Delaware | 1-36232 | 90-1006559 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
One Valero Way San Antonio, Texas | 78249 | |
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. |
VALERO ENERGY PARTNERS LP | |||
By: | Valero Energy Partners GP LLC | ||
its general partner | |||
Date: | October 30, 2015 | By: | /s/ Donna M. Titzman |
Donna M. Titzman | |||
Senior Vice President, Chief Financial Officer, | |||
and Treasurer | |||
• | Third quarter 2015 EBITDA of $43.6 million and distributable cash flow of $41.9 million |
• | Cash distribution for third quarter 2015 increased to $0.3075 per unit |
• | Acquired Corpus Christi Terminal Services Business on October 1, 2015 for $465 million |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Statement of income data (a): | ||||||||||||||||
Operating revenues – related party (b) | $ | 62,037 | $ | 33,666 | $ | 164,168 | $ | 94,998 | ||||||||
Costs and expenses: | ||||||||||||||||
Operating expenses (c) | 15,042 | 17,510 | 47,280 | 50,062 | ||||||||||||
General and administrative expenses (d) | 3,444 | 3,133 | 10,169 | 9,591 | ||||||||||||
Depreciation expense (e) | 10,684 | 7,178 | 25,887 | 19,226 | ||||||||||||
Total costs and expenses | 29,170 | 27,821 | 83,336 | 78,879 | ||||||||||||
Operating income | 32,867 | 5,845 | 80,832 | 16,119 | ||||||||||||
Other income, net (f) | 29 | 156 | 166 | 1,315 | ||||||||||||
Interest and debt expense, net of capitalized interest (g) | (1,353 | ) | (214 | ) | (3,365 | ) | (663 | ) | ||||||||
Income before income taxes | 31,543 | 5,787 | 77,633 | 16,771 | ||||||||||||
Income tax expense (benefit) (h) | 115 | 129 | (62 | ) | 436 | |||||||||||
Net income | 31,428 | 5,658 | 77,695 | 16,335 | ||||||||||||
Less: Net loss attributable to Predecessor | — | (11,885 | ) | (9,516 | ) | (23,890 | ) | |||||||||
Net income attributable to partners | 31,428 | 17,543 | 87,211 | 40,225 | ||||||||||||
Less: General partner’s interest in net income | 1,612 | 351 | 3,821 | 805 | ||||||||||||
Limited partners’ interest in net income | $ | 29,816 | $ | 17,192 | $ | 83,390 | $ | 39,420 | ||||||||
Net income per limited partner unit (basic and diluted): | ||||||||||||||||
Common units | $ | 0.51 | $ | 0.30 | $ | 1.43 | $ | 0.68 | ||||||||
Subordinated units | $ | 0.49 | $ | 0.30 | $ | 1.40 | $ | 0.68 | ||||||||
Weighted-average limited partner units outstanding: | ||||||||||||||||
Common units – public (basic) | 17,250 | 17,250 | 17,250 | 17,250 | ||||||||||||
Common units – public (diluted) | 17,250 | 17,251 | 17,250 | 17,251 | ||||||||||||
Common units – Valero (basic and diluted) | 13,448 | 11,540 | 13,029 | 11,540 | ||||||||||||
Subordinated units – Valero (basic and diluted) | 28,790 | 28,790 | 28,790 | 28,790 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Operating highlights (a): | ||||||||||||||||
Pipeline transportation: | ||||||||||||||||
Pipeline transportation revenues (b) | $ | 21,322 | $ | 20,602 | $ | 61,164 | $ | 51,842 | ||||||||
Pipeline transportation throughput (BPD) (i) | 960,410 | 955,285 | 964,380 | 879,192 | ||||||||||||
Average pipeline transportation revenue per barrel (j) | $ | 0.24 | $ | 0.23 | $ | 0.23 | $ | 0.22 | ||||||||
Terminaling: | ||||||||||||||||
Terminaling revenues (b) | $ | 40,580 | $ | 12,827 | $ | 102,599 | $ | 42,343 | ||||||||
Terminaling throughput (BPD) | 1,335,659 | 479,923 | 1,176,216 | 560,139 | ||||||||||||
Average terminaling revenue per barrel (j) | $ | 0.33 | $ | 0.29 | $ | 0.32 | $ | 0.28 | ||||||||
Storage revenues | $ | 135 | $ | 237 | $ | 405 | $ | 813 | ||||||||
