Delaware | 4610 | 84-0470977 | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Gislar Donnenberg
Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas 77002 (713) 220-4200 |
R. Joel Swanson
Joshua Davidson Baker Botts L.L.P. One Shell Plaza 910 Louisiana Street Houston, Texas 77002 (713) 229-1234 |
The information
in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.
|
| Our only cash generating assets are our indirect ownership interests in Valero L.P., and our cash flow is therefore completely dependent upon the ability of Valero L.P. to make cash distributions to its partners, including us. |
| Valero L.P.s unitholders, excluding the owner of Valero L.P.s general partner, have the right to remove Valero L.P.s general partner by a simple majority vote, which would cause us to divest our indirect general partner interest and incentive distribution rights in Valero L.P. in exchange for cash or common units of Valero L.P. and cause us to lose our ability to manage Valero L.P. |
| Assuming an initial public offering price of $ per unit, you will experience immediate and substantial dilution of $14.40 per unit. |
| Although we manage Valero L.P. through our indirect ownership of its general partner, Valero L.P.s general partner owes fiduciary duties to Valero L.P. and Valero L.P.s unitholders, which may conflict with our interests. |
| If we or Valero L.P. were treated as a corporation for federal or state income tax purposes, then our cash available for distribution to you would be substantially reduced. |
| Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income. |
Per Unit | Total | |||
Initial public offering price
|
$ | $ | ||
Underwriting discount
|
$ | $ | ||
Proceeds to selling unitholders (before expenses)
|
$ | $ |
Citigroup | Goldman, Sachs & Co. | Morgan Stanley | RBC Capital Markets | UBS Investment Bank |
Wachovia Securities |
Credit Suisse |
Deutsche Bank Securities |
JPMorgan |
KeyBanc Capital Markets |
Raymond James |
Oppenheimer & Co. |
Petrie Parkman & Co. |
Sanders Morris Harris |
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Quantitative and Qualitative Disclosures about Market Risk
|
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Valero L.P.s Relationship with Valero Energy
|
142 | |||||
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ii
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F-1 | ||||||||
A-1 | ||||||||
Certificate of Formation of UDS Logistics, LLC | ||||||||
Certificate of Amendment of Certificate of Formation | ||||||||
Opinion of Andrews Kurth LLP | ||||||||
Opinion of Andrews Kurth LLP | ||||||||
Long-Term Incentive Plan | ||||||||
Second Amendment to 5-Year Revolving Credit Agreement | ||||||||
First Amendment to 5-Year Term Credit Agreement | ||||||||
Second Amendment to 5-Year Term Credit Agreement | ||||||||
Third Amendment to 5-Year Revolving Credit Agreement | ||||||||
List of Subsidiaries | ||||||||
Consent of KPMG LLP | ||||||||
Consent of Ernst & Young LLP |
iii
1
2
3
4
5
6
7
the 2% general partner interest in Valero L.P., which we hold
through our 100% ownership interest in Riverwalk Logistics, L.P.;
100% of the incentive distribution rights issued by Valero L.P.,
which entitle us to receive increasing percentages of the cash
distributed by Valero L.P., currently at the maximum percentage
of 23%; and
10,225,491 common units of Valero L.P. representing a 21.4%
limited partner interest in Valero L.P.
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the increases in Valero L.P.s per unit quarterly
distribution from $0.60 declared and paid for the third quarter
of 2001 to $0.885 declared and paid for the first quarter of
2006; and
the increases in Valero L.P.s distributions with respect
to the 2% general partner interest resulting from the issuance
of a total of 31,420,855 common units by Valero L.P. during such
period to finance acquisitions and capital improvements.
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(a)
Actual distributions paid to Valero GP Holdings for quarters
prior to the March 18, 2003 redemption were as follows (in
millions, except per unit amounts):
Total Distribution Paid to
Per Unit Distribution
Valero GP Holdings, LLC
$
0.501
(b)
$
7.2
0.600
8.6
0.600
8.7
0.650
9.5
0.700
10.5
0.700
10.5
0.700
10.5
(b)
The second quarter 2001 distribution was prorated for the period
from April 16, 2001, the effective date of Valero
L.P.s initial public offering, to June 30, 2001.
8.0% of all cash distributed in a quarter after $0.60 per
unit has been distributed with respect to all units of Valero
L.P. for that quarter until $0.66 per unit has been
distributed; and
23.0% of all cash distributed in a quarter after $0.66 per
unit has been distributed with respect to all units of Valero
L.P. for that quarter.
Valero L.P.s 46,809,749 common units outstanding as of
May 8, 2006; and
our ownership of the 2% general partner interest in Valero L.P.,
the incentive distribution rights, and 10,225,491 common units.
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(a)
This represents the most recent distribution (first
quarter 2006) presented on an annualized basis.
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our public unitholders will own an approximate 39% limited
liability company interest in us represented by
16,500,000 units;
our current owners, subsidiaries of Valero Energy, will own an
approximate 61% limited liability company interest in us
represented by 26,000,000 units; and
we will continue to own a 100% membership interest in Valero GP,
LLC and Riverwalk Holdings, LLC, which own the 2% general
partner interest, 100% of the incentive distribution rights and
a 21.4% limited partner interest in Valero L.P.
Valero GP, LLC will provide all employees for us; and
Valero GP, LLC will provide us with all executive management,
accounting, legal, cash management, corporate finance and other
administrative services.
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8
9
10
11
12
13
14
15
16
17
18
19
20
Units offered by subsidiaries of Valero Energy
Corporation
16,500,000 units or 18,975,000 units if the
underwriters exercise their option to purchase additional units
in full.
Units outstanding after this offering
42,500,000 units.
Use of proceeds
We will not receive any of the proceeds of this offering.
Subsidiaries of Valero Energy will receive all the proceeds of
this offering.
Cash distributions
We expect to make an initial quarterly cash distribution of
$0.30 per unit to the extent we have sufficient cash from
operations after establishment of cash reserves and payment of
fees and expenses. Please read Our Cash Distribution
Policy and Restrictions on Distributions Our Initial
Distribution Rate.
We expect to pay you a prorated distribution for the initial
quarter during which we are a publicly traded limited liability
company. This distribution will be paid for the period beginning
on the closing date of this offering and ending on the last day
of that fiscal quarter. For example, in November 2006, we expect
to pay you a distribution for the period from the closing date
of this offering to and including September 30, 2006.
However, we cannot assure you that we will declare or pay any
distributions.
Limited call right
If at any time our affiliates own more than 80% of our
outstanding units, our affiliates have the right, but not the
obligation, to purchase all of the remaining units at a price
not less than the then current market price of the units. At the
completion of this offering, our current owners will own
approximately 61% of our units.
Limited voting rights
If any person or group other than our affiliates acquires
beneficial ownership of 20% or more of any class of our units,
that person or group loses voting rights on all of its units.
This loss of voting rights does not apply to any person or group
that acquires all of its units from our affiliates and any
transferees of that person or group approved by our board of
directors or to any person or group who acquires the units with
the prior approval of our board of directors.
Staggered board
We will have a staggered board of directors as a result of which
only a portion of the members of our board of directors will be
elected each year. Removal of directors will require a meeting
of unitholders and cannot be done by written consent.
Preferred unit purchase rights
Upon closing of this offering, we expect to adopt a preferred
unit purchase rights plan, which will be designed to cause
substantial dilution to anyone who may attempt to acquire us on
terms not approved by our board of directors upon any triggering
event, such as the acquisition of 15% of our outstanding units.
Estimated ratio of taxable income to distributions
We estimate that if you own the units you purchase in this
offering through the record date for distributions for the
period ending December 31, 2008, you will be allocated, on
a cumulative basis, an amount of federal taxable income for that
period that will be less than 20% of the cash distributed with
respect to that period. Please read Material Tax
Consequences Tax Consequences of Unit
Ownership for the basis of this estimate.
Exchange listing
We intend to apply to list our units on the New York Stock
Exchange under the symbol VEH.
Table of Contents
67 refined product terminal facilities providing approximately
58.2 million barrels of storage capacity;
8,389 miles of refined product pipelines, including
2,000 miles of anhydrous ammonia pipelines, with 21
associated terminals providing storage capacity of
4.9 million barrels;
854 miles of crude oil pipelines with 11 associated storage
tanks providing storage capacity of 1.7 million
barrels; and
60 crude oil storage tanks providing storage capacity of
12.5 million barrels.
continuous improvement of its operations through initiatives
focused on matters such as improving safety and environmental
stewardship, cost controls and asset reliability and integrity;
external growth initiatives from acquisitions that meet its
financial and strategic criteria; and
internal growth initiatives comprised of enhancing the
utilization of its existing assets by expanding its business
with current and new customers as well as investing in accretive
expansion projects.
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Valero L.P.s Common Units
Our Units
Valero L.P. pays its limited partners and general partner
quarterly distributions equal to the cash it receives from its
operations, less certain reserves for expenses and other uses of
cash. Valero L.P.s general partner currently has a 2%
general partner interest in Valero L.P. and owns the incentive
distribution rights in Valero L.P.
We expect to pay our unitholders quarterly distributions equal
to the cash we receive from Valero L.P., less certain reserves
for expenses and other uses of cash.
Valero L.P. is a pass-through entity that is not subject to an
entity-level federal income tax.
Similarly, we are a pass-through entity that is not subject to
an entity-level federal income tax.
Valero L.P. expects that holders of its common units will
benefit for a period of time from tax basis adjustments and
remedial allocations of deductions so that they will be
allocated a relatively small amount of federal taxable income
compared to the cash distributed to them.
We also expect that our unitholders will benefit for a period of
time from tax basis adjustments as a result of our indirect
ownership of interests in Valero L.P. However, our ownership of
the incentive distribution rights will cause more taxable income
to be allocated to us from Valero L.P. Therefore, we expect the
ratio of our taxable income to the distributions you will
receive to be higher than the ratio of taxable income to the
distributions received by the common unitholders of Valero L.P.
Moreover, if Valero L.P. is successful in increasing its
distributable cash flow over time, we expect the ratio of our
taxable income to distributions will increase.
Valero L.P. common unitholders receive Schedule K-1s from Valero
L.P. reflecting the unitholders share of Valero
L.P.s items of income, gain, loss and deduction at the end
of each fiscal year.
Similarly, our unitholders will receive Schedule K-1s from us
reflecting the unitholders share of our items of income,
gain, loss and deduction at the end of each fiscal year.
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Valero L.P.s Common Units
Our Units
Assets and Operations
Valero L.P. is a publicly traded Delaware limited partnership
based in San Antonio, Texas, engaged in the crude oil and
refined product transportation, terminalling and storage
business. Valero L.P. operates terminals in the United States,
the Netherlands Antilles, Canada, Mexico, the Netherlands and
the United Kingdom.
Our only cash generating assets are our indirect ownership
interests in Valero L.P. We currently have no independent
operations. Accordingly, our financial performance and our
ability to pay cash distributions to our unitholders is
completely dependent upon the ability of Valero L.P. to make
cash distributions to its partners, including us.
Valero L.P. may issue an unlimited number of additional
partnership interests and other equity securities without
obtaining unitholder approval.
Similarly, we may issue an unlimited number of additional
limited liability company interests and other equity securities
without obtaining unitholder approval.
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Our only cash generating assets are our ownership interests in
Valero GP, LLC and Riverwalk Holdings, LLC, which own the 2%
general partner interest, 100% of the incentive distribution
rights and a 21.4% limited partner interest in Valero L.P. Our
cash flow and ability to make distributions is therefore
completely dependent upon the ability of Valero L.P. to make
cash distributions to its partners, including us. If Valero L.P.
does not make cash distributions or reduces the level of cash
distributions to its partners, we may not have sufficient cash
to pay distributions at our estimated initial quarterly
distribution level or at all.
In the future, we may not have sufficient cash to pay
distributions at our estimated initial quarterly distribution
level or to increase distributions.
Valero L.P.s unitholders, excluding the owner of Valero
L.P.s general partner, have the right to remove Valero
L.P.s general partner by a simple majority vote, which
would cause us to divest our indirect general partner interest
and incentive distribution rights in Valero L.P. in exchange for
cash or common units of Valero L.P. and cause us to lose our
ability to manage Valero L.P.
Valero L.P.s general partner, with our consent, may limit
or modify the incentive distributions we are entitled to receive
in order to facilitate the growth strategy of Valero L.P. Our
board of directors can give this consent without a vote of our
unitholders.
The amount of cash distributions that we will be able to
distribute to you will be reduced by the costs associated with
our being a public company, other general and administrative
expenses and any reserves that our board of directors believes
prudent to maintain for the proper conduct of our business and
for future distributions.
Restrictions in our anticipated credit facility could limit our
ability to make distributions to our unitholders.
Our ability to sell our ownership interests in Valero L.P. may
be limited by securities laws restrictions and liquidity
constraints.
The market price of our units could be adversely affected by
sales of substantial amounts of our units into the public
markets, including sales by our existing unitholders.
Distributions on our incentive distribution rights in Valero
L.P. are more uncertain than distributions on the common units
we hold.
Assuming an initial public offering price of $24.00 per
unit, you will experience immediate and substantial dilution of
$14.40 per unit.
Although we manage Valero L.P. through our indirect ownership of
its general partner, Valero L.P.s general partner owes
fiduciary duties to Valero L.P. and Valero L.P.s
unitholders, which may conflict with our interests.
The fiduciary duties of our officers and directors may conflict
with those of Valero L.P.s general partners officers
and directors.
