UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2003
VALERO L.P.
(Exact name of registrant as specified in its charter)
Delaware 1-16417 74-2956831
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
One Valero Place
San Antonio, Texas 78212
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 370-2000
------------------------------
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated July 28, 2003.
Item 12. Results of Operations and Financial Condition.
On July 28, 2003, Valero L.P. (the "Partnership") issued a press release
announcing financial results for the quarter ended June 30, 2003. A copy of the
press release is furnished with this report as Exhibit 99.1, and is incorporated
herein by reference. The press release discloses certain financial measures
(EBITDA and distributable cash flow) that are non-GAAP financial measures as
defined under SEC rules. The press release furnishes a reconciliation of these
non-GAAP financial measures to their nearest GAAP financial measures. Reasons
for the Partnership's use of these non-GAAP financial measures are disclosed in
the Partnership's annual report on Form 10-K for the year ended December 31,
2002, under the caption "Item 6. Selected Financial Data."
The information in this report is being furnished, not filed, pursuant to Item
12 of Form 8-K. Accordingly, the information in Item 12 of this report will not
be incorporated by reference into any registration statement filed by the
Partnership under the Securities Act of 1933, as amended, unless specifically
identified therein as being incorporated therein by reference.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALERO L.P.
By: Riverwalk Logistics, L.P.
its general partner
By: Valero GP, LLC
its general partner
Date: July 28, 2003 By: /s/Bradley C. Barron
--------------------------
Name: Bradley C. Barron
Title: Corporate Secretary
3
EXHIBIT INDEX
Number Exhibit
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99.1 Press Release dated July 28, 2003.
4
Exhibit 99.1
Valero L.P. Reports
Second Quarter Earnings and
Announces Distribution Increase
SAN ANTONIO, July 28, 2003 -- Valero L.P. (NYSE: VLI) today announced net income
applicable to limited partners of $17.1 million, or $0.79 per unit, for the
second quarter of 2003, compared to $14.6 million, or $0.76 per unit, for the
second quarter of 2002. For the first six months of 2003, net income applicable
to limited partners was $28.8 million, or $1.40 per unit, compared to $24.2
million, or $1.26 per unit, for the same period last year. Distributable cash
flow before the general partner's interest for the second quarter was $24.2
million, compared to $18.1 million for the second quarter of 2002.
With respect to the quarterly distribution to unitholders payable for the second
quarter of 2003, Valero L.P. today announced that it has declared a distribution
of $0.75 per unit payable August 14, 2003 to holders of record as of August 5,
2003. This distribution represents an increase of $.05 per unit over the
distribution for the first quarter paid in May 2003.
The increase in net income for the quarter was primarily related to the benefit
from the pipeline and feedstock storage assets acquired March 18, 2003 from
Valero Energy Corporation. The increase was partially offset by the effect of
reduced throughput volumes related to unplanned refinery outages at Valero
Energy's Benicia, Texas City and Ardmore refineries during the quarter.
"We are pleased to be able to report both good financial results and another
increase in the quarterly distribution for the partnership," said Curt
Anastasio, Chief Executive Officer. "This represents the third five-cent
increase in the quarterly distribution since we went public in April 2001 and
reflects the continuing successful growth of the partnership. Our most recent
acquisition of pipelines and feedstock storage assets from Valero Energy in
March of this year continues to perform well and is exceeding our initial
expectations."
"We remain in a great position to grow our asset base. Our primary goal
continues to be to further increase cash distributions to unitholders through
additional accretive acquisitions and internal growth opportunities while
maintaining our solid financial position," said Anastasio.
A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT)
today, (July 28), to discuss the financial and operational results for the
second quarter of 2003. Anyone interested in listening to the presentation can
call 800/901-5213, ID 98952190, or listen via the internet on the company's web
site at www.valerolp.com.
