SAN ANTONIO, Feb. 5, 2015 /PRNewswire/ -- Valero Energy
Partners LP (NYSE: VLP, the Partnership), today reported fourth
quarter 2014 net income of $19.1
million, or $0.32 per limited
partner unit. The Partnership generated earnings before
interest, income taxes, depreciation, and amortization (EBITDA) of
$23.7 million and distributable cash
flow of $22.6 million. The
Partnership's coverage ratio for the fourth quarter of 2014 was
1.43x.
Fourth quarter 2014 revenues were $34.2
million versus fourth quarter 2013 revenues of $33.1 million. The increase was related
primarily to higher throughput volumes in the Memphis and Port Arthur Logistics Systems and
in the Three Rivers Crude System.
Operating expenses in the fourth quarter of 2014 were
$7.7 million, general and
administrative expenses were $2.9
million, and depreciation expense was $4.4 million. These expenses combined were
$1.0 million lower than in the fourth
quarter of 2013, mainly due to lower maintenance expense, which was
partially offset by additional costs of operating as a separate
publicly traded master limited partnership, incremental costs
related to the management fee charged by Valero Energy Corporation
(Valero), and costs related to the retirement of assets replaced in
the Memphis Logistics System.
"The Partnership finished its fourth quarter and first full year
with strong performance," said Valero Chairman and CEO Joe Gorder. "In January 2015, we announced an increase in the
Partnership's quarterly distribution to $0.266 per unit, or almost 11 percent above
the previous quarterly distribution and 25 percent above the
minimum quarterly distribution. We are pleased to have
delivered to our unitholders growth in distributions near the top
end of our targeted range."
Liquidity and Financial Position
As of December 31, 2014, the
Partnership had $537 million of total
liquidity consisting of $237 million
in cash and cash equivalents and $300
million in an undrawn revolving credit facility.
Capital spending in 2014 was $11.2
million, including $4.7
million for maintenance capital. Excluding expected
acquisitions, estimated total 2015 capital expenditures are
approximately $9 million, of which
about half is maintenance capital.
Strategic Update
The Partnership expects to increase its growth by completing
$1 billion in acquisition
transactions from subsidiaries of Valero in 2015. As a
result, the Partnership expects to deliver annualized fourth
quarter 2015 EBITDA of approximately $200
million, or 111 percent higher than its fourth quarter
2014 annualized EBITDA of $95
million.
Conference Call
The Partnership's senior management will host a conference call
at 3 p.m. ET today to discuss this
earnings release. A live broadcast of the conference call
will be available on the Partnership's web site at
www.valeroenergypartners.com.
About Valero Energy Partners LP
Valero Energy Partners LP is a fee-based, growth-oriented,
traditional master limited partnership formed by Valero Energy
Corporation to own, operate, develop, and acquire crude oil and
refined petroleum products pipelines, terminals, and other
transportation and logistics assets. With headquarters in
San Antonio, the Partnership's
assets include crude oil and refined petroleum products pipeline
and terminal systems in the Gulf Coast and Mid-Continent regions of
the United States that are
integral to the operations of several of Valero's refineries.
