
34
|
|
Interest and debt expense, net of capitalized interest
|
(230
|
)
|
|
(12
|
)
|
|
(47
|
)
|
|
178
|
|
|
(111
|
)
|
Income before income tax expense (benefit)
|
562
|
|
|
100
|
|
|
1,094
|
|
|
(952
|
)
|
|
804
|
|
Income tax expense (benefit)
|
(47
|
)
|
|
—
|
|
|
212
|
|
|
—
|
|
|
165
|
|
Net income
|
609
|
|
|
100
|
|
|
882
|
|
|
(952
|
)
|
|
639
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
Net income attributable to stockholders
|
$
|
609
|
|
|
$
|
100
|
|
|
$
|
852
|
|
|
$
|
(952
|
)
|
|
$
|
609
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Income
Three Months Ended September 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,849
|
|
|
$
|
—
|
|
|
$
|
30,849
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
—
|
|
|
—
|
|
|
27,701
|
|
|
—
|
|
|
27,701
|
|
Operating expenses (excluding depreciation and amortization expense reflected below)
|
—
|
|
|
—
|
|
|
1,193
|
|
|
—
|
|
|
1,193
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
504
|
|
|
—
|
|
|
504
|
|
Total cost of sales
|
—
|
|
|
—
|
|
|
29,398
|
|
|
—
|
|
|
29,398
|
|
Other operating expenses
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
General and administrative expenses (excluding depreciation and amortization expense reflected below)
|
3
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
209
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Operating income (loss)
|
(3
|
)
|
|
—
|
|
|
1,222
|
|
|
—
|
|
|
1,219
|
|
Equity in earnings of subsidiaries
|
1,005
|
|
|
85
|
|
|
53
|
|
|
(1,143
|
)
|
|
—
|
|
Other income, net
|
65
|
|
|
—
|
|
|
161
|
|
|
(184
|
)
|
|
42
|
|
Interest and debt expense, net of capitalized interest
|
(230
|
)
|
|
(15
|
)
|
|
(50
|
)
|
|
184
|
|
|
(111
|
)
|
Income before income tax expense (benefit)
|
837
|
|
|
70
|
|
|
1,386
|
|
|
(1,143
|
)
|
|
1,150
|
|
Income tax expense (benefit)
|
(19
|
)
|
|
—
|
|
|
295
|
|
|
—
|
|
|
276
|
|
Net income
|
856
|
|
|
70
|
|
|
1,091
|
|
|
(1,143
|
)
|
|
874
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
1
|
|
|
17
|
|
|
18
|
|
Net income attributable to stockholders
|
$
|
856
|
|
|
$
|
70
|
|
|
$
|
1,090
|
|
|
$
|
(1,160
|
)
|
|
$
|
856
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,445
|
|
|
$
|
—
|
|
|
$
|
80,445
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
—
|
|
|
—
|
|
|
72,396
|
|
|
—
|
|
|
72,396
|
|
Operating expenses (excluding depreciation and amortization expense reflected below)
|
—
|
|
|
—
|
|
|
3,629
|
|
|
—
|
|
|
3,629
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
1,645
|
|
|
—
|
|
|
1,645
|
|
Total cost of sales
|
—
|
|
|
—
|
|
|
77,670
|
|
|
—
|
|
|
77,670
|
|
Other operating expenses
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
General and administrative expenses (excluding depreciation and amortization expense reflected below)
|
3
|
|
|
—
|
|
|
622
|
|
|
—
|
|
|
625
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
39
|
|
Operating income (loss)
|
(3
|
)
|
|
—
|
|
|
2,100
|
|
|
—
|
|
|
2,097
|
|
Equity in earnings of subsidiaries
|
1,763
|
|
|
299
|
|
|
261
|
|
|
(2,323
|
)
|
|
—
|
|
Other income, net
|
138
|
|
|
—
|
|
|
462
|
|
|
(532
|
)
|
|
68
|
|
Interest and debt expense, net of capitalized interest
|
(693
|
)
|
|
(36
|
)
|
|
(138
|
)
|
|
532
|
|
|
(335
|
)
|
Income before income tax expense (benefit)
|
1,205
|
|
|
263
|
|
|
2,685
|
|
|
(2,323
|
)
|
|
1,830
|
|
Income tax expense (benefit)
|
(157
|
)
|
|
—
|
|
|
533
|
|
|
—
|
|
|
376
|
|
Net income
|
1,362
|
|
|
263
|
|
|
2,152
|
|
|
(2,323
|
)
|
|
1,454
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
90
|
|
|
2
|
|
|
92
|
|
Net income attributable to stockholders
|
$
|
1,362
|
|
|
$
|
263
|
|
|
$
|
2,062
|
|
|
$
|
(2,325
|
)
|
|
$
|
1,362
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,303
|
|
|
$
|
—
|
|
|
$
|
88,303