Valero L.P. owns and operates crude oil and refined product pipelines, refined
product terminals and refinery feedstock storage assets primarily in Texas, New
Mexico, Colorado, Oklahoma and California. The partnership transports refined
products from Valero Energy's refineries to established and growing markets in
the Mid-Continent, Southwest and the Texas-Mexico border region of the United
States. In addition, its pipelines and storage facilities primarily supply six
of Valero Energy's key refineries with crude oil and other feedstocks as well as
provide access to domestic and foreign crude oil sources.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the
Securities Litigation Reform Act of 1995 regarding future events and the future
financial performance of Valero L.P. All forward-looking statements are based on
the partnership's beliefs as well as assumptions made by and information
currently available to the partnership. These statements reflect the
partnership's current views with respect to future events and are subject to
various risks, uncertainties and assumptions. These risks, uncertainties and
assumptions are discussed in Valero L.P.'s 2002 annual report on Form 10-K and
subsequent filings with the Securities and Exchange Commission.
For more information, visit Valero L.P.'s web site at www.valerolp.com.
-30-
Valero L.P.
Consolidated Financial Information
June 30, 2003 and 2002
(unaudited, in thousands, except unit data,
per unit data and barrel information)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Statement of Income Data (Note 1):
Revenues $ 47,542 $ 30,030 $ 79,358 $ 56,054
----------- ----------- ----------- -----------
Costs and expenses:
Operating expenses 16,335 9,565 27,996 18,749
General and administrative expenses 1,670 1,698 3,514 3,487
Depreciation and amortization 7,269 3,876 11,552 8,231
----------- ----------- ----------- -----------
Total costs and expenses 25,274 15,139 43,062 30,467
----------- ----------- ----------- -----------
Operating income 22,268 14,891 36,296 25,587
Equity income from Skelly-Belvieu
Pipeline Company 600 844 1,331 1,522
Interest expense, net (Note 2) (4,736) (796) (7,113) (1,352)
----------- ----------- ----------- -----------
Income before income tax expense 18,132 14,939 30,514 25,757
Income tax expense (Note 3) - - - 395
----------- ----------- ----------- -----------
Net income 18,132 14,939 30,514 25,362
Net income applicable to general partner
including incentive distributions (Note 3) (1,066) (299) (1,690) (1,144)
----------- ----------- ----------- -----------
Net income applicable to limited partners $ 17,066 $ 14,640 $ 28,824 $ 24,218
=========== =========== =========== ===========
Net income per unit applicable to limited
partners (Note 4) $ 0.79 $ 0.76 $ 1.40 $ 1.26
Weighted average number of limited
partnership units outstanding (Note 5) 21,702,990 19,253,894 20,635,667 19,247,789
Earnings before interest, taxes and
depreciation and amortization (EBITDA, Note 6) $ 30,137 $ 19,611 $ 49,179 $ 35,340
Distributable cash flow (Note 6) 24,234 18,081 39,724 32,558
Operating Data (barrels/day):
Crude oil pipeline throughput 348,390 360,558 340,619 336,605
Refined product pipeline throughput 396,639 303,654 347,000 283,375
Refined product terminal throughput 233,881 179,915 205,495 177,877
Crude oil tank throughput 475,280 - 277,468 -
June 30, June 30, March 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Balance Sheet Data:
Long-term debt, including current portion (Note 2) $ 365,231 $ 101,076 $ 383,891 $ 109,658
Partners' equity (Note 5) 385,636 291,932 362,590 293,895
Debt-to-capitalization ratio 48.6% 25.7% 51.4% 27.2%
See accompanying notes on the following page.
Valero L.P.
Consolidated Financial Information - Continued
June 30, 2003 and 2002
Notes:
1. Effective March 18, 2003, Valero L.P. and Valero Energy Corporation
(Valero Energy) entered into (i) a contribution agreement whereby Valero
Energy contributed to Valero Logistics Operations, L.P. (Valero
Logistics) certain crude oil and other feedstock tank assets in exchange
for an aggregate amount of $200,000,000 in cash, and (ii) a contribution
agreement whereby Valero Energy contributed to Valero Logistics certain
refined product pipelines and refined product terminals (referred to as
the South Texas Pipelines and Terminals) in exchange for an aggregate
amount of $150,000,000 in cash. Effective January 7, 2003, Valero L.P.