Contacts
Investors:
John Locke, Executive Director –
Investor Relations, 210-345-3077
Karen Ngo, Manager – Investor
Relations, 210-345-4574
Media:
Bill Day, Vice President –
Communications, 210-345-2928
To download our investor relations mobile app, which offers
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Safe-Harbor Statement
This release contains forward-looking statements within the
meaning of federal securities laws. These statements discuss future
expectations, contain projections of results of operations or of
financial condition or state other forward-looking information. You
can identify forward-looking statements by words such as
"anticipate," "believe," "estimate," "expect," "forecast,"
"project," "could," "may," "should," "would," "will" or other
similar expressions that convey the uncertainty of future events or
outcomes. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and
other factors, some of which are beyond the Partnership's control
and are difficult to predict. These statements are often based upon
various assumptions, many of which are based, in turn, upon further
assumptions, including examination of historical operating trends
made by the management of the Partnership. Although the Partnership
believes that these assumptions were reasonable when made, because
assumptions are inherently subject to significant uncertainties and
contingencies, which are difficult or impossible to predict and are
beyond its control, the Partnership cannot give assurance that it
will achieve or accomplish these expectations, beliefs or
intentions. When considering these forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements contained in the Partnership's filings with
the U.S. Securities and Exchange Commission, including the Form S-1
and prospectus relating to the initial public offering of the
Partnership's common units, and the Partnership's annual reports on
Form 10-K and quarterly reports on Form 10-Q, available on the
Partnership's website at www.valeroenergypartners.com. These risks
could cause the Partnership's actual results to differ materially
from those contained in any forward-looking statement.
Use of Non-GAAP Financial Information
This earnings release includes the terms "EBITDA,"
"distributable cash flow," and "coverage ratio." These terms
are supplemental financial measures that are not defined under
United States generally accepted
accounting principles ("GAAP"). We reconcile these non-GAAP
measures to the most directly comparable GAAP measures in the
tables that accompany this release. In note (k) to the tables
that accompany this release, we disclose the reasons why we believe
our use of the non-GAAP financial measures in this release provides
useful information.
VALERO ENERGY
PARTNERS LP EARNINGS RELEASE (In Thousands,
Except per Unit Amounts, per Barrel Amounts, and
Ratios) (Unaudited)
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Statement of
income data (a):
|
|
|
|
|
|
|
|
|
Operating revenues –
related party (b)
|
|
$
|
34,182
|
|
|
$
|
33,069
|
|
|
$
|
129,180
|
|
|
$
|
124,985
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses (c)
|
|
7,692
|
|
|
9,594
|
|
|
31,719
|
|
|
32,205
|
|
General and
administrative expenses (d)
|
|
2,938
|
|
|
2,169
|
|
|
12,330
|
|
|
7,195
|
|
Depreciation
expense
|
|
4,364
|
|
|
4,224
|
|
|
16,451
|
|
|
16,256
|
|
Total costs and
expenses
|
|
14,994
|
|
|
15,987
|
|
|
60,500
|
|
|
55,656
|
|
Operating
income
|
|