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
Cost of materials and other
|
—
|
|
|
—
|
|
|
79,317
|
|
|
—
|
|
|
79,317
|
|
Operating expenses (excluding depreciation and amortization expense reflected below)
|
—
|
|
|
—
|
|
|
3,439
|
|
|
—
|
|
|
3,439
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
1,499
|
|
|
—
|
|
|
1,499
|
|
Total cost of sales
|
—
|
|
|
—
|
|
|
84,255
|
|
|
—
|
|
|
84,255
|
|
Other operating expenses
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
41
|
|
General and administrative expenses (excluding depreciation and amortization expense reflected below)
|
4
|
|
|
—
|
|
|
691
|
|
|
—
|
|
|
695
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
39
|
|
Operating income (loss)
|
(4
|
)
|
|
—
|
|
|
3,277
|
|
|
—
|
|
|
3,273
|
|
Equity in earnings of subsidiaries
|
2,634
|
|
|
241
|
|
|
152
|
|
|
(3,027
|
)
|
|
—
|
|
Other income, net
|
163
|
|
|
1
|
|
|
455
|
|
|
(531
|
)
|
|
88
|
|
Interest and debt expense, net of capitalized interest
|
(681
|
)
|
|
(41
|
)
|
|
(165
|
)
|
|
531
|
|
|
(356
|
)
|
Income before income tax expense (benefit)
|
2,112
|
|
|
201
|
|
|
3,719
|
|
|
(3,027
|
)
|
|
3,005
|
|
Income tax expense (benefit)
|
(58
|
)
|
|
1
|
|
|
731
|
|
|
—
|
|
|
674
|
|
Net income
|
2,170
|
|
|
200
|
|
|
2,988
|
|
|
(3,027
|
)
|
|
2,331
|
|
Less: Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
113
|
|
|
48
|
|
|
161
|
|
Net income attributable to stockholders
|
$
|
2,170
|
|
|
$
|
200
|
|
|
$
|
2,875
|
|
|
$
|
(3,075
|
)
|
|
$
|
2,170
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
609
|
|
|
$
|
100
|
|
|
$
|
882
|
|
|
$
|
(952
|
)
|
|
$
|
639
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(180
|
)
|
|
—
|
|
|
(163
|
)
|
|
163
|
|
|
(180
|
)
|
Net gain on pension and other postretirement benefits
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Net loss on cash flow hedges
|
(2
|
)
|
|
—
|
|
|
(4
|
)
|
|
2
|
|
|
(4
|
)
|
Other comprehensive loss before income tax benefit
|
(179
|
)
|
|
—
|
|
|
(167
|
)
|
|
165
|
|
|
(181
|
)
|
Income tax benefit related to items of other comprehensive loss
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
Other comprehensive loss
|
(179
|
)
|
|
—
|
|
|
(166
|
)
|
|
164
|
|
|
(181
|
)
|
Comprehensive income
|
430
|
|
|
100
|
|
|
716
|
|
|
(788
|
)
|
|
458
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
28
|
|
Comprehensive income attributable to stockholders
|
$
|
430
|
|
|
$
|
100
|
|
|
$
|
688
|
|
|
$
|
(788
|
)
|
|
$
|
430
|
|
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended September 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
856
|
|
|
$
|
70
|
|
|
$
|
1,091
|
|
|
$
|
(1,143
|
)
|
|
$
|
874
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
20
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
23
|
|
Net gain on pension and other postretirement benefits
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Other comprehensive income before income tax expense
|
28
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
31
|
|
Income tax expense related to items of other comprehensive income
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Other comprehensive income
|
27
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
30
|
|
Comprehensive income
|
883
|
|
|
70
|
|
|
1,093
|
|
|
(1,142
|
)
|
|
904
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
4
|
|
|
17
|
|
|
21
|
|
Comprehensive income attributable to stockholders
|
$
|
883
|
|
|
$
|
70
|
|
|
$
|
1,089
|
|
|
$
|
(1,159
|
)
|
|
$
|
883
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Comprehensive Income
Nine Months Ended September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
1,362
|
|
|
$
|
263
|
|
|
$
|
2,152
|
|
|
$
|
(2,323
|
)
|
|
$
|
1,454
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(28
|
)
|
|
—
|
|
|
(59
|
)
|
|
62