When Valero Energy reduces its ownership interest such that it
owns less than 20% of us or Valero GP, LLC, Valero Energy and
its affiliates may directly compete with Valero L.P., which
could cause conflicts
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of interest and may adversely impact Valero L.P., and as a
result, our results of operations and cash available for
distribution.
Subsidiaries of Valero Energy will control us and will own a
sufficient number of our units to block any attempt to remove or
replace our board of directors.
A decline in production at the Valero Energy refineries Valero
L.P. serves or the Tesoro Mandan refinery could materially
reduce the volume of crude oil and refined petroleum products
Valero L.P. transports or stores in its assets.
Valero L.P.s future financial and operating flexibility
may be adversely affected by restrictions in its debt agreements
and by its, our and Valero Energys leverage.
Valero L.P.s subsidiary, Valero Logistics Operations, L.P.
(Valero Logistics Operations), may be unable to purchase its
senior notes upon a change of control of Valero GP Holdings.
Valero L.P. may not be able to generate sufficient cash from
operations to enable it to pay expected quarterly distributions
on its units every quarter.
Valero L.P. depends on Valero Energy for a significant portion
of its revenues and throughputs of crude oil and refined
products. Any reduction in the crude oil and refined products
that Valero L.P. transports or stores for Valero Energy, as a
result of scheduled or unscheduled refinery maintenance,
upgrades or shutdowns or otherwise, could result in a decline in
Valero L.P.s revenues, earnings and cash available to pay
distributions.
Under the pipelines and terminals usage agreement, Valero Energy
may use other transportation methods or providers for up to 25%
of the crude oil processed and refined products produced at the
Ardmore, McKee and Three Rivers refineries. Furthermore, Valero
Energy is not required to use Valero L.P.s pipelines if
there is a change in market conditions that has a material
adverse effect on Valero Energy for the transportation of crude
oil and refined products, or in the markets for refined products
served by these refineries. These factors could adversely affect
Valero L.P.s ability to make distributions to its
unitholders, including us.
Increases in natural gas and power prices could adversely affect
Valero L.P.s ability to make distributions to its
unitholders, including us.
Valero L.P.s operations are subject to federal, state and
local laws and regulations relating to environmental protection
and operational safety that could require Valero L.P. to make
substantial expenditures.
If we or Valero L.P. were treated as a corporation for federal
or state income tax purposes, then our cash available for
distribution to you would be substantially reduced.
A successful IRS contest of the federal income tax positions we
or Valero L.P. take may adversely impact the market for our or
Valero L.P.s units, and the costs of any contest will
reduce cash available for distribution to our unitholders.
Even if you do not receive any cash distributions from us, you
will be required to pay taxes on your share of our taxable
income.
The sale or exchange of 50% or more of our or Valero L.P.s
capital and profits interests, within a twelve-month period,
will result in the termination of our or Valero L.P.s
partnership for federal income tax purposes. Valero Energy
currently intends to sell its interests in us, pending market
conditions, such that 50% or more of the total interests in our
capital and profits may be sold within a twelve-month period
after the completion of this offering.
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Historical
Pro Forma
Three Months
Year Ended December 31,
Ended March 31,
Year Ended
Three Months
December 31,
Ended
2001
2002
2003
2004
2005
2005
2006
2005
March 31, 2006
(unaudited)
(unaudited)
(unaudited)
$
98,827
$
118,458
$
52,286
$
35,314
$
37,646
$
8,660
$
11,175
$
25,951
$
11,175
33,583
37,838
9,484
5,349
7,023
1,562
91
28
8
500
(e)
125
(e)
13,390
13,708
2,975
52,322
58,569
14,021
91
28
8
500
125
46,505
59,889
38,265
35,223
37,618
8,660
11,167
25,451
11,050
3,179
3,190
705
401
567
381
34
456
1
(3,811
)
(21,686
)
(20,283
)
(17,110
)
(17,778
)
(4,414
)
(4,743
)
(9,393
)
(14,109
)
(2,400
)
36,480
27,284
16,287
18,514
20,407
4,627
6,458
25,907
11,051
396
33
67
114
67
83
99
85
$
36,480
$
26,888
$
16,254
$
18,447
$
20,293
$
4,560
$
6,375
$
25,808
$
10,966
$
0.61
$
0.26
(at period end):
$
729,188
$
760,256
$
392,937
$
388,991
$
410,314
$
407,995
$
416,919
285,519
386,816
283,797
270,597
265,961
265,354
309,278
244,771
105,960
113,975
141,780
141,043
407,954
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Historical
Three Months Ended
Year Ended December 31,
March 31,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(unaudited)
$
77,132
$
60,369
$
23,033
$
22,183
$
16,731
$
3,131
$
6,432
(17,926
)
(80,607
)
(17,060
)
1,521
(19,606
)
2,520
1,286
(51,414
)
45,975
296,679
(23,632
)
2,876
(5,650
)
(7,719
)
15,872
39,130
36,013
37,964
44,745
9,703
12,661
(a)
Minority interest represents the proportionate interest of
public unitholders in the net income of Valero L.P. during the
period that Valero GP Holdings consolidated Valero L.P.
(b)
Total debt as of December 31, 2001 and 2002 includes
$26.9 million and $110.4 million, respectively, of
Valero L.P.s outstanding debt, prior to the ceasing of
consolidation of Valero L.P. on March 18, 2003. The
remainder of the debt at the end of 2001 and 2002 and all of the
debt as of December 31, 2003, 2004 and 2005 and
March 31, 2006 represents notes payable by Valero GP
Holdings to subsidiaries of Valero Energy. The pro forma total
debt as of March 31, 2006 is zero as the result of a
planned capital contribution to Valero GP Holdings by Valero
Energy subsidiaries of such notes.
(c)
Members equity in the historical balance sheet decreased
from December 31, 2002 to December 31, 2003 as a
result of the distribution to Valero GP Holdings members
of the proceeds received from the redemption by Valero L.P. of
3,809,750 common units held by Valero GP Holdings.
Members equity in the pro forma balance sheet as of
March 31, 2006 is significantly higher than the
members equity in the historical balance sheet as of the
same date due to the planned capital contribution of notes from
Valero Energy subsidiaries discussed in footnote (b) above.
(d)
Distributions received from Valero L.P. for the years ended
December 31, 2001, 2002 and 2003 include distributions
received by Valero GP Holdings prior to the ceasing of
consolidation of Valero L.P. on March 18, 2003, which were
eliminated in the combined statements of cash flows, and
therefore these amounts are not derived from the historical
statements of cash flows.
(e)
Reflects contractual amounts incurred pursuant to the
Administration Agreement. Please read Certain
Relationships and Related Transactions Related Party
Transactions.
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the acquisition of Kaneb by Valero L.P. occurred on
January 1, 2005;
the sale of certain assets acquired as part of the acquisition
of Kaneb for $455 million occurred on January 1, 2005
and that the proceeds from such sale were used to repay debt;
the sale of Martin Oil LLC, a wholly owned subsidiary of Kaneb
that was acquired as part of the acquisition of Kaneb, to Valero
Energy for $26.8 million occurred on January 1, 2005
and that the proceeds were used to repay debt; and
the sale of Valero L.P.s subsidiaries in Australia and New
Zealand, which were acquired in connection with the acquisition
of Kaneb and which Valero L.P. sold on March 30, 2006 for
$65 million plus working capital adjustments, occurred on
January 1, 2005 and that the proceeds were used to repay
debt.
Table of Contents
Historical
Pro Forma
Three Months Ended
Year Ended December 31,
March 31,
Year Ended
December 31,
2001
2002
2003
2004
2005(e)
2005
2006
2005
(unaudited)
(unaudited)
$
98,827
$
118,458
$
181,450
$
220,792
$
659,557
$
56,635
$
274,004
$
1,005,662
229,806
114,218
401,357
33,583
37,838
64,609
78,298
184,609
19,685
71,070
272,250
5,349
6,950
7,537
11,321
26,553
3,503
8,560
65,528
13,390
16,440
26,267
33,149
64,895
8,732
24,189
94,180
42,000
52,322
61,228
98,413
122,768
505,863
31,920
218,037
875,315
46,505
57,230
83,037
98,024
153,694
24,715
55,967
130,347
3,179
3,188
2,416
1,344
2,319
378
1,206
5,116
(3,811
)
(4,880
)
(15,860
)
(20,950
)
(43,625
)
(5,829
)
(15,465
)
(61,121
)
45,873
55,538
69,593
78,418
112,388
19,264
41,708
74,342
(395
)
(4,713
)
(2,119
)
8,742
45,873
55,143
69,593
78,418
107,675
19,264
39,589
$
83,084
3,398
(138
)
$
45,873
$
55,143
$
69,593
$
78,418
$
111,073
$
19,264
$
39,451
$
1.82
$
2.72
$
3.02
$
3.15
$
2.76
$
0.77
$
0.75
$
1.48
0.10
$
1.82
$
2.72
$
3.02
$
3.15
$
2.86
$
0.77
$
0.75
$
1.70
$
2.75
$
2.95
$
3.20
$
3.365
$
0.800
$
0.885
$
387,070
$
415,508
$
827,557
$
857,507
$
3,366,992
$
3,323,180
25,660
108,911
353,257
384,171
1,169,659
1,187,662
342,166
293,895
438,163
438,311
1,900,779
1,898,480
303,811
348,023
355,008
381,358
358,965
381,086
427,675
308,047
295,456
392,145
442,596
556,654
443,993
700,969
176,771
175,559
225,426
256,576
245,084
253,531
252,275
366,986
473,714
517,409
505,643
513,073
$
77,132
$
77,656
$
106,108
$
108,503
$
186,430
$
15,300
$
57,052
(17,926
)
(80,607
)
(442,350
)
(58,511
)
(89,000
)
(6,239
)
39,935
(51,414
)
28,688
318,454
(49,590
)
(77,178
)
(16,410
)
(25,703
)
(a)
Cost of product sales relates to the sale of bunker fuel. Valero
L.P. purchases bunker fuel for resale and records cost of
product sales for barrels of fuel sold.
Table of Contents
(b)
For the quarter ended June 30, 2005, Kaneb recorded a
provision for loss contingencies associated with certain legal
matters. Please read Kaneb Services LLC
Notes to Consolidated Financial Statements
Note 10. Commitments and Contingencies included
elsewhere in this prospectus.
(c)
Valero L.P. is not a taxable entity for federal and state income
tax purposes. For 2002, income tax expense relates to the
acquisition by Valero L.P. of the Wichita Falls Business from
Valero Energy. The historical and pro forma income tax amounts
for the year ended December 31, 2005 and the historical
income tax amounts for the three months ended March 31,
2006 relate to taxable, wholly owned corporate subsidiaries of
Valero L.P. that were acquired as part of the acquisition of
Kaneb. The corporate subsidiaries are primarily international
subsidiaries.
(d)
On September 30, 2005, Valero L.P. sold certain assets it
acquired as part of the acquisition of Kaneb for
$455 million, and on March 30, 2006 Valero L.P. sold
its subsidiaries in Australia and New Zealand, which were also
acquired as part of the acquisition of Kaneb, for
$65 million plus working capital adjustments. The results
of operations of these assets and subsidiaries are included in
income (loss) from discontinued operations.
(e)
The historical statement of income data for the year ended
December 31, 2005 includes the results of operations of
Kaneb from the date of acquisition, July 1, 2005, through
December 31, 2005.