19,188
|
|
|
17,082
|
|
|
68,680
|
|
|
69,329
|
|
Other income, net
(e)
|
|
189
|
|
|
198
|
|
|
1,504
|
|
|
309
|
|
Interest expense
(f)
|
|
(209)
|
|
|
(59)
|
|
|
(872)
|
|
|
(198)
|
|
Income before income
taxes
|
|
19,168
|
|
|
17,221
|
|
|
69,312
|
|
|
69,440
|
|
Income tax expense
(benefit) (g)
|
|
112
|
|
|
(300)
|
|
|
548
|
|
|
1,434
|
|
Net income
|
|
19,056
|
|
|
17,521
|
|
|
68,764
|
|
|
68,006
|
|
Less:
Net income attributable to Predecessor
|
|
—
|
|
|
15,480
|
|
|
9,483
|
|
|
65,965
|
|
Net income
attributable to partners
|
|
19,056
|
|
|
2,041
|
|
|
59,281
|
|
|
2,041
|
|
Less:
General partner's interest in net income
|
|
381
|
|
|
41
|
|
|
1,186
|
|
|
41
|
|
Limited partners'
interest in net income
|
|
$
|
18,675
|
|
|
$
|
2,000
|
|
|
$
|
58,095
|
|
|
$
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
limited partner unit (basic
and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
units
|
|
$
|
0.32
|
|
|
$
|
0.03
|
|
|
$
|
1.01
|
|
|
$
|
0.03
|
|
Subordinated
units
|
|
$
|
0.32
|
|
|
$
|
0.03
|
|
|
$
|
1.01
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
limited partner units outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units –
public (basic)
|
|
17,250
|
|
|
17,250
|
|
|
17,250
|
|
|
17,250
|
|
Common units –
public (diluted)
|
|
17,251
|
|
|
17,250
|
|
|
17,251
|
|
|
17,250
|
|
Common units
– Valero (basic and diluted)
|
|
11,540
|
|
|
11,540
|
|
|
11,540
|
|
|
11,540
|
|
Subordinated
units – Valero (basic and diluted)
|
|
28,790
|
|
|
28,790
|
|
|
28,790
|
|
|
28,790
|
|
VALERO ENERGY
PARTNERS LP EARNINGS RELEASE (In Thousands,
Except per Unit Amounts, per Barrel Amounts, and
Ratios) (Unaudited)
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Operating
highlights (a):
|
|
|
|
|
|
|
|
|
Pipeline
transportation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline
transportation revenues
|
|
$
|
20,895
|
|
|
$
|
19,964
|
|
|
$
|
72,737
|
|
|
$
|
75,908
|
|
Pipeline
transportation throughput (BPD) (h)
|
|
993,861
|
|
|
836,295
|
|
|
908,095
|
|
|
814,103
|
|
Average
pipeline transportation revenue per barrel (i)
|
|
$
|
0.23
|
|
|
$
|
0.26
|
|
|
$
|
0.22
|
|
|
$
|
0.26
|
|
Terminaling:
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling
revenues
|
|
$
|
13,152
|
|
|
$
|
9,085
|
|
|
$
|
55,495
|
|
|
$
|
29,642
|
|
Terminaling
throughput (BPD)
|
|
500,612
|
|
|
317,750
|
|
|
545,135
|
|
|
260,704
|
|
Average
terminaling revenue per barrel (i)
|
|
$
|
0.29
|
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.31
|
|
Storage revenues
(j)
|
|
$
|
135
|
|
|
$
|
4,020
|
|
|
$
|
948
|
|
|
$
|
19,435
|
|
Total
operating revenues – related party
|
|
$
|
34,182
|
|
|
$
|
33,069
|
|
|
$
|
129,180
|
|
|
$
|
124,985
|
|
Capital
expenditures (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
$
|
1,623
|
|
|
$
|
4,968
|
|
|
$
|
4,653
|
|
|
$
|
6,720
|
|
Expansion
|
|
2,322
|
|
|
6,438
|
|
|
6,574
|
|
|
15,174
|
|
Total capital
expenditures
|
|
3,945
|
|
|
11,406
|
|
|
11,227
|
|
|
21,894
|
|
Less: Capital
expenditures attributable to Predecessor
|
|
—
|
|
|
11,406
|
|
|
1,033
|
|
|
21,894
|
|
Capital expenditures
attributable to Partnership
|
|
$
|
3,945
|
|
|
$
|
—
|
|
|
$
|
10,194
|
|
|
$
|
—
|
|
Other financial
information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution declared
per unit
|
|
$
|
0.266
|
|
|
$
|
0.037
|
|
|
$
|
0.941
|
|
|
$
|
0.037
|
|
EBITDA attributable
to Partnership (k)
|
|
$
|
23,741
|
|
|
$
|
2,603
|
|
|
$
|
75,368
|
|