|
|
|
(25
|
)
|
Net gain on pension and other postretirement benefits
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Net gain on cash flow hedges
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Other comprehensive loss before income tax expense
|
(20
|
)
|
|
—
|
|
|
(58
|
)
|
|
62
|
|
|
(16
|
)
|
Income tax expense related to items of other comprehensive loss
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Other comprehensive loss
|
(22
|
)
|
|
—
|
|
|
(58
|
)
|
|
62
|
|
|
(18
|
)
|
Comprehensive income
|
1,340
|
|
|
263
|
|
|
2,094
|
|
|
(2,261
|
)
|
|
1,436
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
94
|
|
|
2
|
|
|
96
|
|
Comprehensive income attributable to stockholders
|
$
|
1,340
|
|
|
$
|
263
|
|
|
$
|
2,000
|
|
|
$
|
(2,263
|
)
|
|
$
|
1,340
|
|
Condensed Consolidating Statement of Comprehensive Income
Nine Months Ended September 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net income
|
$
|
2,170
|
|
|
$
|
200
|
|
|
$
|
2,988
|
|
|
$
|
(3,027
|
)
|
|
$
|
2,331
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
(224
|
)
|
|
—
|
|
|
(190
|
)
|
|
191
|
|
|
(223
|
)
|
Net gain on pension and other postretirement benefits
|
25
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
25
|
|
Other comprehensive loss before income tax expense
|
(199
|
)
|
|
—
|
|
|
(189
|
)
|
|
190
|
|
|
(198
|
)
|
Income tax expense related to items of other comprehensive loss
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
Other comprehensive loss
|
(204
|
)
|
|
—
|
|
|
(189
|
)
|
|
190
|
|
|
(203
|
)
|
Comprehensive income
|
1,966
|
|
|
200
|
|
|
2,799
|
|
|
(2,837
|
)
|
|
2,128
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
114
|
|
|
48
|
|
|
162
|
|
Comprehensive income attributable to stockholders
|
$
|
1,966
|
|
|
$
|
200
|
|
|
$
|
2,685
|
|
|
$
|
(2,885
|
)
|
|
$
|
1,966
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net cash provided by (used in) operating activities
|
$
|
15
|
|
|
$
|
(35
|
)
|
|
$
|
4,203
|
|
|
$
|
(360
|
)
|
|
$
|
3,823
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures (excluding VIEs)
|
—
|
|
|
—
|
|
|
(1,179
|
)
|
|
—
|
|
|
(1,179
|
)
|
Capital expenditures of VIEs:
|
|
|
|
|
|
|
|
|
|
DGD
|
—
|
|
|
—
|
|
|
(91
|
)
|
|
—
|
|
|
(91
|
)
|
Other VIEs
|
—
|
|
|
—
|
|
|
(139
|
)
|
|
—
|
|
|
(139
|
)
|
Deferred turnaround and catalyst cost expenditures (excluding VIEs)
|
—
|
|
|
—
|
|
|
(583
|
)
|
|
—
|
|
|
(583
|
)
|
Deferred turnaround and catalyst cost expenditures of DGD
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
(16
|
)
|
Investments in unconsolidated joint ventures
|
—
|
|
|
—
|
|
|
(122
|
)
|
|
—
|
|
|
(122
|
)
|
Acquisitions of undivided interests
|
—
|
|
|
—
|
|
|
(65
|
)
|
|
—
|
|
|
(65
|
)
|
Intercompany investing activities
|
289
|
|
|
2
|
|
|
(1,533
|
)
|
|
1,242
|
|
|
—
|
|
Other investing activities, net
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Net cash provided by (used in) investing activities
|
289
|
|
|
2
|
|
|
(3,723
|
)
|
|
1,242
|
|
|
(2,190
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from debt issuances and borrowings (excluding VIEs)
|
992
|
|
|
—
|
|
|
900
|
|
|
—
|
|
|
1,892
|
|
Proceeds from borrowings of VIEs
|
—
|
|
|
—
|
|
|
148
|
|
|
—
|
|
|
148
|
|
Repayments of debt and finance lease obligations (excluding VIEs)
|
(871
|
)
|
|
—
|
|
|
(925
|
)
|
|
—
|
|
|
(1,796
|
)
|
Repayments of debt of VIEs
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Intercompany financing activities
|
1,187
|
|
|
160
|
|
|
(105
|
)
|
|
(1,242
|
)
|
|
—
|
|
Purchases of common stock for treasury
|
(555
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
Common stock dividends
|
(1,123
|
)
|
|
—
|
|
|
(81
|
)
|
|
81
|
|
|
(1,123
|
)
|
Acquisition of VLP publicly held common units
|
—
|
|
|
—
|
|
|
(950
|
)
|
|
—
|
|