Total operating revenues – related party | $ | 62,037 | $ | 33,666 | $ | 164,168 | $ | 94,998 | ||||||||
Capital expenditures (a): | ||||||||||||||||
Maintenance | $ | 326 | $ | 3,870 | $ | 4,549 | $ | 12,218 | ||||||||
Expansion | 868 | 8,729 | 2,697 | 42,582 | ||||||||||||
Total capital expenditures | 1,194 | 12,599 | 7,246 | 54,800 | ||||||||||||
Less: Capital expenditures attributable to Predecessor | — | 9,574 | 3,693 | 48,551 | ||||||||||||
Capital expenditures attributable to Partnership | $ | 1,194 | $ | 3,025 | $ | 3,553 | $ | 6,249 | ||||||||
Other financial information: | ||||||||||||||||
Distribution declared per unit | $ | 0.3075 | $ | 0.2400 | $ | 0.8775 | $ | 0.6750 | ||||||||
EBITDA attributable to Partnership (k) | $ | 43,580 | $ | 22,204 | $ | 114,127 | $ | 51,627 | ||||||||
Distributable cash flow (k) | $ | 41,880 | $ | 21,131 | $ | 109,383 | $ | 50,346 | ||||||||
Distribution declared: | ||||||||||||||||
Limited partner units – public | $ | 5,307 | $ | 4,141 | $ | 15,145 | $ | 11,647 | ||||||||
Limited partner units – Valero | 13,471 | 9,679 | 37,547 | 27,223 | ||||||||||||
General partner units – Valero | 1,386 | 282 | 3,194 | 793 | ||||||||||||
Total distribution declared | $ | 20,164 | $ | 14,102 | $ | 55,886 | $ | 39,663 | ||||||||
Coverage ratio (k) | 2.08x | 1.50x | 1.96x | 1.27x | ||||||||||||
September 30, | December 31, | |||||||||||||||
2015 | 2014 | |||||||||||||||
Balance sheet data (a): | ||||||||||||||||
Cash and cash equivalents | $ | 50,563 | $ | 236,579 | ||||||||||||
Total assets | 706,188 | 891,764 | ||||||||||||||
Current portion of debt and capital lease obligations | 1,183 | 1,200 | ||||||||||||||
Debt and capital lease obligations, less current portion | 335,381 | 1,519 | ||||||||||||||
Total debt and capital lease obligations | 336,564 | 2,719 | ||||||||||||||
Partners’ capital | 360,389 | 880,910 | ||||||||||||||
Working capital | 55,866 | 238,365 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Reconciliation of net income to EBITDA and distributable cash flow (a)(k): | ||||||||||||||||
Net income | $ | 31,428 | $ | 5,658 | $ | 77,695 | $ | 16,335 | ||||||||
Plus: | ||||||||||||||||
Depreciation expense | 10,684 | 7,178 | 25,887 | 19,226 | ||||||||||||
Interest and debt expense, net of capitalized interest | 1,353 | 214 | 3,365 | 663 | ||||||||||||
Income tax expense (benefit) | 115 | 129 | (62 | ) | 436 | |||||||||||
EBITDA | 43,580 | 13,179 | 106,885 | 36,660 | ||||||||||||
Less: EBITDA attributable to Predecessor | — | (9,025 | ) | (7,242 | ) | (14,967 | ) | |||||||||
EBITDA attributable to Partnership | 43,580 | 22,204 | 114,127 | 51,627 | ||||||||||||
Plus: | ||||||||||||||||
Adjustments related to minimum throughput commitments | — | (235 | ) | 4 | 272 | |||||||||||
Projects prefunded by Valero | — | 418 | 589 | 2,046 | ||||||||||||
Other | — | — | 384 | — | ||||||||||||
Less: | ||||||||||||||||
Cash interest paid | 1,374 | 221 | 2,952 | 686 | ||||||||||||
Income taxes paid | — | — | 441 | 9 | ||||||||||||
Maintenance capital expenditures | 326 | 1,035 | 2,328 | 2,904 | ||||||||||||
Distributable cash flow | $ | 41,880 | $ | 21,131 | $ | 109,383 | $ | 50,346 | ||||||||
Reconciliation of net cash provided by operating activities to EBITDA and distributable cash flow (a)(k): | ||||||||||||||||
Net cash provided by operating activities | $ | 43,419 | $ | 10,326 | $ | 98,880 | $ | 33,625 | ||||||||
Plus: | ||||||||||||||||
Changes in current assets and current liabilities | (1,430 | ) | 2,515 | 4,643 | 1,935 | |||||||||||