|
$
|
2,603
|
|
Distributable cash
flow (k)
|
|
$
|
22,606
|
|
|
$
|
2,581
|
|
|
$
|
72,952
|
|
|
$
|
2,581
|
|
Distribution
declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
partner units – public
|
|
$
|
4,591
|
|
|
$
|
638
|
|
|
$
|
16,238
|
|
|
$
|
638
|
|
Limited
partner units – Valero
|
|
10,727
|
|
|
1,492
|
|
|
37,950
|
|
|
1,492
|
|
General
partner units – Valero
|
|
511
|
|
|
44
|
|
|
1,304
|
|
|
44
|
|
Total distribution
declared
|
|
$
|
15,829
|
|
|
$
|
2,174
|
|
|
$
|
55,492
|
|
|
$
|
2,174
|
|
Coverage ratio
(k)
|
|
1.43x
|
|
|
1.19x
|
|
|
1.31x
|
|
|
1.19x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
Balance sheet data
(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
|
$
|
236,579
|
|
|
$
|
375,118
|
|
Total
assets
|
|
|
|
|
|
|
|
596,073
|
|
|
737,590
|
|
Total capital lease
obligations
|
|
|
|
|
|
|
|
2,719
|
|
|
4,127
|
|
Partners'
capital
|
|
|
|
|
|
|
|
585,219
|
|
|
722,164
|
|
Working
capital
|
|
|
|
|
|
|
|
238,365
|
|
|
372,230
|
|
VALERO ENERGY
PARTNERS LP EARNINGS RELEASE (In Thousands,
Except per Unit Amounts, per Barrel Amounts, and
Ratios) (Unaudited)
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Reconciliation of
net income to EBITDA and distributable cash flow (a)(k):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
19,056
|
|
|
$
|
17,521
|
|
|
$
|
68,764
|
|
|
$
|
68,006
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
4,364
|
|
|
4,224
|
|
|
16,451
|
|
|
16,256
|
|
Interest
expense
|
|
209
|
|
|
59
|
|
|
872
|
|
|
198
|
|
Income tax expense
(benefit)
|
|
112
|
|
|
(300)
|
|
|
548
|
|
|
1,434
|
|
EBITDA
|
|
23,741
|
|
|
21,504
|
|
|
86,635
|
|
|
85,894
|
|
Less:
EBITDA attributable to Predecessor
|
|
—
|
|
|
18,901
|
|
|
11,267
|
|
|
83,291
|
|
EBITDA attributable
to Partnership
|
|
23,741
|
|
|
2,603
|
|
|
75,368
|
|
|
2,603
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments related
to minimum throughput commitments
|
|
(164)
|
|
|
—
|
|
|
108
|
|
|
—
|
|
Projects prefunded by
Valero
|
|
865
|
|
|
—
|
|
|
2,911
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest
paid
|
|
213
|
|
|
22
|
|
|
899
|
|
|
22
|
|
Income taxes
paid
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Maintenance capital
expenditures
|
|
1,623
|
|
|
—
|
|
|
4,527
|
|
|
—
|
|
Distributable cash
flow
|
|
$
|
22,606
|
|
|
$
|
2,581
|
|
|
$
|
72,952
|
|
|
$
|
2,581
|
|
Reconciliation of
net cash provided by operating activities to EBITDA and distributable cash flow
(a)(k):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
24,047
|
|
|
$
|
18,341
|
|
|
$
|
83,906
|
|
|
$
|
81,835
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in current
assets and current liabilities
|
|
(617)
|
|
|
2,903
|
|
|
1,318
|
|
|
2,947
|
|
Change in deferred
charges and credits and other operating activities, net
|
|
(1)
|
|
|
14
|
|
|
71
|
|
|
17
|
|
Amortization of fair
value adjustment to capital lease obligations
|
|
90
|
|
|
90
|
|
|
360
|
|
|
417
|
|
Amortization of debt
issuance costs
|
|
(82)
|
|
|
(13)
|
|
|
(329)
|
|
|
(13)
|
|
Unit-based
compensation expense
|
|
(17)
|
|
|
—
|
|
|
(68)
|
|
|
—
|
|
Interest
expense
|
|
209
|
|
|
59
|
|
|
872
|
|
|
198
|
|
Current income tax
expense
|
|
112
|
|
|
110
|
|
|
505
|
|
|
493
|
|
EBITDA
|
|
23,741
|
|
|
21,504
|
|
|
86,635
|
|
|
85,894
|
|
Less: EBITDA
attributable to Predecessor
|
|
—
|
|
|
18,901
|
|
|
11,267
|
|
|
83,291
|
|
EBITDA attributable
to Partnership
|
|
23,741
|
|
|
2,603
|
|
|
75,368
|
|
|
2,603