Table of Contents
Our only cash generating assets are our ownership interests in Valero GP, LLC and Riverwalk Holdings, LLC, which own the 2% general partner interest, 100% of the incentive distribution rights and a 21.4% limited partner interest in Valero L.P. Our cash flow and ability to make distributions is therefore completely dependent upon the ability of Valero L.P. to make cash distributions to its partners, including us. If Valero L.P. does not make cash distributions or reduces the level of cash distributions to its partners, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or at all. |
| the amount of crude oil and refined product transported in its pipelines; | |
| throughput volumes in its terminals and storage facilities; | |
| tariff rates and fees it charges and the margins it realizes for its services; | |
| the level of its operating costs; | |
| weather conditions; | |
| domestic and foreign governmental regulations and taxes; | |
| the effect of worldwide energy conservation measures; and | |
| prevailing economic conditions. |
| its debt service requirements and restrictions on distributions contained in its current or future debt agreements; | |
| receipts or payments under interest rate swaps; | |
| the sources of cash used to fund its acquisitions; | |
| the level of capital expenditures it makes; | |
| fluctuations in its working capital needs; | |
| issuances of debt and equity securities; and | |
| adjustments in cash reserves made by Valero L.P.s general partner in its discretion. |
21
In the future, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or to increase distributions. |
| interest expense and principal payments on any indebtedness we may incur; | |
| restrictions on distributions contained in any future debt agreements; | |
| our general and administrative expenses, including expenses we will incur as a result of being a public company; | |
| expenses of our subsidiaries, including tax liabilities of our corporate subsidiaries, if any; | |
| reserves necessary for us to make the necessary capital contributions to maintain our 2% general partner interest in Valero L.P., as required by the partnership agreement of Valero L.P. upon the issuance of additional partnership securities by Valero L.P.; and | |
| reserves our board of directors believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions. |
Valero L.P.s unitholders, excluding the owner of Valero L.P.s general partner, have the right to remove Valero L.P.s general partner by a simple majority vote, which would cause us to divest our indirect general partner interest and incentive distribution rights in Valero L.P. in exchange for cash or common units of Valero L.P. and cause us to lose our ability to manage Valero L.P. |
22
Valero L.P.s general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of Valero L.P. Our board of directors can give this consent without a vote of our unitholders. |
The amount of cash distributions that we will be able to distribute to you will be reduced by the costs associated with our being a public company, other general and administrative expenses and any reserves that our board of directors believes prudent to maintain for the proper conduct of our business and for future distributions. |
Restrictions in our anticipated credit facility could limit our ability to make distributions to our unitholders. |
23
| adversely affect our ability to obtain additional financing for future operations or capital needs; | |
| limit our ability to pursue acquisitions and other business opportunities; or | |
| make our results of operations more susceptible to adverse economic or operating conditions. |
Our ability to sell our ownership interests in Valero L.P. may be limited by securities laws restrictions and liquidity constraints. |
The market price of our units could be adversely affected by sales of substantial amounts of our units into the public markets, including sales by our existing unitholders. |
Distributions on our incentive distribution rights in Valero L.P. are more uncertain than distributions on the common units we hold. |
24
Assuming an initial public offering price of $24.00 per unit, you will experience immediate and substantial dilution of $14.40 per unit. |
If we fail to develop or maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. |
Valero Energys contemplated further divestiture of its ownership interest in us remaining after this offering may cause an increase in Valero L.P.s administrative costs and expenses, which may reduce the cash available for distribution to Valero L.P.s partners and, as a result, to our unitholders. |
If Valero L.P.s general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of Valero L.P., it may not be able to satisfy its obligations and its cash flows will be reduced. |
25
If distributions on our units are not paid with respect to any fiscal quarter, including those at the anticipated initial distribution rate, our unitholders will not be entitled to receive such payments in the future. |
Our cash distribution policy limits our growth because we do not retain earnings to reinvest in any acquisitions or growth capital expenditures. |
If in the future we cease to manage Valero L.P., we may be deemed to be an investment company under the Investment Company Act of 1940, which would cause us either have to register as an investment company, obtain exemptive relief from the SEC, or modify our organizational structure or our contract rights. |
26
An increase in interest rates may cause the market price of our units to decline resulting in the loss of a portion of your investment in us. |
We may issue an unlimited number of additional securities without the consent of our unitholders, which will dilute your ownership interest in us and may increase the risk that we will not have sufficient available cash to maintain or increase our per unit distribution level. |
| our unitholders proportionate ownership interest in us will decrease; | |
| the amount of cash available for distribution on each unit may decrease; | |
| the relative voting strength of each previously outstanding unit may be diminished; | |
| the ratio of taxable income to distributions may increase; and | |
| the market price of the units may decline. |
Valero L.P. may issue additional Valero L.P. units, which may increase the risk that Valero L.P. will not have sufficient available cash to maintain or increase its per unit cash distribution level and that we will have to make a capital contribution to Valero L.P. |
The initial public offering price of our units may not be indicative of the market price of our units after this offering, and our unit price may be volatile. In addition, you may not be able to resell our units at or above the initial public offering price. |
27
| Valero L.P.s operating and financial performance and prospects; | |
| quarterly variations in the rate of growth of our distributions per unit; | |
| changes in revenue or earnings estimates or publication of research reports by analysts; | |
| speculation in the press or investment community; | |
| level of investor interest in purchasing our units due to the very limited number of publicly traded entities whose assets consist exclusively of ownership interests in a publicly traded limited partnership; | |
| sales of our units by our unitholders; | |
| announcements by Valero L.P. or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, securities offerings or capital commitments; | |
| general market conditions; and | |
| domestic and international economic, legal and regulatory factors unrelated to Valero L.P.s performance. |
| Valero L.P.s cash distributions to its common unitholders have a priority over distributions on its incentive distribution rights; | |
| we participate in the distributions on the 2% general partner interest and the incentive distribution rights in Valero L.P. while Valero L.P.s common unitholders do not; and | |
| we may enter into other businesses separate and apart from Valero L.P. or any of its affiliates. |
Anti-takeover provisions in our limited liability company agreement may make an acquisition of us more complicated and the removal and replacement of our directors and executive officers more difficult. |
28
Valero L.P.s common unitholders may not have limited liability if a court finds that limited partner actions constitute control of Valero L.P.s business and may therefore become liable for certain of Valero L.P.s obligations, which may impact the cash we have available to make distributions. |
Although we manage Valero L.P. through our indirect ownership of its general partner, Valero L.P.s general partner owes fiduciary duties to Valero L.P. and Valero L.P.s unitholders, which may conflict with our interests. |
| the allocation of shared overhead expenses to Valero L.P. and us; | |
| the entering into, interpretation and enforcement of contractual obligations between us and our affiliates, including Valero Energy, on the one hand, and Valero L.P., on the other hand; | |
| the determination and timing of the amount of cash to be distributed to Valero L.P.s partners and the amount of cash to be reserved for the future conduct of Valero L.P.s business; | |
| any proposal by Valero GP, LLC to eliminate, reduce or modify the incentive distribution rights; | |
| the decision whether Valero L.P. should make acquisitions, and on what terms; | |
| the determination of whether Valero L.P. should use cash on hand, borrow or issue equity to raise cash to finance acquisitions or expansion capital projects, repay indebtedness, meet working capital needs, pay distributions to Valero L.P.s partners or otherwise; and |
29
| any decision we make in the future to engage in business activities independent of, or in competition with, Valero L.P. |
The fiduciary duties of our officers and directors may conflict with those of Valero L.P.s general partners officers and directors. |
When Valero Energy reduces its ownership interest such that it owns less than 20% of us or Valero GP, LLC, Valero Energy and its affiliates may directly compete with Valero L.P., which could cause conflicts of interest and may adversely impact Valero L.P., and as a result, our results of operations and cash available for distribution. |
Subsidiaries of Valero Energy will control us and will own a sufficient number of our units to block any attempt to remove or replace our board of directors. |
Our affiliates have a limited call right that may require you to sell your units at an undesirable time or price. |
30
A decline in production at the Valero Energy refineries Valero L.P. serves or the Tesoro Mandan refinery could materially reduce the volume of crude oil and refined petroleum products Valero L.P. transports or stores in its assets. |
| scheduled upgrades or maintenance; | |
| unscheduled maintenance or catastrophic events, such as a fire, flood, explosion or power outage; | |
| labor difficulties that result in a work stoppage or slowdown; | |
| environmental proceedings or other litigation that require the halting of all or a portion of the operations of the refinery; or | |
| legislation or regulation that adversely impacts the economics of refinery operations. |
Valero L.P.s future financial and operating flexibility may be adversely affected by restrictions in its debt agreements and by its, our and Valero Energys leverage. |
31
Valero L.P.s subsidiary, Valero Logistics Operations, L.P., may be unable to purchase its senior notes upon a change of control of Valero GP Holdings. |
Valero L.P. may not be able to generate sufficient cash from operations to enable it to pay expected quarterly distributions on its units every quarter. |
| the amount of crude oil and refined product transported in its pipelines; | |
| throughput volumes in its terminals and storage facilities; | |
| tariff rates and fees it charges and the margins it realizes for its services; | |
| the level of its operating cost; | |
| weather conditions; | |
| domestic and foreign governmental regulations and taxes; | |
| the effect of worldwide energy conservation measures; and | |
| prevailing economic conditions. |
32
Valero L.P. depends on Valero Energy for a significant portion of its revenues and throughputs of crude oil and refined products. Any reduction in the crude oil and refined products that Valero L.P. transports or stores for Valero Energy, as a result of scheduled or unscheduled refinery maintenance, upgrades or shutdowns or otherwise, could result in a decline in Valero L.P.s revenues, earnings and cash available to pay distributions. |
| a material decrease in the supply of crude oil; | |
| a material increase in the price of crude oil; | |
| a material decrease in demand for refined products in the markets served by Valero L.P.s pipelines and terminals; | |
| scheduled turnarounds or unscheduled maintenance; | |
| operational problems or catastrophic events at a refinery; | |
| environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at a refinery; | |
| a decision by Valero Energy to redirect refined products transported in Valero L.P.s pipelines to markets not served by Valero L.P.s pipelines or to transport crude oil by means other than Valero L.P.s pipelines; | |
| increasingly stringent environmental regulations, including new EPA fuels content regulations requiring refinery upgrades; or | |
| a decision by Valero Energy to sell one or more of the refineries Valero L.P. serves to a purchaser that elects not to use Valero L.P.s pipelines and terminals. |
Under the pipelines and terminals usage agreement, Valero Energy may use other transportation methods or providers for up to 25% of the crude oil processed and refined products produced at the Ardmore, McKee and Three Rivers refineries. Furthermore, Valero Energy is not required to use Valero L.P.s pipelines if there is a change in market conditions that has a material adverse effect on Valero Energy for the transportation of crude oil and refined products, or in the markets for refined products served by these refineries. These factors could adversely affect Valero L.P.s ability to make distributions to its unitholders, including us. |
33
Increases in natural gas and power prices could adversely affect Valero L.P.s ability to make distributions to its partners, including us. |
Valero L.P.s operations are subject to federal, state and local laws and regulations relating to environmental protection and operational safety that could require Valero L.P. to make substantial expenditures. |
Increases in interest rates could adversely affect Valero L.P.s business and the trading price of Valero L.P.s units. |
Valero L.P.s pipeline integrity program may subject it to significant costs and liabilities. |
34
Valero L.P.s operations are subject to operational hazards and unforeseen interruptions for which it may not be adequately insured. |
Valero L.P.s exposure to a diversified national and international geographic asset and product mix may have an adverse impact on its results of operations. |
Reduced demand for refined products could affect Valero L.P.s results of operations and ability to make distributions to its partners, including us. |
| a recession or other adverse economic condition that results in lower spending by consumers on gasoline, diesel, and travel; | |
| higher fuel taxes or other governmental or regulatory actions that increase, directly or indirectly, the cost of gasoline; |
35
| an increase in fuel economy, whether as a result of a shift by consumers to more fuel-efficient vehicles or technological advances by manufacturers; | |
| an increase in the market price of crude oil that leads to higher refined product prices, which may reduce demand for gasoline. Market prices for crude oil and refined products are subject to wide fluctuation in response to changes in global and regional supply that are beyond Valero L.P.s control, and recent significant increases in the price of crude oil may result in a lower demand for refined products; and | |
| the increased use of alternative fuel sources, such as battery-powered engines. Several state and federal initiatives mandate this increased use. For example, the Energy Policy Act of 1992 requires 75% of new vehicles purchased by federal agencies since 1999, 75% of all new vehicles purchased by state governments since 2000, and 70% of all new vehicles purchased for private fleets in 2006 and thereafter to use alternative fuels. |