|
(950
|
)
|
Distributions to noncontrolling interests and unitholders of VLP
|
—
|
|
|
(279
|
)
|
|
(57
|
)
|
|
279
|
|
|
(57
|
)
|
Other financing activities, net
|
(16
|
)
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(29
|
)
|
Net cash used in financing activities
|
(386
|
)
|
|
(119
|
)
|
|
(1,087
|
)
|
|
(882
|
)
|
|
(2,474
|
)
|
Effect of foreign exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Net decrease in cash and cash equivalents
|
(82
|
)
|
|
(152
|
)
|
|
(611
|
)
|
|
—
|
|
|
(845
|
)
|
Cash and cash equivalents at beginning of period
|
291
|
|
|
152
|
|
|
2,539
|
|
|
—
|
|
|
2,982
|
|
Cash and cash equivalents at end of period
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
1,928
|
|
|
$
|
—
|
|
|
$
|
2,137
|
|
VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valero
Energy
Corporation
|
|
Valero
Energy
Partners LP
|
|
Other Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net cash provided by (used in) operating activities
|
$
|
(824
|
)
|
|
$
|
(37
|
)
|
|
$
|
3,709
|
|
|
$
|
(155
|
)
|
|
$
|
2,693
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures (excluding VIEs)
|
—
|
|
|
—
|
|
|
(1,025
|
)
|
|
—
|
|
|
(1,025
|
)
|
Capital expenditures of VIEs:
|
|
|
|
|
|
|
|
|
|
|
DGD
|
—
|
|
|
—
|
|
|
(143
|
)
|
|
—
|
|
|
(143
|
)
|
Other VIEs
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
—
|
|
|
(89
|
)
|
Deferred turnaround and catalyst cost expenditures (excluding VIEs)
|
—
|
|
|
—
|
|
|
(641
|
)
|
|
—
|
|
|
(641
|
)
|
Deferred turnaround and catalyst cost expenditures of DGD
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
Investments in unconsolidated joint ventures
|
—
|
|
|
—
|
|
|
(124
|
)
|
|
—
|
|
|
(124
|
)
|
Peru Acquisition, net of cash acquired
|
—
|
|
|
—
|
|
|
(466
|
)
|
|
—
|
|
|
(466
|
)
|
Acquisitions of undivided interests
|
—
|
|
|
—
|
|
|
(181
|
)
|
|
—
|
|
|
(181
|
)
|
Minor acquisitions
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
Intercompany investing activities
|
590
|
|
|
292
|
|
|
(1,425
|
)
|
|
543
|
|
|
—
|
|
Other investing activities, net
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
Net cash provided by (used in) investing activities
|
590
|
|
|
292
|
|
|
(4,193
|
)
|
|
543
|
|
|
(2,768
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from debt issuances and borrowings (excluding VIEs)
|
750
|
|
|
498
|
|
|
10
|
|
|
—
|
|
|
1,258
|
|
Proceeds from borrowings of VIEs
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
71
|
|
Repayments of debt and finance lease obligations (excluding VIEs)
|
(787
|
)
|
|
(410
|
)
|
|
(151
|
)
|
|
—
|
|
|
(1,348
|
)
|
Repayments of debt of VIEs
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Intercompany financing activities
|
1,435
|
|
|
(94
|
)
|
|
(798
|
)
|
|
(543
|
)
|
|
—
|
|
Purchases of common stock for treasury
|
(1,081
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,081
|
)
|
Common stock dividends
|
(1,031
|
)
|
|
—
|
|
|
(32
|
)
|
|
32
|
|
|
(1,031
|
)
|
Contributions from noncontrolling interests
|
—
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Distributions to noncontrolling interests and unitholders of VLP
|
—
|
|
|
(159
|
)
|
|
(27
|
)
|
|
123
|
|
|
(63
|
)
|
Other financing activities, net
|
2
|
|
|
(4
|
)
|
|
(13
|
)
|
|
—
|
|
|
(15
|
)
|
Net cash used in financing activities
|
(712
|
)
|
|
(169
|
)
|
|
(912
|
)
|
|
(388
|
)
|
|
(2,181
|
)
|
Effect of foreign exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
—
|
|
|
(43
|
)
|
Net increase (decrease) in cash and cash equivalents
|
(946
|
)
|
|
86
|
|
|
(1,439
|
)
|
|
—
|
|
|
(2,299
|
)
|
Cash and cash equivalents at beginning of period
|
1,746
|
|
|
42
|
|
|
4,062
|
|
|
—
|
|
|
5,850
|
|
Cash and cash equivalents at end of period
|
$
|
800
|
|
|
$
|
128
|
|
|
$
|
2,623
|
|
|
$
|
—
|
|
|
$
|
3,551
|
|