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments related
to minimum throughput commitments
|
|
(164)
|
|
|
—
|
|
|
108
|
|
|
—
|
|
Projects prefunded by
Valero
|
|
865
|
|
|
—
|
|
|
2,911
|
|
|
—
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest
paid
|
|
213
|
|
|
22
|
|
|
899
|
|
|
22
|
|
Income taxes
paid
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Maintenance capital
expenditures
|
|
1,623
|
|
|
—
|
|
|
4,527
|
|
|
—
|
|
Distributable cash
flow
|
|
$
|
22,606
|
|
|
$
|
2,581
|
|
|
$
|
72,952
|
|
|
$
|
2,581
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
Comparison of
ratio of net income attributable to partners divided by total
distribution declared to coverage ratio (k):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to partners
|
|
$
|
19,056
|
|
|
$
|
2,041
|
|
|
$
|
59,281
|
|
|
$
|
2,041
|
|
Total distribution
declared
|
|
$
|
15,829
|
|
|
$
|
2,174
|
|
|
$
|
55,492
|
|
|
$
|
2,174
|
|
Ratio of net income
attributable to partners divided by total distribution declared
|
|
1.20x
|
|
|
0.94x
|
|
|
1.07x
|
|
|
0.94x
|
|
Coverage ratio:
Distributable cash flow divided by total distribution declared
|
|
1.43x
|
|
|
1.19x
|
|
|
1.31x
|
|
|
1.19x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31, 2014
|
|
Three Months
Ended
December 31, 2015
|
|
|
As
Reported
|
|
Annualized
(x4)
|
|
Forecasted
|
|
Annualized
(x4)
|
Reconciliation of
net income to EBITDA (k)(l):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
19,056
|
|
|
$
|
76,224
|
|
|
$
|
32,000
|
|
|
$
|
128,000
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
4,364
|
|
|
17,456
|
|
|
10,900
|
|
|
43,600
|
|
Interest
expense
|
|
209
|
|
|
836
|
|
|
7,000
|
|
|
28,000
|
|
Income tax
expense
|
|
112
|
|
|
448
|
|
|
200
|
|
|
800
|
|
EBITDA
|
|
$
|
23,741
|
|
|
$
|
94,964
|
|
|
$
|
50,100
|
|
|
$
|
200,400
|
|
|
See Notes to Earnings
Release on Table Page 5.
|
|
VALERO ENERGY
PARTNERS LP NOTES TO EARNINGS RELEASE
|
|
|
(a)
|
References to the
"Partnership," "we," "us," or "our" refer to Valero Energy Partners
LP, one or more of its subsidiaries, or all of them taken as a
whole for periods after December 16, 2013, the date the Partnership
completed its initial public offering (IPO) of 17,250,000 common
units representing limited partner interests. For periods prior to
the IPO and periods prior to the Acquisition (defined below), those
terms refer to Valero Energy Partners LP Predecessor, our
Predecessor for accounting purposes. References in these notes to
"Valero" may refer to Valero Energy Corporation, one or more of its
subsidiaries, or all of them taken as a whole, other than Valero
Energy Partners LP, any of its subsidiaries, or its general
partner.
|
|
|
|
On December 16, 2013,
Valero contributed certain crude oil and refined petroleum products
pipelines, terminals, and other logistics assets (the Contributed
Assets) to us, and we completed the IPO of our common units,
which represented a 29.4 percent limited partner interest in
us. Valero owns the remaining 68.6 percent limited partner interest
in us and the 2 percent general partner interest.
|
|
|
|
On July 1, 2014,
we acquired the Texas Crude Systems Business from Valero (the
Acquisition). The Acquisition was accounted for as a transfer of a
business between entities under common control. As entities under
the common control of Valero, we recorded the Acquisition on our
balance sheet at Valero's carrying value rather than fair value.