Changes in deferred charges and credits and other operating activities, net | 118 | (10 | ) | (341 | ) | 44 | ||||||||||
Interest and debt expense, net of capitalized interest | 1,353 | 214 | 3,365 | 663 | ||||||||||||
Current income tax expense | 120 | 134 | 338 | 393 | ||||||||||||
EBITDA | 43,580 | 13,179 | 106,885 | 36,660 | ||||||||||||
Less: EBITDA attributable to Predecessor | — | (9,025 | ) | (7,242 | ) | (14,967 | ) | |||||||||
EBITDA attributable to Partnership | 43,580 | 22,204 | 114,127 | 51,627 | ||||||||||||
Plus: | ||||||||||||||||
Adjustments related to minimum throughput commitments | — | (235 | ) | 4 | 272 | |||||||||||
Projects prefunded by Valero | — | 418 | 589 | 2,046 | ||||||||||||
Other | — | — | 384 | — | ||||||||||||
Less: | ||||||||||||||||
Cash interest paid | 1,374 | 221 | 2,952 | 686 | ||||||||||||
Income taxes paid | — | — | 441 | 9 | ||||||||||||
Maintenance capital expenditures | 326 | 1,035 | 2,328 | 2,904 | ||||||||||||
Distributable cash flow | $ | 41,880 | $ | 21,131 | $ | 109,383 | $ | 50,346 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Comparison of ratio of net income attributable to partners divided by total distribution declared to coverage ratio (k): | ||||||||||||||||
Net income attributable to partners | $ | 31,428 | $ | 17,543 | $ | 87,211 | $ | 40,225 | ||||||||
Total distribution declared | $ | 20,164 | $ | 14,102 | $ | 55,886 | $ | 39,663 | ||||||||
Ratio of net income attributable to partners divided by total distribution declared | 1.56x | 1.24x | 1.56x | 1.01x | ||||||||||||
Coverage ratio: Distributable cash flow divided by total distribution declared | 2.08x | 1.50x | 1.96x | 1.27x |
Nine Months Ended September 30, 2015 | ||||||||||||
Valero Energy Partners LP | Houston and St. Charles Terminal Services Business (January 1, 2015 to February 28, 2015) | Valero Energy Partners LP (Currently Reported) | ||||||||||
Operating revenues – related party (b) | $ | 164,168 | $ | — | $ | 164,168 | ||||||
Costs and expenses: | ||||||||||||
Operating expenses | 40,085 | 7,195 | 47,280 | |||||||||
General and administrative expenses | 10,122 | 47 | 10,169 | |||||||||
Depreciation expense | 23,613 | 2,274 | 25,887 | |||||||||
Total costs and expenses | 73,820 | 9,516 | 83,336 | |||||||||
Operating income (loss) | 90,348 | (9,516 | ) | 80,832 | ||||||||
Other income, net | 166 | — | 166 | |||||||||
Interest and debt expense, net of capitalized interest | (3,365 | ) | — | (3,365 | ) | |||||||
Income (loss) before income taxes | 87,149 | (9,516 | ) | 77,633 | ||||||||
Income tax benefit | (62 | ) | — | (62 | ) | |||||||
Net income (loss) | 87,211 | (9,516 | ) | 77,695 | ||||||||
Less: Net loss attributable to Predecessor | — | (9,516 | ) | (9,516 | ) | |||||||
Net income attributable to partners | $ | 87,211 | $ | — | $ | 87,211 |
Three Months Ended September 30, 2014 | ||||||||||||
Valero Energy Partners LP (Previously Reported) | Houston and St. Charles Terminal Services Business (July 1, 2014 to September 30, 2014) | Valero Energy Partners LP (Currently Reported) | ||||||||||
Operating revenues – related party (b) | $ | 33,666 | $ | — | $ | 33,666 | ||||||
Costs and expenses: | ||||||||||||
Operating expenses | 8,553 | 8,957 | 17,510 | |||||||||
General and administrative expenses | 3,065 | 68 | 3,133 | |||||||||
Depreciation expense | 4,318 | 2,860 | 7,178 | |||||||||
Total costs and expenses | 15,936 | 11,885 | 27,821 | |||||||||
Operating income (loss) | 17,730 | (11,885 | ) | 5,845 | ||||||||
Other income, net | 156 | — | 156 | |||||||||
Interest and debt expense, net of capitalized interest | (214 | ) | — | (214 | ) | |||||||