Valero L.P. may not be able to integrate effectively and efficiently with Kaneb or any future businesses or operations it may acquire. Any future acquisitions may substantially increase the levels of Valero L.P.s indebtedness and contingent liabilities. |
Valero L.P. may sell additional limited partnership units without unitholder approval, diluting existing interests of its unitholders, including us. |
36
Valero Energy and its affiliates have conflicts of interest and limited fiduciary responsibilities, which may permit them to favor their own interests to the detriment of Valero L.P.s unitholders. |
| Valero Energy, as the primary shipper in certain of Valero L.P.s pipelines, has an economic incentive to seek lower tariff rates for these pipelines, lower terminalling fees and lower storage fees; | |
| Neither Valero L.P.s partnership agreement nor any other agreement requires Valero Energy to pursue a business strategy that favors Valero L.P. or utilizes Valero L.P.s assets, including any increase in refinery production or pursuing or growing markets linked to Valero L.P.s assets. Valero Energys directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of Valero Energy; | |
| Valero Energy and its affiliates may engage in limited competition with Valero L.P.; | |
| Valero Energy may use other transportation methods or providers for up to 25% of the crude oil processed and refined products produced at its Ardmore, McKee and Three Rivers refineries and is not required to use Valero L.P.s pipelines if there is a material change in the market conditions for the transportation of crude oil and refined products, or in the markets for refined products served by these refineries, that has a material adverse effect on Valero Energy; | |
| For some of the refined product pipelines and terminals connected to Valero Energys Corpus Christi East, Corpus Christi West and Three Rivers refineries, Valero Energy has agreed to specified minimum commitment percentages for certain pipelines and terminals, which generally represent approximately 75% of 2002 historical volumes, but may use other transportation and storage methods and providers for any volumes exceeding such minimum commitments; | |
| Valero L.P.s general partner is allowed to take into account the interests of parties other than Valero L.P., such as Valero Energy, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to Valero L.P.s unitholders; | |
| Valero L.P.s general partner may limit its liability and reduce its fiduciary duties, while also restricting the remedies available to unitholders. As a result of purchasing Valero L.P.s common units, unitholders have consented to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law; | |
| Valero L.P.s general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, issuance of additional limited partner interests and reserves, each of which can affect the amount of cash that is paid to Valero L.P.s unitholders; | |
| Valero L.P.s general partner determines in its sole discretion which costs incurred by Valero Energy and its affiliates are reimbursable by Valero L.P.; | |
| Valero L.P.s general partner may cause Valero L.P. to pay the general partner or its affiliates for any services rendered on terms that are fair and reasonable to Valero L.P. or enter into additional contractual arrangements with any of these entities on Valero L.P.s behalf; | |
| Valero L.P.s general partner controls the enforcement of obligations owed to Valero L.P. by Valero Energy and its affiliates, including under the handling and throughput agreement, the throughput commitment agreement, the terminalling agreements and the pipelines and terminals usage agreement with Valero Energy; |
37
| Valero L.P.s general partner decides whether to retain separate counsel, accountants, or others to perform services for Valero L.P.; and | |
| In some instances, Valero L.P.s general partner may cause Valero L.P. to borrow funds in order to permit the payment of distributions, even if the purpose or effect of the borrowing is to make incentive distributions. |
The rates that Valero L.P. may charge on its interstate pipelines are subject to regulation and could be limited or reduced by various federal and state agencies, such as FERC and the STB. |
Valero L.P.s pipeline operations are subject to FERC rate-making principles that could have an adverse impact on Valero L.P.s ability to recover the full cost of operating its pipeline facilities and its ability to make distributions to its partners. |
38
Terrorist attacks and the threat of terrorist attacks have resulted in increased costs to Valero L.P.s business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact Valero L.P.s results of operations. |
If we or Valero L.P. were treated as a corporation for federal or state income tax purposes, then our cash available for distribution to you would be substantially reduced. |
39
A successful IRS contest of the federal income tax positions we or Valero L.P. take may adversely impact the market for our or Valero L.P.s units, and the costs of any contest will reduce cash available for distribution to our unitholders. |
Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income. |
The sale or exchange of 50% or more of our or Valero L.P.s capital and profits interests, within a twelve-month period, will result in the termination of our or Valero L.P.s partnership for federal income tax purposes. Valero Energy currently intends to sell its interests in us, pending market conditions, such that 50% or more of the total interests in our capital and profits may be sold within a twelve-month period after the completion of this offering. |
40
Tax gain or loss on the disposition of our units could be different than expected. |
Tax-exempt entities and foreign persons face unique tax issues from owning units that may result in adverse tax consequences to them. |
We will treat each purchaser of our units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of our units. |
You will likely be subject to state and local taxes and return filing requirements as a result of investing in our units. |
We expect that our ratio of taxable income to cash distributions will be higher than the ratio applicable to holders of common units in Valero L.P. |
41
Items of our income, gain, loss and deduction will be allocated among our unitholders to account for the difference between the fair market value and tax basis of our assets at the time of an offering. |
42
March 31, 2006 | |||||||||||||
Offering | As Adjusted | ||||||||||||
Historical | Adjustments | for Offering | |||||||||||
Cash
|
$ | 120 | $ | 3,417 | $ | 3,537 | |||||||
Notes payable to affiliates
|
$ | 265,354 | $ | (265,354 | ) | $ | | ||||||
Members equity
|
141,043 | 266,911 | 407,954 | ||||||||||
Total capitalization
|
$ | 406,397 | $ | 1,557 | $ | 407,954 | |||||||
43
Assumed initial public offering price per unit
|
$ | 24.00 | ||
Less: Net tangible book value per unit before and after the
offering (a)
|
9.60 | |||
Immediate dilution in net tangible book value per unit to
purchasers in this offering (b)
|
$ | 14.40 | ||
(a) | Determined by dividing the total number of units outstanding after this offering (42,500,000 units) into our net tangible book value. |
(b) | If the initial public offering price were to increase or decrease by $1.00 per unit, immediate dilution in net tangible book value per unit would increase by $1.00 or decrease by $1.00, respectively. |
44
Rationale for Our Cash Distribution Policy |
Restrictions and Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy |
| Valero L.P.s distribution policy is subject to restrictions on distributions under its credit agreements, which contain material financial tests and covenants it must satisfy. Should it be unable to comply with the restrictions under its credit agreements, Valero L.P. would be prohibited from making cash distributions to us, which in turn would prevent us from making cash distributions to you notwithstanding our stated cash distribution policy. | |
| Our cash distribution policy may be subject to restrictions on distributions under our anticipated credit facility. Our credit facility may contain material financial tests and covenants that we must satisfy. Should we be unable to comply with the restrictions, if any, under our anticipated credit facility, we would be prohibited from making cash distributions to you notwithstanding our stated cash distribution policy. | |
| Valero L.P.s general partner has broad discretion under Valero L.P.s partnership agreement to establish reserves for the prudent conduct of Valero L.P.s business and for future cash distributions to Valero L.P.s unitholders, and the establishment of those reserves could result in a reduction in cash distributions that we would otherwise anticipate receiving from Valero L.P., which in turn could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated distribution policy. |
45
| Our board of directors has discretion under our limited liability company agreement to establish reserves for the prudent conduct of our business and for future distributions to our unitholders, and the establishment of those reserves could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated cash distribution policy. | |
| While our limited liability company agreement requires us to distribute our available cash, our limited liability company agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our units. | |
| Under Section 18-607 of the Delaware Limited Liability Company Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. | |
| Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, Valero L.P. may not make a distribution to us if the distribution would cause its liabilities to exceed the fair value of its assets. | |
| We may lack sufficient cash to pay distributions to our unitholders due to increases in general and administrative expenses, principal and interest payments required under any outstanding debt, working capital requirements and anticipated cash needs of us or Valero L.P. and its subsidiaries. |
Our Cash Distribution Policy Limits Our Ability to Grow |
Valero L.P.s Ability to Grow is Dependent on its Ability to Access External Growth Capital |
Our Cash Distribution Policy |
46
Distributions | |||||||||||||
Number | One | Four | |||||||||||
of Units | Quarter | Quarters | |||||||||||
Publicly held units
|
16,500,000 | $ | 4,950,000 | $ | 19,800,000 | ||||||||
Units held by subsidiaries of Valero Energy
|
26,000,000 | 7,800,000 | 31,200,000 | ||||||||||
Total
|
42,500,000 | $ | 12,750,000 | $ | 51,000,000 | ||||||||
| provide for the conduct of our business; | |
| comply with applicable law or any debt instrument or other agreement applicable to us; | |
| provide funds for distributions to our unitholders with respect to any one or more of the next four quarters; or | |
| permit Riverwalk Logistics, L.P. to make capital contributions to Valero L.P. to maintain its 2% general partner interest upon the issuance of partnership securities by Valero L.P. |
Valero L.P.s Cash Distribution Policy |
47
Paid to | ||||||||||||||||||||||||||||
Limited | ||||||||||||||||||||||||||||
Partners, | Paid to Valero GP Holdings, LLC | |||||||||||||||||||||||||||
Excluding | Total | |||||||||||||||||||||||||||
Valero GP | Limited | General | Incentive | Paid to | ||||||||||||||||||||||||
Distribution | Holdings, | Partner | Partner | Distribution | All | |||||||||||||||||||||||
Per Unit | LLC | Units | Interest | Rights | Total | Partners | ||||||||||||||||||||||
2003
|
||||||||||||||||||||||||||||
1st Quarter
|
$ | 0.700 | $ | 8,063 | $ | 7,201 | $ | 319 | $ | 384 | $ | 7,904 | $ | 15,967 | ||||||||||||||
2nd Quarter
|
0.750 | 8,638 | 7,716 | 348 | 718 | 8,782 | 17,420 | |||||||||||||||||||||
3rd Quarter
|
0.750 | 9,570 | 7,710 | 369 | 759 | 8,838 | 18,408 | |||||||||||||||||||||
4th Quarter
|
0.750 | 9,587 | 7,693 | 369 | 759 | 8,821 | 18,408 | |||||||||||||||||||||
2004
|
||||||||||||||||||||||||||||
1st Quarter
|
0.800 | 10,229 | 8,204 | 399 | 1,112 | 9,715 | 19,944 | |||||||||||||||||||||
2nd Quarter
|
0.800 | 10,230 | 8,203 | 399 | 1,112 | 9,714 | 19,944 | |||||||||||||||||||||
3rd Quarter
|
0.800 | 10,230 | 8,203 | 399 | 1,112 | 9,714 | 19,944 | |||||||||||||||||||||
4th Quarter
|
0.800 | 10,241 | 8,192 | 399 | 1,112 | 9,703 | 19,944 | |||||||||||||||||||||
2005
|
||||||||||||||||||||||||||||
1st Quarter
|
0.800 | 10,243 | 8,190 | 399 | 1,112 | 9,701 | 19,944 | |||||||||||||||||||||
2nd Quarter (a)
|
0.855 | 31,279 | 8,744 | 879 | 3,049 | 12,672 | 43,951 | |||||||||||||||||||||
3rd Quarter
|
0.855 | 31,282 | 8,740 | 879 | 3,049 | 12,668 | 43,950 | |||||||||||||||||||||
4th Quarter
|
0.855 | 31,289 | 8,733 | 879 | 3,049 | 12,661 | 43,950 | |||||||||||||||||||||
2006
|
||||||||||||||||||||||||||||
1st Quarter
|
0.885 | 32,377 | 9,050 | 916 | 3,480 | 13,446 | 45,823 |
(a) | For the second quarter of 2005, Valero L.P.s financial statements reflected a total cash distribution of approximately $21.6 million, which was based on the partnership interests outstanding as of June 30, 2005. On July 1, 2005, Valero L.P. issued approximately 23.8 million of its common units in exchange for all outstanding units of Kaneb Pipe Line Partners, L.P. in connection with its acquisition of Kaneb. Pursuant to the terms of the merger agreement and because actual payments are made within 45 days after the end of each quarter based on the partnership interests outstanding as of a record date that is set after the end of each quarter, the actual cash payment made with respect to the second quarter was approximately $44.0 million, which includes the distributions paid to former Kaneb unitholders with respect to the second quarter of 2005. |
| our Pro Forma Cash Available for Distribution in which we present the amount of available cash that we would have had for the year ended December 31, 2005 and the twelve months ended March 31, 2006, giving effect to the following transactions as if these transactions had occurred on January 1, 2005: |
| the acquisition of Kaneb by Valero L.P., and the sale of certain assets acquired in such acquisition as described under Managements Discussion and Analysis of Financial Condition and Results of Operations Valero L.P. Recent Developments; |
48
| the existence of the Administration Agreement to be entered into between Valero GP Holdings and Valero GP, LLC, which will provide for the payment by Valero GP Holdings of certain costs incurred by Valero GP, LLC personnel on behalf of Valero GP Holdings; | |
| the incurrence of certain third party costs by Valero GP Holdings related to its being a publicly held entity; and | |
| a quarterly cash distribution from Valero L.P. of $0.885 per limited partner unit, or $3.54 per limited partner unit on an annualized basis. |
| our Estimated Minimum Cash Available for Distribution Based upon Estimated Minimum EBITDA of Valero L.P. in which we present the calculation of estimated minimum EBITDA of Valero L.P. necessary for Valero L.P. to pay distributions to its partners, including us, which will enable us to have sufficient cash available for distribution to fully fund our expected distribution for the twelve months ending June 30, 2007. |
Pro Forma Cash Available for Distribution |
49
Twelve Months | |||||||||||
Year Ended | Ended | ||||||||||
December 31, | March 31, | ||||||||||
2005 | 2006 | ||||||||||
Valero L.P. Data:
|
|||||||||||
Pro Forma Income from Continuing Operations
|
$ | 83,084 | $ | 90,280 | |||||||
Plus:
|
|||||||||||
Interest expense, net
|
61,121 | 62,605 | |||||||||
Income tax benefit
|
(8,742 | ) | (7,751 | ) | |||||||
Depreciation and amortization expense
|
94,180 | 94,965 | |||||||||
Provision for loss contingencies
|
42,000 | 42,000 | |||||||||
Other non-cash charges
|
4,000 | 4,000 | |||||||||
Cash payments by Kaneb related to acquisition costs (a)
|
23,022 | 20,600 | |||||||||
Pro Forma Adjusted EBITDA (b)
|
298,665 | 306,699 | |||||||||
Plus:
|
|||||||||||
Distributions from joint ventures
|
6,841 | 7,977 | |||||||||
Borrowings to fund strategic capital expenditures
|
51,436 | 56,629 | |||||||||
Less:
|
|||||||||||
Equity income from joint ventures
|
(5,116 | ) | (4,745 | ) | |||||||
Interest expense, net
|
(61,121 | ) | (62,605 | ) | |||||||
Income tax benefit
|
8,742 | 7,751 | |||||||||
Strategic capital expenditures
|
(51,436 | ) | (56,629 | ) | |||||||
Reliability capital expenditures
|
(38,680 | ) | (36,051 | ) | |||||||
Pro Forma Cash Available for Distribution Prior to Cash
Reserves
|
209,331 | 219,026 | |||||||||
Less:
|
|||||||||||
Cash reserves (c)
|
(26,041 | ) | (35,736 | ) | |||||||
Pro Forma Cash Available for Distribution to All Valero L.P.