Transfers between entities under common control are accounted for
as though the transfer occurred as of the beginning of the period
of transfer, and prior period financial statements and financial
information are retrospectively adjusted to furnish comparative
information. Accordingly, the statement of income data, operating
highlights, and balance sheet data have been retrospectively
adjusted to include the historical results of the Texas Crude
Systems Business for all periods presented prior to July 1,
2014.
|
|
|
(b)
|
Our Predecessor
generated revenues by providing fee-based transportation and
terminaling services to Valero and by leasing certain crude oil and
refined petroleum products storage capacity to Valero. Subsequent
to the IPO and Acquisition, we entered into new commercial
agreements with Valero. Under these new agreements, certain of the
historical storage capacity lease arrangements were replaced with
terminaling throughput fees. In addition, we began charging a
terminaling throughput fee for crude oil delivered to our Lucas
terminal for which we did not historically charge a throughput fee,
and we revised the rates charged for transportation services
provided by certain of our pipelines.
|
|
|
(c)
|
The decrease in
operating expenses for the three months ended December 31,
2014 compared to the three months ended December 31, 2013 was
due primarily to lower maintenance expense of $2.6 million at
our Memphis and Port Arthur logistics systems. The decrease in
maintenance expense was partially offset by an increase of $624,000
in insurance expense as a result of us acquiring our own insurance
policies. Prior to being a separate publicly traded limited
partnership, we were allocated a portion of Valero's insurance
costs.
|
|
|
|
The decrease in
operating expenses for the year ended December 31, 2014
compared to the year ended December 31, 2013 was due primarily
to lower maintenance expense of $2.8 million at our Memphis,
Port Arthur, and McKee logistics systems. The decrease in
maintenance expense was partially offset by an increase of $2.4
million in insurance expense as a result of us acquiring our own
insurance policies as described above.
|
|
|
(d)
|
The increase in
general and administrative expenses for the three months and year
ended December 31, 2014 compared to the three months and year
ended December 31, 2013 was due primarily to $526,000 and
$2.3 million, respectively, of additional incremental costs of
being a separate publicly traded limited partnership; and $243,000
and $2.4 million, respectively, in incremental costs related
to the management fee charged to us by Valero effective with the
IPO. During the year ended December 31, 2014, we also incurred
$457,000 in costs related to the Acquisition.
|
|
|
(e)
|
The increase in
"other income, net" for the year ended December 31, 2014
compared to the year ended December 31, 2013 was due primarily
to interest income (net of bank fees) of $870,000 earned on our
cash and cash equivalents. Prior to the IPO, our Predecessor
participated in Valero's centralized cash management system;
therefore, it held no cash or cash equivalents, and no interest
income was allocated to our Predecessor by Valero. Incremental
income of $214,000 from the sale of scrap metal and $143,000
related to right-of-way fees collected during the year ended
December 31, 2014 also contributed to the increase.
|
|
|
(f)
|
The increase in
interest expense for the three months and year ended
December 31, 2014 compared to the three months and year ended
December 31, 2013 was due primarily to commitment fees and
amortization of debt issuance costs related to the Partnership's
revolving credit facility, which was entered into in connection
with the IPO.
|
|
|
(g)
|
Our income tax
expense is associated with the Texas margin tax. Our effective tax
rate was 1 percent during the year ended December 31, 2014
compared to 2 percent during the year ended December 31, 2013.
The decrease was due primarily to deferred tax expense recorded
during the second quarter of 2013 in connection with the initial
recognition of a deferred tax liability associated with a change in
the law with respect to the Texas margin tax. During the three
months ended December 31, 2013, we made an adjustment to
reduce our deferred tax liability resulting in an income tax
benefit for the period.
|
|
|
(h)
|
Represents the sum of
volumes transported through each separately tariffed pipeline
segment.
|
|
|
(i)
|
Management uses
average revenue per barrel to evaluate performance and compare
profitability to other companies in the industry. There are a
variety of ways to calculate average revenue per barrel; different
companies may calculate it in different ways. We calculate average
revenue per barrel as revenue divided by throughput for the period.