Income (loss) before income taxes | 17,672 | (11,885 | ) | 5,787 | ||||||||
Income tax expense | 129 | — | 129 | |||||||||
Net income (loss) | 17,543 | (11,885 | ) | 5,658 | ||||||||
Less: Net loss attributable to Predecessor | — | (11,885 | ) | (11,885 | ) | |||||||
Net income attributable to partners | $ | 17,543 | $ | — | $ | 17,543 |
Nine Months Ended September 30, 2014 | ||||||||||||
Valero Energy Partners LP (Previously Reported) | Houston and St. Charles Terminal Services Business (January 1, 2014 to September 30, 2014) | Valero Energy Partners LP (Currently Reported) | ||||||||||
Operating revenues – related party (b) | $ | 94,998 | $ | — | $ | 94,998 | ||||||
Costs and expenses: | ||||||||||||
Operating expenses | 24,027 | 26,035 | 50,062 | |||||||||
General and administrative expenses | 9,392 | 199 | 9,591 | |||||||||
Depreciation expense | 12,087 | 7,139 | 19,226 | |||||||||
Total costs and expenses | 45,506 | 33,373 | 78,879 | |||||||||
Operating income (loss) | 49,492 | (33,373 | ) | 16,119 | ||||||||
Other income, net | 1,315 | — | 1,315 | |||||||||
Interest and debt expense, net of capitalized interest | (663 | ) | — | (663 | ) | |||||||
Income (loss) before income taxes | 50,144 | (33,373 | ) | 16,771 | ||||||||
Income tax expense | 436 | — | 436 | |||||||||
Net income (loss) | 49,708 | (33,373 | ) | 16,335 | ||||||||
Less: Net income (loss) attributable to Predecessor | 9,483 | (33,373 | ) | (23,890 | ) | |||||||
Net income attributable to partners | $ | 40,225 | $ | — | $ | 40,225 |
(a) | References to “Partnership,” “we,” “us,” or “our” refer to Valero Energy Partners LP, one or more of its subsidiaries, or all of them taken as a whole for periods after December 16, 2013, the date the Partnership completed its initial public offering (IPO). For periods prior to the IPO and effective dates of subsequent acquisitions from Valero, those terms refer to Valero Energy Partners LP Predecessor, our Predecessor for accounting purposes. References in these notes to “Valero” may refer to Valero Energy Corporation, one or more of its subsidiaries, or all of them taken as a whole, other than Valero Energy Partners LP, any of its subsidiaries, or its general partner. |
(b) | Operating revenues include amounts attributable to our Predecessor. Prior to being acquired by us, the Texas Crude Systems Business generated revenues by providing fee-based transportation and terminaling services to Valero, but the Houston and St. Charles Terminal Services Business did not charge Valero for services provided and did not generate revenues. Effective with the date of each acquisition, we entered into additional schedules to our commercial agreements with Valero with respect to the services we provide to Valero using the assets of the acquired businesses. This resulted in changes to pipeline and terminaling throughput fees previously charged to Valero for services provided by certain assets and new charges for terminaling services provided by other assets. |
(c) | The decrease in operating expenses for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was due primarily to lower maintenance expense of $2.9 million at the St. Charles terminal and the Lucas crude system. The decrease in maintenance expense was partially offset by an increase in insurance expense of $596,000 as a result of the acquired assets being covered under our own insurance policies. Prior to the acquisition, our Predecessor was allocated a portion of Valero’s insurance costs. |