Partners (d)
|
$ | 183,290 | $ | 183,290 | |||||||
50
Twelve Months | ||||||||||||
Year Ended | Ended | |||||||||||
December 31, | March 31, | |||||||||||
2005 | 2006 | |||||||||||
Pro Forma Cash Distributed to All Valero L.P. Partners
(e):
|
||||||||||||
Distributions to Valero GP Holdings, LLC:
|
||||||||||||
2% general partner interest
|
$ | 3,666 | $ | 3,666 | ||||||||
Incentive distribution rights
|
13,918 | 13,918 | ||||||||||
Limited partner units
|
36,158 | 36,198 | ||||||||||
Total distributions to Valero GP Holdings, LLC
|
53,742 | 53,782 | ||||||||||
Distributions to public unitholders
|
129,548 | 129,508 | ||||||||||
Total pro forma cash distributed to all Valero L.P.
partners
|
$ | 183,290 | $ | 183,290 | ||||||||
Debt Covenant Ratios Calculated Pursuant to Credit
Agreements (f):
|
||||||||||||
Debt-to-EBITDA
|
4.03 | x | 4.01 | x | ||||||||
EBITDA-to-Interest
|
4.76 | x | 4.73 | x | ||||||||
Valero GP Holdings, LLC Data:
|
||||||||||||
Pro Forma Cash Distributions Received from Valero
L.P.
|
$ | 53,742 | $ | 53,782 | ||||||||
Less:
|
||||||||||||
General and administrative expenses (g)
|
(2,350 | ) | (2,350 | ) | ||||||||
Income tax expense
|
(53 | ) | (53 | ) | ||||||||
Cash reserves (c)
|
(339 | ) | (379 | ) | ||||||||
Pro Forma Cash Available for Distribution
|
$ | 51,000 | $ | 51,000 | ||||||||
Expected Cash Distributions by Valero GP Holdings, LLC:
|
||||||||||||
Expected distribution per unit
|
$ | 1.20 | $ | 1.20 | ||||||||
Distributions paid to public unitholders (based on
16,500,000 units)
|
$ | 19,800 | $ | 19,800 | ||||||||
Distributions paid to Valero Energy (based on
26,000,000 units)
|
31,200 | 31,200 | ||||||||||
Total expected cash distributions paid to our unitholders
|
$ | 51,000 | $ | 51,000 | ||||||||
(a) | Represents cash paid by Kaneb for certain costs incurred in connection with Valero L.P.s acquisition of Kaneb, which were charged to expense. | |
(b) | Valero L.P. does not report EBITDA as a measure of the operating performance of its assets. However, Valero L.P. recognizes that EBITDA is a widely accepted financial measure used by investors to compare partnership performance, even though it is not defined in GAAP, and has therefore reconciled pro forma income from continuing operations to pro forma adjusted EBITDA. Pro forma adjusted EBITDA excludes the charges described in footnote (a), even though these charges relate to cash charges, because the inclusion of such amount would result in pro forma adjusted EBITDA that is not indicative of Valero L.P.s ability to generate cash from its operations. The payment of cash related to this charge has been removed from pro forma adjusted EBITDA to arrive at pro forma cash available for distribution to all Valero L.P. partners. | |
(c) | Valero L.P.s partnership agreement permits and Valero GP Holdings limited liability company agreement permits the board of directors to establish cash reserves that are necessary or appropriate to satisfy general and administrative and other expenses and debt service requirements, to comply with any debt instrument or other agreements, or to provide for other requirements. The amounts reflected in this table are those |
51
amounts that are assumed to be reserved such that the cash available for distribution equals the quarterly distribution of $0.885 per unit and $0.30 per unit for Valero L.P. and Valero GP Holdings, respectively. | ||
(d) | Pro Forma Cash Available for Distribution is a financial measure used by investors to compare partnership performance, even though it is not defined in GAAP, and has therefore been reconciled to pro forma income from continuing operations. | |
(e) | Based on units outstanding as of December 31, 2005 and March 31, 2006, respectively, and a Valero L.P. distribution of $0.885 per quarter. | |
(f) | Valero Logistics Operations and Kaneb Terminals Limited, both wholly owned subsidiaries of Valero L.P., are parties to various credit agreements that require Valero L.P. to maintain certain financial ratios. Specifically, prior to June 30, 2006, Valero L.P. may not allow its ratio of consolidated indebtedness (as defined in the credit agreements) to consolidated EBITDA (as defined in the credit agreements) to exceed 5.0 for the four fiscal quarters most recently ended. Subsequent to June 30, 2006, that ratio may not exceed 4.75. However, in periods subsequent to an acquisition of at least $100 million, the credit agreements permit the maximum ratios indicated above to increase by 0.5. Additionally, the credit agreements require that Valero L.P.s ratio of consolidated EBITDA (as defined in the credit agreements) to consolidated interest expense (as defined in the credit agreements) remain in excess of 3.0 for the four fiscal quarters most recently ended. | |
(g) | Represents general and administrative expenses of $2.4 million that we expect to incur as a public company, including $0.5 million related to the Administration Agreement. |
52
Valero L.P. Data:
|
||||||||
Estimated Minimum Income from Continuing Operations
|
$ | 138,786 | ||||||
Plus:
|
||||||||
Interest expense, net
|
66,300 | |||||||
Income tax expense
|
10,308 | |||||||
Depreciation and amortization expense
|
98,709 | |||||||
Estimated Minimum EBITDA (a)
|
314,103 | |||||||
Plus:
|
||||||||
Distributions from joint ventures
|
6,000 | |||||||
Borrowings to fund strategic capital expenditures
|
92,267 | |||||||
Less:
|
||||||||
Equity income from joint ventures
|
(6,059 | ) | ||||||
Interest expense, net
|
(66,300 | ) | ||||||
Income tax expense
|
(10,308 | ) | ||||||
Strategic capital expenditures
|
(92,267 | ) | ||||||
Reliability capital expenditures
|
(54,146 | ) | ||||||
Cash reserves
|
| |||||||
Estimated Minimum Cash Available for Distribution to All
Valero L.P. Partners (b)
|
$ | 183,290 | ||||||
Estimated Minimum Cash Distributions to All Valero L.P.
Partners (c):
|
||||||||
Estimated Minimum Cash Distributions to Valero GP Holdings, LLC:
|
||||||||
2% general partner interest
|
$ | 3,666 | ||||||
Incentive distribution rights
|
13,918 | |||||||
Common units
|
36,198 | |||||||
Total estimated minimum cash distributions to Valero GP
Holdings, LLC
|
53,782 | |||||||
Estimated minimum cash distributions to public unitholders
|
129,508 | |||||||
Total estimated minimum cash distributions by Valero L.P.
|
$ | 183,290 | ||||||
Debt Covenant Ratio Calculated Pursuant to Credit
Agreements (d):
|
||||||||
Debt-to-EBITDA
|
3.89 | x |
53
Valero GP Holdings, LLC Data:
|
||||||||
Estimated Minimum Cash Distributions to be Received from
Valero L.P.
|
$ | 53,782 | ||||||
Less:
|
||||||||
General and administrative expenses (e)
|
(2,350 | ) | ||||||
Income tax expense
|
(53 | ) | ||||||
Cash reserves (f)
|
(379 | ) | ||||||
Estimated Minimum Cash Available for Distribution
|
$ | 51,000 | ||||||
Expected Minimum Cash Distributions by Valero GP Holdings,
LLC:
|
||||||||
Expected distribution per unit
|
$ | 1.20 | ||||||
Distributions paid to public unitholders (based on
16,500,000 units)
|
$ | 19,800 | ||||||
Distributions paid to Valero Energy (based on
26,000,000 units)
|
31,200 | |||||||
Total distributions paid to our unitholders
|
$ | 51,000 | ||||||
(a) | Valero L.P. does not report EBITDA as a measure of the operating performance of its assets. However, Valero L.P. recognizes that EBITDA is a widely accepted financial measure used by investors to compare partnership performance, even though it is not defined in GAAP, and has therefore reconciled estimated minimum income from continuing operations to EBITDA. | |
(b) | Estimated Minimum Cash Available for Distribution is a financial measure used by investors to compare partnership performance, even though it is not defined in GAAP and has therefore been reconciled to estimated income from continuing operations. | |
(c) | Based on units outstanding as of March 31, 2006 and Valero L.P.s current distribution of $0.885 per quarter. | |
(d) | Valero Logistics Operations and Kaneb Terminals Limited, both wholly owned subsidiaries of Valero L.P., are parties to various credit agreements that require Valero L.P. to maintain certain financial ratios. Specifically, prior to June 30, 2006, Valero L.P. may not allow its ratio of consolidated indebtedness (as defined in the credit agreements) to consolidated EBITDA (as defined in the credit agreements) to exceed 5.0 for the four fiscal quarters most recently ended. Subsequent to June 30, 2006, that ratio may not exceed 4.75. However, in periods subsequent to an acquisition of at least $100 million, the credit agreements permit the maximum ratios indicated above to increase by 0.5. In June 2006, Valero L.P. amended its credit agreements to eliminate the requirement that Valero L.P. maintain a minimum consolidated interest coverage ratio. Therefore, Valero L.P.s EBITDA-to-interest ratio is not shown for the twelve months ending June 30, 2007. | |
(e) | Represents general and administrative expenses of $2.4 million that we expect to incur as a public company, including $0.5 million related to the Administration Agreement. | |
(f) | Valero GP Holdings limited liability company agreement permits the board of directors to establish cash reserves that are necessary or appropriate to satisfy general and administrative and other expenses and debt service requirements, to comply with any debt instrument or other agreements or to provide for other requirements. The amount reflected on this table is that amount which is assumed to be reserved such that the cash available for distribution equals the quarterly distribution of $0.30 per unit, or $1.20 per unit on an annualized basis. | |
Assumptions and Considerations Related to the Estimated Minimum EBITDA of Valero L.P. |
54
| Estimated Minimum Income from Continuing Operations of Valero L.P. We believe that Valero L.P. must achieve a minimum of $138.8 million in income from continuing operations, which is based on a minimum of $250.9 million in operating income from its business segments (before general and administrative expenses). This minimum estimate of $138.8 million in income from continuing operations is intended to be an indicator or benchmark of the amount management considers to be the lowest amount of operating results needed by Valero L.P. to derive its estimated minimum EBITDA of $314.1 million. The estimate of minimum income from continuing operations should not be viewed as Valero L.P.s projection of its earnings. Valero L.P.s management believes that the actual income from continuing operations of Valero L.P. during the twelve months ending June 30, 2007 will exceed $138.8 million. This belief is in part based upon the fact that the estimate of minimum income from continuing operations does not include the operating income impact of any strategic capital projects that may be put into service during the twelve months ending June 30, 2007. The minimum operating income by business segment (before general and administrative expenses and provision for loss contingencies) is provided in the table below for the twelve months ending June 30, 2007 and those amounts are compared to pro forma amounts for the year ended December 31, 2005 and the twelve months ended March 31, 2006 (in thousands). |
Pro Forma | Estimated | ||||||||||||
Minimum | |||||||||||||
Twelve Months | for the | ||||||||||||
Year Ended | Ended | Twelve Months | |||||||||||
December 31, | March 31, | Ending June 30, | |||||||||||
2005 | 2006 | 2007 | |||||||||||
Valero L.P.s Operating Income by Business Segment (Before
General and Administrative Expenses and Provision for Loss
Contingencies):
|
|||||||||||||
Crude oil pipelines
|
$ | 30,439 | $ | 31,326 | $ | 33,451 | |||||||
Refined products pipelines
|
80,350 | 82,402 | 87,792 | ||||||||||
Refined products terminals
|
96,593 | 99,431 | 99,570 | ||||||||||
Crude oil storage tanks
|
30,493 | 29,368 | 30,072 | ||||||||||
237,875 | 242,527 | 250,885 | |||||||||||
Plus:
|
|||||||||||||
Equity income from joint ventures
|
5,116 | 4,745 | 6,059 | ||||||||||
Less:
|
|||||||||||||
General and administrative expenses
|
(65,528 | ) | (60,138 | ) | (41,550 | ) |
55
Pro Forma | Estimated | ||||||||||||
Minimum | |||||||||||||
Twelve Months | for the | ||||||||||||
Year Ended | Ended | Twelve Months | |||||||||||
December 31, | March 31, | Ending June 30, | |||||||||||
2005 | 2006 | 2007 | |||||||||||
Provision for loss contingencies
|
(42,000 | ) | (42,000 | ) | | ||||||||
Interest and other expenses, net
|
(61,121 | ) | (62,605 | ) | (66,300 | ) | |||||||
Income tax (expense) benefit
|
8,742 | 7,751 | (10,308 | ) | |||||||||
Valero L.P.s Income from Continuing Operations
|
$ | 83,084 | $ | 90,280 | $ | 138,786 | |||||||
The minimum operating income by business segment is determined based on estimates of revenues to be generated by each of Valero L.P.s business segments and estimates of the related operating expenses. The assumptions for estimated revenues and operating expenses are outlined below. | |
Assumptions for Estimated Revenues by Business Segment | |
Approximately 64% of Valero L.P.s operating income results from throughput arrangements with its customers. Under throughput arrangements, a customer agrees to pay a certain throughput fee or tariff for volumes moving through Valero L.P.s terminals, pipelines or storage facilities. The majority of the remaining 36% of Valero L.P.s operating income results from storage fee arrangements in which a customer agrees to pay a certain amount for the right to store their products in Valero L.P.s storage tanks for a specified period of time. The average term of these agreements is approximately one year. Valero L.P. also generates operating income from the sale of bunker fuel to marine vessels, but such operating income is not significant. | |
| Crude oil pipelines. Revenue generated in the crude oil pipelines segment is generated entirely from throughput fees. The average throughput fee per barrel is estimated to be $0.41 for the twelve months ending June 30, 2007, as compared to $0.39 for the year ended December 31, 2005 and the twelve months ended March 31, 2006. The estimated increase is primarily the result of a fee increase that is effective July 1, 2006. This throughput fee increase is based on the estimated change in the producer price index, which is allowed under Valero L.P.s throughput agreements. Estimated revenues for this segment were then determined by applying this average throughput fee to an estimated minimum number of barrels of crude oil to be transported per day during the twelve months ending June 30, 2007. Valero L.P. management believes that Valero L.P. will transport at least this volume of crude oil per day because such volume is less than pro forma amounts transported during the twelve months ended March 31, 2006, and management does not anticipate any significant change in volumes transported, except for reductions relating to temporary shutdowns at certain Valero Energy refineries during the remaining part of 2006 for upgrades, catalyst changes and maintenance activities. The following table provides Valero L.P.s assumptions for the average throughput fee per barrel and estimated minimum throughput volumes for the twelve months ending June 30, 2007 compared to pro forma throughput volumes for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. |
Pro Forma | ||||||||||||||||||||||
Estimated Minimum for | ||||||||||||||||||||||
Year Ended | Twelve Months | the Twelve Months | ||||||||||||||||||||
December 31, 2005 | Ended March 31, 2006 | Ending June 30, 2007 | ||||||||||||||||||||
Throughput | Average | Throughput | Average | Throughput | Average | |||||||||||||||||
(Barrels | Throughput | (Barrels | Throughput | (Barrels | Throughput | |||||||||||||||||
per Day) | Fees/Barrel | per Day) | Fees/Barrel | per Day) | Fees/Barrel | |||||||||||||||||
358,965 | $ | 0.39 | 370,453 | $ | 0.39 | 369,069 | $ | 0.41 |
| Refined product pipelines. Revenue generated in the refined product pipelines segment is generated entirely from throughput fees. The average throughput fee per barrel is estimated to be $0.87 for the twelve months ending June 30, 2007, as compared to $0.83 and $0.84 for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. The estimated increase is primarily the result of a fee increase that is effective July 1, 2006. This throughput fee |
56