acquired an asphalt terminal in Pittsburg, California from Telfer Oil
Company for $15,100,000. The statement of income for the three months
ended June 30, 2003, includes $8,470,000 of operating income related to
the tank assets and the South Texas Pipelines and Terminals and $368,000
of operating income related to the Telfer asphalt terminal. The
statement of income for the six months ended June 30, 2003, includes
$10,373,000 of operating income related to the tank assets and the South
Texas Pipelines and Terminals for the period from March 19, 2003 through
June 30, 2003, and $911,000 of operating income related to the Telfer
asphalt terminal. Partially offsetting the increase in operating income
resulting from the acquisitions is an increase in net interest expense
due to additional borrowings to partially fund the 2003 acquisitions.
2. Interest expense increased for the three months and six months ended
June 30, 2003 as compared to the three months and six months ended June
30, 2002 primarily due to interest expense related to $250,000,000 of
6.05% senior notes issued on March 18, 2003 and $100,000,000 of 6.875%
senior notes issued in July of 2002. The proceeds from the 6.875% senior
note offering were used to repay borrowings under the variable-rate
revolving credit facility. The private placement of the 6.05% senior
notes and $25,000,000 of borrowings under the revolving credit facility
were used to fund a portion of the acquisitions discussed in Note 1 and
the redemption of common units discussed in Note 5. During the six
months ended June 30, 2003, Valero Logistics entered into various
interest rate swaps, which effectively convert $167,500,000 of fixed
rate debt to variable rate debt.
3. Net income for the six months ended June 30, 2002 includes $650,000 (net
of income tax expense of $395,000) related to the Wichita Falls Business
for the month ended January 31, 2002. Such net income was allocated
entirely to the general partner.
4. Net income is allocated between limited partners and the general
partner's interests. Then such apportioned net income applicable to the
limited partners is divided by the weighted average number of limited
partnership units outstanding for such class. Net income per unit
applicable to limited partners for the three months ended June 30, 2003
was impacted by the net increase in common units outstanding as a result
of the March 2003 common unit offering and the April 2003 overallotment
exercise. As a result, the net income per unit applicable to limited
partners for the first and second quarters of 2003 does not equal the
year-to-date sum of the 2003 per unit amount.
5. On March 18, 2003, Valero L.P. redeemed from Valero Energy 3,809,750
common units for $134,065,000 in cash, using a portion of the proceeds
from the $250,000,000 private placement of 6.05% senior notes discussed
in Note 2. Also on March 18, 2003, Valero L.P. closed on a public
offering of 5,750,000 common units for total proceeds of $202,342,000,
net of underwriters' discount. On April 16, 2003, Valero L.P. closed on
the exercise of a portion of the overallotment option by selling 581,000
common units for total proceeds of $20,445,000, net of underwriters'
discount. As a result of these common unit transactions, Valero Energy's
aggregate ownership interest in Valero L.P. was reduced to 48.2%,
including Riverwalk Logistics, L.P.'s 2% general partner interest.
Valero L.P.
Consolidated Financial Information - Continued
June 30, 2003 and 2002
6. The following is a reconciliation of income before income tax expense to
EBITDA and distributable cash flow (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Income before income tax expense $ 18,132 $ 14,939 $ 30,514 $ 25,757
Plus interest expense, net 4,736 796 7,113 1,352
Plus depreciation and amortization 7,269 3,876 11,552 8,231
--------- --------- --------- ---------
EBITDA 30,137 19,611 49,179 35,340
Less equity income from Skelly-Belvieu
Pipeline Company (600) (844) (1,331) (1,522)
Less interest expense, net (4,736) (796) (7,113) (1,352)
Less reliability capital expenditures (1,446) (741) (2,638) (1,530)
Plus distributions from Skelly-Belvieu
Pipeline Company 879 851 1,627 1,622
--------- --------- ---------- ----------
Distributable cash flow $ 24,234 $ 18,081 $ 39,724 $ 32,558
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