(d) | The increase in general and administrative expenses for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was due primarily to higher transaction costs (legal and investment advisor fees) of $274,000 associated with the acquisition of businesses from Valero. During the three months ended September 30, 2015, we incurred transaction costs of $423,000 in connection with the October 1, 2015 acquisition of the Corpus Christi Terminal Services Business. During the three months ended September 30, 2014, we incurred $149,000 in transactions costs in connection with the July 1, 2014 acquisition of the Texas Crude Systems Business. |
(e) | The increase in depreciation expense for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was due primarily to $2.8 million in accelerated depreciation related to the retirement of certain assets in the McKee Crude System during the three months ended September 30, 2015. |
(f) | The decrease in “other income, net” for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014 was due primarily to a decrease in interest income (net of bank fees) of $127,000 and $545,000, respectively, attributable to a reduced cash balance during the three and nine months ended September 30, 2015. In addition, scrap metal sales decreased $409,000 and right-of-way fees decreased $141,000 during the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. |
(g) | The increase in “interest and debt expense, net of capitalized interest” for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014 was due primarily to interest expense incurred on borrowings under our revolving credit facility and under the subordinated credit agreement with Valero as discussed in Note (a). Interest expense on this indebtedness was $1.2 million and $3.0 million for the three and nine months ended September 30, 2015, respectively. |
(h) | Our income tax expense (benefit) is associated with the Texas margin tax. During the nine months ended September 30, 2015, we reduced our deferred income tax liabilities due to a reduction in the relative amount of revenue we generate in Texas compared to our total revenue. This reduction was a result of the acquisition of the Houston and St. Charles Terminal Services Business (which includes operations in Louisiana). In addition, in June 2015, the Texas margin tax rate was reduced from 1 percent to 0.75 percent. |
(i) | Represents the sum of volumes transported through each separately tariffed pipeline segment. |
(j) | Management uses average revenue per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate average revenue per barrel; different companies may calculate it in different ways. We calculate average revenue per barrel as revenue divided by throughput for the period. Throughput can be derived by multiplying the throughput barrels per day (BPD) by the number of days in the period. Investors and analysts use this financial measure to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered as an alternative to revenues presented in accordance with U.S. generally accepted accounting principles (GAAP). |
(k) | We define EBITDA as net income before income tax expense, interest expense, and depreciation expense. We define distributable cash flow as EBITDA less cash payments during the period for interest, income taxes, and maintenance capital expenditures, plus adjustments related to minimum throughput commitments, capital projects prefunded by Valero, and certain other items. We define coverage ratio as the ratio of distributable cash flow to the total distribution declared. |
• | 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. |