increase is based on the estimated change in the producer price index, which is allowed under Valero L.P.s throughput agreements. Estimated revenues for this segment were then determined by applying this average throughput fee to an estimated minimum number of barrels of refined products to be transported per day during the twelve months ending June 30, 2007. Valero L.P. management believes that Valero L.P. will transport at least this volume of refined products per day because the completion of pipeline construction in South Texas is expected to increase throughput by 40,000 barrels per day, as compared to the pro forma throughput for the twelve months ended March 31, 2006. The following table provides Valero L.P.s assumptions for the average throughput fee per barrel and estimated minimum throughput volumes for the twelve months ending June 30, 2007 compared to pro forma throughput volumes for the year ended December 31, 2005 and the twelve months ended March 31, 2006. |
Pro Forma | ||||||||||||||||||||||
Estimated Minimum for | ||||||||||||||||||||||
Year Ended | Twelve Months | the Twelve Months | ||||||||||||||||||||
December 31, 2005 | Ended March 31, 2006 | Ending June 30, 2007 | ||||||||||||||||||||
Throughput | Average | Throughput | Average | Throughput | Average | |||||||||||||||||
(Barrels | Throughput | (Barrels | Throughput | (Barrels | Throughput | |||||||||||||||||
per Day) | Fee/Barrel | per Day) | Fees/Barrel | per Day) | Fee/Barrel | |||||||||||||||||
670,761 | $ | 0.83 | 680,228 | $ | 0.84 | 698,046 | $ | 0.87 |
| Refined product terminals. Revenue generated in the refined product terminals segment is generated from storage and throughput fees. Storage fee revenue is estimated to be $233.7 million for the twelve months ending June 30, 2007 as compared to $224.5 million and $230.1 million on a pro forma basis for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. For throughput fee revenue, the average fee per barrel is estimated to be $0.50 for the twelve months ending June 30, 2007, as compared to $0.49 for the year ended December 31, 2005 and the twelve months ended March 31, 2006. The estimated increase is primarily the result of a full twelve-month effect from fee increases that were effective January 1, 2006. These terminalling fee increases are based primarily on the estimated change in the consumer price index and producer price index which are allowed under Valero L.P.s terminals usage agreements. Estimated throughput revenues for this segment were then determined by applying this average terminalling fee to an estimated minimum number of barrels per day of refined products to be throughput during the twelve months ending June 30, 2007. Valero L.P. management believes that Valero L.P. will throughput at least this volume of refined products per day because such volume is less than the pro forma amounts throughput during the year ended December 31, 2005 and the twelve months ended March 31, 2006, and management does not anticipate any significant change in volumes throughput, except for reductions related to temporary shutdowns at certain Valero Energy refineries which is discussed above. The following table provides Valero L.P.s assumptions for the average terminalling fee per barrel and estimated minimum throughput volumes for the twelve months ending June 30, 2007 compared to pro forma throughput volumes for the year ended December 31, 2005 and the twelve months ended March 31, 2006. The table also compares estimated storage fee revenues for the twelve months ending June 30, 2007 to pro forma amounts for the year ended December 31, 2005 and the twelve months ended March 31, 2006 (dollars in thousands, except per barrel amounts). |
Pro Forma | ||||||||||||||||||||||||||||||||||
Estimated Minimum for | ||||||||||||||||||||||||||||||||||
Year Ended | Twelve Months Ended | the Twelve Months Ending | ||||||||||||||||||||||||||||||||
December 31, 2005 | March 31, 2006 | June 30, 2007 | ||||||||||||||||||||||||||||||||
Throughput | Average | Storage | Throughput | Average | Storage | Throughput | Average | Storage | ||||||||||||||||||||||||||
(Barrels | Throughput | Fee | (Barrels | Throughput | Fee | (Barrels | Throughput | Fee | ||||||||||||||||||||||||||
per Day) | Fee/Barrel | Revenues | per Day) | Fee/Barrel | Revenues | per Day) | Fee/Barrel | Revenues | ||||||||||||||||||||||||||
245,084 | $ | 0.49 | $ | 224,514 | 244,775 | $ | 0.49 | $ | 230,051 | 242,678 | $ | 0.50 | $ | 233,666 |
| Crude oil storage tanks. Revenue generated in the crude oil storage tanks segment is generated entirely from throughput fees. For throughput fee revenue, the average fee per barrel is estimated to be $0.260 for the twelve months ending June 30, 2007, as compared to $0.249 and $0.250 for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. The estimated increase is primarily the result of a full twelve- month effect from fee increases that were effective |
57
January 1, 2006 and April 1, 2006. The estimated increase also results from fee increases that will be effective January 1, 2007 and April 1, 2007. These throughput fee increases are based on the estimated change in the consumer price index which is allowed under Valero L.P.s throughput agreements for crude oil storage tanks. Estimated revenues for this segment were then determined by applying this average throughput fee to an estimated minimum number of barrels of crude oil to be received at various Valero Energy refineries during the twelve months ending June 30, 2007. Valero L.P. management believes that Valero L.P. will throughput at least this volume of crude oil per day because such volume is less than the pro forma amounts throughput during the twelve months ended March 31, 2006, and management does not anticipate any significant change in volumes throughput, except for reductions related to temporary shutdowns at certain Valero Energy refineries which is discussed above. The following table provides Valero L.P.s assumptions for the average throughput fee per barrel and estimated minimum throughput volumes for the twelve months ending June 30, 2007 compared to the pro forma throughput volumes for the year ended December 31, 2005 and the twelve months ended March 31, 2006. |
Pro Forma | ||||||||||||||||||||||
Estimated Minimum for | ||||||||||||||||||||||
Year Ended | Twelve Months Ended | the Twelve Months Ending | ||||||||||||||||||||
December 31, 2005 | March 31, 2006 | June 30, 2007 | ||||||||||||||||||||
Throughput | Average | Throughput | Average | Throughput | Average | |||||||||||||||||
(Barrels | Throughput | (Barrels | Throughput | (Barrels | Throughput | |||||||||||||||||
per Day) | Fee/Barrel | per Day) | Fee/Barrel | per Day) | Fee/Barrel | |||||||||||||||||
517,409 | $ | 0.249 | 519,241 | $ | 0.250 | 518,818 | $ | 0.260 |
Assumptions for Estimated Operating Costs (Except for General and Administrative Expenses and Provision for Loss Contingencies) | |
Valero L.P.s most significant operating costs are employee salary and wage costs, power costs and maintenance expenses. The following are Valero L.P.s assumptions regarding these estimated operating costs: |
| Employee salary and wage costs are estimated to be approximately $102.5 million for the twelve months ending June 30, 2007, as compared to approximately $88.1 million and $94.4 million on a pro forma basis for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. Valero L.P.s estimate for the twelve months ending June 30, 2007 assumes no significant changes in the average number of employees as compared to the average number of employees during the year ended December 31, 2005 and the twelve months ended March 31, 2006, and that salaries and wages will increase approximately 4.25%, which is consistent with the actual increase reflected in the pro forma amounts for the year ended December 31, 2005 and the twelve months ended March 31, 2006. | |
| Power costs are estimated to be approximately $51.7 million for the twelve months ending June 30, 2007 as compared to approximately $41.5 million and $42.9 million on a pro forma basis for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. Valero L.P. primarily uses electric power at its pipeline pump stations and terminals and such electric power is furnished by various utility companies that primarily use natural gas to generate the electricity. Accordingly, Valero L.P.s power costs typically fluctuate with natural gas prices, which can vary widely. Electric power usage during the twelve months ending June 30, 2007 is expected to be consistent with the usage during the year ended December 31, 2005 and the twelve months ended March 31, 2006. Valero L.P. assumed that natural gas prices will average $8.75 per MMBTU during the twelve months ending June 30, 2007. | |
| Maintenance expenses are estimated to be approximately $38.0 million for the twelve months ending June 30, 2007, as compared to approximately $36.4 million and $39.1 million on a pro forma basis for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. Valero L.P. assumed that maintenance requirements during the twelve months ending June 30, 2007 will increase in scope and frequency compared to those encountered during the year ended December 31, 2005 and the twelve months ended March 31, 2006. Valero L.P. also assumed that | |
58
primary maintenance costs incurred, such as contract labor and materials, will increase 3% in the twelve months ending June 30, 2007. This increase is consistent with actual increases Valero L.P. experienced for these costs during the year ended December 31, 2005 and the twelve months ended March 31, 2006. |
| General and Administrative Expenses. General and administrative expenses are estimated to be approximately $41.6 million for the twelve months ending June 30, 2007 compared to $65.5 million and $60.1 million included in the pro forma amounts for the year ended December 31, 2005 and the twelve months ended March 31, 2006, respectively. The decrease is primarily the result of $23.0 million of non-recurring merger related expenses incurred by Kaneb, which were included in general and administrative expenses. In addition, Valero L.P. expects to benefit from cost reductions resulting from its acquisition of Kaneb on July 1, 2005. The estimate of $41.6 million for the twelve months ending June 30, 2007 includes estimated cost reductions of approximately $5 million. Valero L.P. believes that these cost reductions will be realized as a result of the elimination of duplicate corporate office expenses and duplicate professional services. Valero L.P. has also considered the impact of the new Services Agreement between Valero L.P. and Valero GP, LLC, which will increase Valero L.P.s general and administrative expenses by approximately $0.6 million in the twelve months ending June 30, 2007. | |
| Provision for Loss Contingencies. In the second quarter of 2005, Kaneb recorded a provision for loss contingencies for various litigation, claims and commitments. No amount has been included in the estimated minimum income from continuing operations for the twelve months ending June 30, 2007 because Valero L.P. does not expect to fund any recorded amounts in the twelve months ending June 30, 2007. | |
| Interest Expense, Net. Valero L.P. estimated that interest expense will increase due to higher interest rates and higher debt balances. Valero L.P. assumed that the LIBOR rate would average 5.04% for the twelve months ending June 30, 2007. This interest rate assumption is consistent with the one year yield curve for 30 day LIBOR rates at the time the minimum income from operations calculation was performed. Debt balances are estimated to increase by approximately $92.3 million during the twelve months ending June 30, 2007, to fund Valero L.P.s strategic capital expenditures program. | |
| Income Tax Expense. Valero L.P. estimated income tax expense based on current statutory tax rates and estimated taxable income for each of its tax paying subsidiaries. The majority of Valero L.P.s tax paying subsidiaries are international subsidiaries. Estimated income tax expense resulted in a 6.9% effective income tax rate for the twelve months ending June 30, 2007. Valero L.P.s pro forma income from continuing operations for the year ended December 31, 2005 and the twelve months ended March 31, 2006 reflects a benefit of approximately $8.7 million and $7.8 million, respectively, for income taxes as a result of Kaneb recording a pre-tax loss in the first half of 2005. The pre-tax loss resulted primarily from merger-related costs and the provision for loss contingencies. | |
| Distributions from Joint Ventures and Equity Income from Joint Ventures. Valero L.P. currently owns equity interests in a refined products pipeline and multiple refined products terminals. Based on the earnings expectations for these joint ventures, Valero L.P. assumed it will receive cash distributions of approximately $6 million for the twelve months ending June 30, 2007. | |
| Strategic Capital. Strategic capital expenditures are made to expand the operating capacity of Valero L.P.s current operations. Valero L.P. estimated strategic capital expenditures of approximately $92.3 million for the twelve months ending June 30, 2007. Valero L.P. assumed that it will fund these expenditures with borrowings under its existing revolving credit agreement. | |
| Reliability Capital. Reliability capital expenditures are made on an ongoing basis to maintain current operations. These expenditures do not increase operating capacity or operating income. Valero L.P. estimated reliability capital expenditures of approximately $54.1 million for the twelve months ending June 30, 2007. The projects expected to be completed during the twelve months ending June 30, 2007 are consistent with Valero L.P.s ongoing program of asset improvements to maintain the reliability and | |
59
integrity of its assets. Valero L.P. assumed that it will fund these expenditures with cash generated from operating activities. |
| the 2% general partner interest in Valero L.P., which we hold through our 100% ownership interest in Riverwalk Logistics, L.P.; | |
| 100% of the incentive distribution rights issued by Valero L.P., described in more detail below; and | |
| 10,225,491 common units of Valero L.P. representing a 21.4% limited partner interest in Valero L.P. |
Incentive Distribution Rights Hypothetical Allocations of Distributions to Us and Valero L.P.s Other Unitholders |
Distributions | Distributions | |||||||||||
Distributions | on our | on our | ||||||||||
to | General | Incentive | ||||||||||
Unitholders, | Partner | Distribution | ||||||||||
Valero L.P. Quarterly Distribution Per Unit | Including Us | Interest | Rights | |||||||||
Up to $0.60
|
98% | 2% | 0% | |||||||||
With respect to amounts above $0.60 up to $0.66
|
90% | 2% | 8% | |||||||||
With respect to amounts above $0.66
|
75% | 2% | 23% |
| Valero L.P.s 46,809,749 common units outstanding as of May 8, 2006; and | |
| our ownership of (i) the 2% general partner interest, (ii) the incentive distribution rights and (iii) 10,225,491 of Valero L.P.s common units. |
60
Distributions to | Distributions to Us from Interests in Valero L.P. | |||||||||||||||||||||||||||||||||
Owners of Valero | ||||||||||||||||||||||||||||||||||
Valero L.P.s | L.P. Other Than Us | |||||||||||||||||||||||||||||||||
Quarterly | Total | General | Incentive | Limited | ||||||||||||||||||||||||||||||
Distribution | Annual | Distribution | % of | Partner | Distribution | Partner | Distribution | % of | ||||||||||||||||||||||||||
per Unit | Distributions | Amount | Total | Interest | Rights | Units | Amount | Total | ||||||||||||||||||||||||||
$0.600 | $ | 114,636 | $ | 87,802 | 77% | $ | 2,293 | $ | | $ | 24,541 | $ | 26,834 | 23% | ||||||||||||||||||||
0.660 | 127,119 | 96,583 | 76% | 2,542 | 999 | 26,995 | 30,536 | 24% | ||||||||||||||||||||||||||
0.885 | 183,290 | 129,508 | 71% | 3,666 | 13,918 | 36,198 | 53,782 | 29% | ||||||||||||||||||||||||||
0.925 | 193,276 | 135,361 | 70% | 3,866 | 16,215 | 37,834 | 57,915 | 30% | ||||||||||||||||||||||||||
0.970 | 204,511 | 141,947 | 69% | 4,090 | 18,799 | 39,675 | 62,564 | 31% |
61
| satisfy general, administrative and other expenses and debt service requirements; | |
| permit Riverwalk Logistics, L.P. to make capital contributions to Valero L.P. to maintain its 2% general partner interest upon the issuance of additional partnership securities by Valero L.P.; | |
| comply with applicable law or any debt instrument or other agreement; | |
| provide funds for distributions to unitholders with respect to any one or more of the next four quarters; and | |
| otherwise provide for the proper conduct of our business. |
62
Historical | Pro Forma | ||||||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | Year Ended | Three Months | ||||||||||||||||||||||||||||||||||||
December 31, | Ended | ||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | 2005 | March 31, 2006 | |||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||
Statement of Income Data:
|
|||||||||||||||||||||||||||||||||||||||
Operating revenues
|
$ | 98,827 | $ | 118,458 | $ | 24,868 | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||||
Equity in earnings of Valero L.P.