Throughput can be derived by multiplying the throughput barrels per
day (BPD) by the number of days in the period. Investors and
analysts use this financial measure to help analyze and compare
companies in the industry on the basis of operating performance.
This financial measure should not be considered as an alternative
to revenues presented in accordance with U.S. generally accepted
accounting principles (GAAP).
|
|
|
(j)
|
Prior to the IPO, our
Predecessor leased some of our refined petroleum products and crude
oil storage capacity to Valero. Subsequent to the IPO, under our
commercial agreements with Valero, certain of these storage
capacity lease agreements were replaced with terminaling
fees.
|
|
|
(k)
|
We define EBITDA as
net income before income tax expense, interest expense, and
depreciation expense. We define distributable cash flow as EBITDA
less cash payments during the period for interest, income taxes,
and maintenance capital expenditures, plus adjustments related to
minimum throughput commitments and capital projects prefunded by
Valero. We define coverage ratio as the ratio of distributable cash
flow to the total distribution declared.
|
|
|
|
EBITDA, distributable
cash flow, and coverage ratio are supplemental financial measures
that are not defined under GAAP; they may be used by management and
external users of our financial statements, such as industry
analysts, investors, lenders, and rating agencies, to:
|
|
|
|
- describe our expectation of
forecasted earnings;
- assess our operating performance as
compared to other publicly traded limited partnerships in the
transportation and logistics industry, without regard to historical
cost basis or, in the case of EBITDA, financing
methods;
- assess the ability of our business to
generate sufficient cash to support our decision to make
distributions to our unitholders;
- assess our ability to incur and
service debt and fund capital expenditures; and
- assess the viability of acquisitions
and other capital expenditure projects and the returns on
investment of various investment opportunities.
|
|
We believe that the
presentation of EBITDA provides useful information to investors in
assessing our financial condition and results of operations. The
GAAP measures most directly comparable to EBITDA are net income and
net cash provided by operating activities. EBITDA should not be
considered an alternative to net income or net cash provided by
operating activities presented in accordance with GAAP. EBITDA has
important limitations as an analytical tool because it excludes
some, but not all, items that affect net income or net cash
provided by operating activities. EBITDA should not be considered
in isolation or as a substitute for analysis of our results as
reported under GAAP. Additionally, because EBITDA may be defined
differently by other companies in our industry, our definition of
EBITDA may not be comparable to similarly titled measures of other
companies, thereby diminishing its utility.
|
|
|
|
We use distributable
cash flow to measure whether we have generated from our operations,
or "earned," an amount of cash sufficient to support the payment of
the minimum quarterly distributions. Our partnership agreement
contains the concept of "operating surplus" to determine whether
our operations are generating sufficient cash to support the
distributions that we are paying, as opposed to returning capital
to our partners. Because operating surplus is a cumulative concept
(measured from the IPO date and compared to cumulative
distributions from the IPO date), we use the term distributable
cash flow to approximate operating surplus on a quarterly or
annual, rather than a cumulative, basis. As a result, distributable
cash flow is not necessarily indicative of the actual cash we have
on hand to distribute or that we are required to
distribute.
|
|
|
|
We use the coverage
ratio to reflect the relationship between our distributable cash
flow and the total distribution declared. We have also provided the
ratio of net income attributable to partners, the most directly
comparable GAAP measure to distributable cash flow, to the total
distribution declared.
|
|
|
(l)
|
Forecasted amount is
based on Valero's expectations of future drops in the Partnership
during 2015. However, there is no certainty that such drops will
occur as expected by Valero.
|
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SOURCE Valero Energy Partners LP