|
| | 27,418 | 35,314 | 37,646 | 8,660 | 11,175 | 25,951 | 11,175 | ||||||||||||||||||||||||||||||
Total revenues
|
98,827 | 118,458 | 52,286 | 35,314 | 37,646 | 8,660 | 11,175 | 25,951 | 11,175 | ||||||||||||||||||||||||||||||
Costs and expenses:
|
|||||||||||||||||||||||||||||||||||||||
Operating expenses
|
33,583 | 37,838 | 9,484 | | | | | | | ||||||||||||||||||||||||||||||
General and administrative expenses
|
5,349 | 7,023 | 1,562 | 91 | 28 | | 8 | 500 | (e) | 125 | (e) | ||||||||||||||||||||||||||||
Depreciation and amortization expense
|
13,390 | 13,708 | 2,975 | | | | | | | ||||||||||||||||||||||||||||||
Total costs and expenses
|
52,322 | 58,569 | 14,021 | 91 | 28 | | 8 | 500 | 125 | ||||||||||||||||||||||||||||||
Operating income
|
46,505 | 59,889 | 38,265 | 35,223 | 37,618 | 8,660 | 11,167 | 25,451 | 11,050 | ||||||||||||||||||||||||||||||
Equity in earnings of Skelly-Belvieu Pipeline Company
|
3,179 | 3,188 | 633 | | | | | | | ||||||||||||||||||||||||||||||
Other income, net
|
| | 72 | 375 | 456 | 369 | 1 | 456 | 1 | ||||||||||||||||||||||||||||||
Interest income affiliated
|
| 2 | | 26 | 111 | 12 | 33 | | |
63
Historical | Pro Forma | |||||||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | Year Ended | Three Months | |||||||||||||||||||||||||||||||||||
December 31, | Ended | |||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | 2005 | March 31, 2006 | ||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||||||||||||||||
Affiliated
|
| (16,806 | ) | (18,691 | ) | (17,110 | ) | (17,778 | ) | (4,414 | ) | (4,743 | ) | | | |||||||||||||||||||||||
Nonaffiliated, net
|
(3,811 | ) | (4,880 | ) | (1,592 | ) | | | | | | | ||||||||||||||||||||||||||
Minority interest (a)
|
(9,393 | ) | (14,109 | ) | (2,400 | ) | | | | | | | ||||||||||||||||||||||||||
Income before income tax expense
|
36,480 | 27,284 | 16,287 | 18,514 | 20,407 | 4,627 | 6,458 | 25,907 | 11,051 | |||||||||||||||||||||||||||||
Income tax expense
|
| 396 | 33 | 67 | 114 | 67 | 83 | 99 | 85 | |||||||||||||||||||||||||||||
Net income
|
$ | 36,480 | $ | 26,888 | $ | 16,254 | $ | 18,447 | $ | 20,293 | $ | 4,560 | $ | 6,375 | $ | 25,808 | $ | 10,966 | ||||||||||||||||||||
Pro forma earnings per unit
|
$ | 0.61 | $ | 0.26 | ||||||||||||||||||||||||||||||||||
Balance Sheet Data (at period end):
|
||||||||||||||||||||||||||||||||||||||
Total assets
|
$ | 729,188 | $ | 760,256 | $ | 392,937 | $ | 388,991 | $ | 410,314 | $ | 407,995 | $ | 416,919 | ||||||||||||||||||||||||
Total debt (b)
|
285,519 | 386,816 | 283,797 | 270,597 | 265,961 | 265,354 | | |||||||||||||||||||||||||||||||
Members equity (c)
|
309,278 | 244,771 | 105,960 | 113,975 | 141,780 | 141,043 | 407,954 | |||||||||||||||||||||||||||||||
Other Financial Data:
|
||||||||||||||||||||||||||||||||||||||
Net cash provided by operating activities
|
$ | 77,132 | $ | 60,369 | $ | 23,033 | $ | 22,183 | $ | 16,731 | $ | 3,131 | $ | 6,432 | ||||||||||||||||||||||||
Net cash provided by (used in) investing activities
|
(17,926 | ) | (80,607 | ) | (17,060 | ) | 1,521 | (19,606 | ) | 2,520 | 1,286 | |||||||||||||||||||||||||||
Net cash provided by (used in) financing activities
|
(51,414 | ) | 45,975 | 296,679 | (23,632 | ) | 2,876 | (5,650 | ) | (7,719 | ) | |||||||||||||||||||||||||||
Distributions received from Valero L.P. (d)
|
15,872 | 39,130 | 36,013 | 37,964 | 44,745 | 9,703 | 12,661 |
(a) | Minority interest represents the proportionate interest of public unitholders in the net income of Valero L.P. during the period that Valero GP Holdings consolidated Valero L.P. | |
(b) | Total debt as of December 31, 2001 and 2002 includes $26.9 million and $110.4 million, respectively, of Valero L.P.s outstanding debt, prior to the ceasing of consolidation of Valero L.P. on March 18, 2003. The remainder of the debt at the end of 2001 and 2002 and all of the debt as of December 31, 2003, 2004 and 2005 and March 31, 2006 represents notes payable by Valero GP Holdings to subsidiaries of Valero Energy. The pro forma total debt as of March 31, 2006 is zero as the result of a planned capital contribution to Valero GP Holdings by Valero Energy subsidiaries of such notes. | |
(c) | Members equity in the historical balance sheet decreased from December 31, 2002 to December 31, 2003 as a result of the distribution to Valero GP Holdings members of the proceeds received from the redemption by Valero L.P. of 3,809,750 common units held by Valero GP Holdings. Members equity in the pro forma balance sheet as of March 31, 2006 is significantly higher than the members equity in the historical balance sheet as of the same date due to the assumed planned capital contribution of notes from Valero Energy subsidiaries discussed in footnote (b) above. | |
(d) | Distributions received from Valero L.P. for the years ended December 31, 2001, 2002 and 2003 include distributions received by Valero GP Holdings prior to the ceasing of consolidation of Valero L.P. on March 18, 2003, which were eliminated in the combined statements of cash flows, and therefore these amounts are not derived from the historical statements of cash flows. | |
(e) | Reflects contractual amounts incurred pursuant to the Administration Agreement. Please read Certain Relationships and Related Transactions Related Party Transactions. |
64
| the acquisition of Kaneb by Valero L.P. occurred on January 1, 2005; | |
| the sale of certain assets acquired as part of the acquisition of Kaneb for $455 million occurred on January 1, 2005 and that the proceeds from such sale were used to repay debt; | |
| the sale of Martin Oil LLC, a wholly owned subsidiary of Kaneb that was acquired as part of the acquisition of Kaneb, to Valero Energy for $26.8 million occurred on January 1, 2005 and that the proceeds were used to repay debt; and | |
| the sale of Valero L.P.s subsidiaries in Australia and New Zealand, which were acquired in connection with the acquisition of Kaneb and which Valero L.P. sold on March 30, 2006 for $65 million plus working capital adjustments, occurred on January 1, 2005 and that the proceeds were used to repay debt. |
Historical | Pro Forma | |||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||
Year Ended December 31, | March 31, | Year Ended | ||||||||||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005(e) | 2005 | 2006 | 2005 | |||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||
Statement of Income Data:
|
||||||||||||||||||||||||||||||||||
Revenues
|
$ | 98,827 | $ | 118,458 | $ | 181,450 | $ | 220,792 | $ | 659,557 | $ | 56,635 | $ | 274,004 | $ | 1,005,662 | ||||||||||||||||||
Costs and expenses:
|
||||||||||||||||||||||||||||||||||
Cost of product sales (a)
|
| | | | 229,806 | | 114,218 | 401,357 | ||||||||||||||||||||||||||
Operating expenses
|
33,583 | 37,838 | 64,609 | 78,298 | 184,609 | 19,685 | 71,070 | 272,250 | ||||||||||||||||||||||||||
General and administrative expenses
|
5,349 | 6,950 | 7,537 | 11,321 | 26,553 | 3,503 | 8,560 | 65,528 | ||||||||||||||||||||||||||
Depreciation and amortization expense
|
13,390 | 16,440 | 26,267 | 33,149 | 64,895 | 8,732 | 24,189 | 94,180 | ||||||||||||||||||||||||||
Provision for loss contingencies (b)
|
| | | | | | | 42,000 | ||||||||||||||||||||||||||
Total costs and expenses
|
52,322 | 61,228 | 98,413 | 122,768 | 505,863 | 31,920 | 218,037 | 875,315 | ||||||||||||||||||||||||||
Operating income
|
46,505 | 57,230 | 83,037 | 98,024 | 153,694 | 24,715 | 55,967 | 130,347 | ||||||||||||||||||||||||||
Equity earnings in joint ventures
|
3,179 | 3,188 | 2,416 | 1,344 | 2,319 | 378 | 1,206 | 5,116 | ||||||||||||||||||||||||||
Interest and other expense, net
|
(3,811 | ) | (4,880 | ) | (15,860 | ) | (20,950 | ) | (43,625 | ) | (5,829 | ) | (15,465 | ) | (61,121 | ) | ||||||||||||||||||
Income from continuing operations before income tax (expense)
benefit
|
45,873 | 55,538 | 69,593 | 78,418 | 112,388 | 19,264 | 41,708 | 74,342 | ||||||||||||||||||||||||||
Income tax (expense) benefit (c)
|
| (395 | ) | | | (4,713 | ) | | (2,119 | ) | 8,742 | |||||||||||||||||||||||
Income from continuing operations
|
45,873 | 55,143 | 69,593 | 78,418 | 107,675 | 19,264 | 39,589 | $ | 83,084 | |||||||||||||||||||||||||
Income (loss) from discontinued operations
(d)
|
| | | | 3,398 | | (138 | ) | ||||||||||||||||||||||||||
Net income
|
$ | 45,873 | $ | 55,143 | $ | 69,593 | $ | 78,418 | $ | 111,073 | $ | 19,264 | $ | 39,451 | ||||||||||||||||||||
Net income per unit applicable to limited partners:
|
||||||||||||||||||||||||||||||||||
Continuing operations
|
$ | 1.82 | $ | 2.72 | $ | 3.02 | $ | 3.15 | $ | 2.76 | $ | 0.77 | $ | 0.75 | $ | 1.48 | ||||||||||||||||||
65
Historical
Pro Forma
Three Months Ended
Year Ended December 31,
March 31,
Year Ended
December 31,
2001
2002
2003
2004
2005(e)
2005
2006
2005
(unaudited)
(unaudited)
0.10
$
1.82
$
2.72
$
3.02
$
3.15
$
2.86
$
0.77
$
0.75
$
1.70
$
2.75
$
2.95
$
3.20
$
3.365
$
0.800
$
0.885
$
387,070
$
415,508
$
827,557
$
857,507
$
3,366,992
$
3,323,180
25,660
108,911
353,257
384,171
1,169,659
1,187,662
342,166
293,895
438,163
438,311
1,900,779
1,898,480
303,811
348,023
355,008
381,358
358,965
381,086
427,675
308,047
295,456
392,145
442,596
556,654
443,993
700,969
176,771
175,559
225,426
256,576
245,084
253,531
252,275
366,986
473,714
517,409
505,643
513,073
$
77,132
$
77,656
$
106,108
$
108,503
$
186,430
$
15,300
$
57,052
(17,926
)
(80,607
)
(442,350
)
(58,511
)
(89,000
)
(6,239
)
39,935
(51,414
)
28,688
318,454
(49,590
)
(77,178
)
(16,410
)
(25,703
)
(a) | Cost of product sales relates to the sale of bunker fuel. Valero L.P. purchases bunker fuel for resale and records cost of product sales for barrels of fuel sold. | |
(b) | For the quarter ended June 30, 2005, Kaneb recorded a provision for loss contingencies associated with certain legal matters. Please read Kaneb Services LLC Notes to Consolidated Financial Statements Note 10. Commitments and Contingencies included elsewhere in this prospectus. | |
(c) | Valero L.P. is not a taxable entity for federal and state income tax purposes. For 2002, income tax expense relates to the acquisition by Valero L.P. of the Wichita Falls Business from Valero Energy. The historical and pro forma income tax amounts for the year ended December 31, 2005 and the historical income tax amounts for the three months ended March 31, 2006, relate to taxable, wholly owned corporate subsidiaries of Valero L.P. that were acquired as part of the acquisition of Kaneb. The corporate subsidiaries are primarily international subsidiaries. | |
(d) | On September 30, 2005, Valero L.P. sold certain assets it acquired as part of the acquisition of Kaneb for $455 million, and on March 30, 2006 Valero L.P. sold its subsidiaries in Australia and New Zealand, which were also acquired as part of the acquisition of Kaneb, for $65 million plus working capital adjustments. The results of operations of these assets and subsidiaries are included in income (loss) from discontinued operations. | |
(e) | The historical statement of income data for the year ended December 31, 2005 includes the results of operations of Kaneb from the date of acquisition, July 1, 2005, through December 31, 2005. |
66
| the 2% general partner interest in Valero L.P., which we hold through our 100% ownership interest in Riverwalk Logistics, L.P.; | |
| 100% of the incentive distribution rights issued by Valero L.P., which entitle us to receive increasing percentages of the cash distributed by Valero L.P., currently at the maximum percentage of 23%; and | |
| 10,225,491 common units of Valero L.P. representing a 21.4% limited partner interest in Valero L.P. |
67
| the increases in Valero L.P.s per unit quarterly distribution from $0.60 declared and paid for the third quarter of 2001 to $0.885 declared and paid for the first quarter of 2006; | |
| the decrease in Valero L.P.s distributions to Valero Energy resulting from the redemption by Valero L.P. on March 18, 2003 of 3,809,750 common units indirectly owned by Valero Energy; and | |
| the increases in Valero L.P.s distributions with respect to the 2% general partner interest resulting from the issuance of a total of 31,420,855 common units by Valero L.P. during such period to finance acquisitions and capital improvements. |
68
Cash Distributions Made by Valero L.P.(a)
Three
Months
April 16, 2001 to
Year Ended December 31,
Ended
December 31,
March 31,
2001
2002
2003
2004
2005
2006
$
1.70
$
2.75
$
2.95
$
3.20
$
3.365
$
0.885
19,217
19,261
22,423
23,041
40,868
46,810
$
33,359
$
55,175
$
70,203
$
79,776
$
151,795
$
45,823
$
667
$
1,103
$
1,405
$
1,596
$
3,036
$
916
1,103
2,620
4,448
10,259
3,480
23,889
38,729
30,320
32,802
34,407
9,050
$
24,556
$
40,935
$
34,345
$
38,846
$
47,702
$
13,446
73.6
%
74.2
%
48.9
%
48.7
%
31.4
%
29.3
%
(a) | Distributions declared for a quarter are paid by Valero L.P. within 45 days following the end of each quarter based on the partnership interests outstanding as of a record date that is set after the end of each quarter. Distributions for the fourth quarter are declared and paid in the year following such quarter. |
(b) | Average number of Valero L.P. limited partner units outstanding on the distribution record dates for the periods presented. |
(c) | For the second quarter of 2005, Valero L.P.s financial statements reflected a total cash distribution of approximately $21.6 million, which was based on the partnership interests outstanding as of June 30, 2005. On July 1, 2005, Valero L.P. issued approximately 23.8 million of its common units in exchange for all outstanding units of Kaneb Pipe Line Partners, L.P. in connection with its acquisition of Kaneb. Pursuant to the terms of the merger agreement and because actual payments are made within 45 days after the end of each quarter based on the partnership interests outstanding as of a record date that is set after the end of each quarter, the actual cash payment made with respect to the second quarter was approximately $44.0 million, which includes the distributions paid to former Kaneb unitholders with respect to the second quarter of 2005. |
(d) | Effective March 11, 2004, Valero L.P.s partnership agreement was amended to reduce the incentive distribution rights to 23% for total distributions in excess of $0.66 per unit. This amendment had no effect on the amount of distributions paid relative to the incentive distribution rights for 2004 and 2005, and the three months ended March 31, 2006. Valero GP Holdings does not currently anticipate a further lowering of the incentive distribution rights. |
(e) | The 2002 percentage increase is based on the $34.6 million of cash distributions that would have been paid to us for 2001 had Valero L.P. issued common units to the public on January 1, 2001. The 2003 percentage decrease results from the redemption by Valero L.P. in March 2003 of 3,809,750 common units held by Valero GP Holdings. |
69
| Valero GP, LLC will provide all employees for us; and | |
| Valero GP, LLC will provide us with all executive management, accounting, legal, cash management, corporate finance and other administrative services. |
70
Employee Benefits |
| All benefit obligations for benefits payable under the Pension Plan, Excess Pension Plan and SERP associated with employees service through the effective date of this offering will be the responsibility of Valero Energy. All benefit obligations related to service after the effective date of this offering will be covered under new and separate benefit plans maintained by Valero GP, LLC. We expect these new plans to provide employee retirement benefits comparable to the benefits previously provided to these employees under the Valero Energy plans. | |
| Medical and other welfare benefits will continue to be provided to Valero GP, LLC employees under the Flex Benefits Plan through December 31, 2006, at which time a new welfare benefit plan will be established by Valero GP, LLC. Valero GP, LLC will reimburse Valero Energy for the medical and other welfare benefits provided to Valero GP, LLC employees from the effective date of this offering through December 31, 2006. We expect the new Valero GP, LLC plan to provide employee welfare benefits comparable to the benefits previously provided to these employees under the Valero Energy plan. | |
| Benefit obligations related to the LTIP and certain long-term disability (LTD) benefits under the Flex Benefits Plan will be retained by Valero GP, LLC. Valero Energy will contribute cash to us on the effective date of this offering that will be sufficient to fund the fair value of these liabilities at that date. We expect the LTD plan to continue to provide similar benefits to Valero GP, LLC employees after the effective date of this offering. | |
| Benefit obligations related to the post-retirement medical benefits will be retained by Valero GP, LLC for those employees that are not retirement eligible (employees over 55 years old with 5 years of service and eligible to receive benefits under the Pension Plan). The benefit obligation for retirement eligible employees under the Retiree Benefits Plan will be the responsibility of Valero Energy. Valero Energy will contribute cash and a receivable from Valero L.P. to us on the effective date of this offering that will be sufficient to fund the estimated post-retirement benefit obligation retained by Valero GP, LLC at that date. We expect the post-retirement medical benefits plan to be adopted by Valero GP, LLC will provide comparable benefits to its employees after the effective date of this offering. |
Other Contingencies |
71
72
| company-specific factors, such as asset integrity issues and maintenance requirements that impact the throughput rates of its assets; | |
| seasonal factors that affect the demand for refined products and fertilizers transported by and/or stored in its assets; | |
| industry factors, such as changes in the prices of petroleum products that affect demand and operations of its customers; and | |
| other factors such as refinery utilization rates and maintenance turnaround schedules that impact the operations of refineries served by its assets. |
73
Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2006 |
Three Months Ended March 31, | ||||||||||
2005 | 2006 | |||||||||
Statement of Income Data:
|
||||||||||
Revenues:
|
||||||||||
Services revenues
|
$ | 56,635 | $ | 147,929 | ||||||
Product sales
|
| 126,075 | ||||||||
Total revenues
|
56,635 | 274,004 | ||||||||
Costs and expenses:
|
||||||||||
Cost of product sales
|
| 114,218 | ||||||||
Operating expenses
|
19,685 | 71,070 | ||||||||
General and administrative expenses
|
3,503 | 8,560 | ||||||||
Depreciation and amortization
|
8,732 | 24,189 | ||||||||
Total costs and expenses
|
31,920 | 218,037 | ||||||||
Operating income
|
24,715 | 55,967 | ||||||||
Equity income from joint ventures
|
378 | 1,206 | ||||||||
Interest and other expenses, net
|
(5,829 | ) | (15,465 | ) | ||||||
Income from continuing operations before income tax
expense
|
19,264 | 41,708 | ||||||||
Income tax expense
|
| 2,119 | ||||||||
Income from continuing operations
|
19,264 | 39,589 | ||||||||
Loss from discontinued operations
|
| (138 | ) | |||||||
Net income
|
19,264 | 39,451 | ||||||||
Less general partners interest and incentive distributions
|
(1,476 | ) | (4,199 | ) | ||||||
Limited partners interest in net income
|
$ | 17,788 | $ | 35,252 | ||||||
Weighted-average units outstanding
|
23,041,394 | 46,809,749 | ||||||||
Net income per unit applicable to limited partners:
|
||||||||||
Continuing operations
|
$ | 0.77 | $ | 0.75 | ||||||
Discontinued operations
|
| | ||||||||
Net income
|
$ | 0.77 | $ | 0.75 | ||||||
December 31, | March 31, | ||||||||
2005 | 2006 | ||||||||
Balance Sheet Data:
|
|||||||||
Long-term debt, including current portion
|
$ | 1,170,705 | $ | 1,188,228 | |||||
Partners equity
|
1,900,779 | 1,898,480 | |||||||
Debt-to-capitalization ratio (a)
|
38.1% | 38.5% |
(a) | Valero L.P.s debt-to -capitalization ratio is defined as its long-term debt, including current portion, divided by the sum of its long-term debt, including current portion, and partners equity. |
74
Three Months Ended
March 31,
2005
2006
253,531
252,275
$
9,937
$
10,540
59,533
126,075
9,937
196,148
114,218
4,497
43,979
1,859
10,906
$
3,581
$
27,045
443,993
700,969
$
22,182
$
52,046
9,303
19,802
3,857
10,139
$
9,022
$
22,105
381,086
427,675
$
13,185
$
14,049
3,823
3,697
1,146
1,249
$
8,216
$
9,103
505,643
513,073
$
11,331
$
11,761
2,062
3,592
1,870
1,895
$
7,399
$
6,274
$
56,635
$
274,004
114,218
19,685
71,070
8,732
24,189
28,218
64,527
3,503
8,560
$
24,715
$
55,967
75
Highlights |
Refined Product Terminals |
Refined Product Pipelines |
76
Crude Oil Pipelines |
Crude Oil Storage Tanks |
General |
77
Year Ended December 31, | ||||||||||
2004 | 2005 | |||||||||
Statement of Income Data:
|
||||||||||
Revenues:
|
||||||||||
Services
|
$ | 220,792 | $ | 407,194 | ||||||
Product
|
| 252,363 | ||||||||
Total revenues
|
220,792 | 659,557 | ||||||||
Costs and expenses:
|
||||||||||
Cost of sales
|
| 229,806 | ||||||||
Operating expenses
|
78,298 | 184,609 | ||||||||
General and administrative expenses
|
11,321 | 26,553 | ||||||||
Depreciation and amortization
|
33,149 | 64,895 | ||||||||
Total costs and expenses
|
122,768 | 505,863 | ||||||||
Operating income
|
98,024 | 153,694 | ||||||||
Equity income from joint ventures
|
1,344 | 2,319 | ||||||||
Interest and other expense, net
|
(20,950 | ) | (43,625 | ) | ||||||
Income from continuing operations before income tax expense
|
78,418 | 112,388 | ||||||||
Income tax expense
|
| 4,713 | ||||||||
Income from continuing operations
|
78,418 | 107,675 | ||||||||
Income from discontinued operations
|
| 3,398 | ||||||||
Net income
|
78,418 | 111,073 | ||||||||
Less general partners interest and incentive distributions
|
(5,927 | ) | (10,758 | ) | ||||||
Limited partners interest in net income
|
$ | 72,491 | $ | 100,315 | ||||||
Weighted-average units outstanding
|
23,041,394 | 35,023,250 | ||||||||
Net income per unit applicable to limited partners:
|
||||||||||
Continuing operations
|
$ | 3.15 | $ | 2.76 | ||||||
Discontinued operations
|
| 0.10 | ||||||||
Net income
|
$ | 3.15 | $ | 2.86 | ||||||
December 31, | ||||||||
2004 | 2005 | |||||||
Balance Sheet Data:
|
||||||||
Long-term debt, including current portion
|
$ | 385,161 | $ | 1,170,705 | ||||
Partners equity
|
438,311 | 1,900,779 | ||||||
Debt-to-capitalization ratio (a)
|
46.8 | % | 38.1 | % |
(a) | Valero L.P.s debt-to -capitalization ratio is defined as its long-term debt, including current portion, divided by the sum of its long-term debt, including current portion, and partners equity. |
78
Year Ended December 31,
2004
2005
256,576
245,084
$
39,984
$
43,617
115,352
252,363
229,806
18,365
94,607
6,471
25,008
$
15,148
$
61,911
442,596
556,654
$
86,418
$
149,853
37,332
64,671
14,715
27,778
$
34,371
$
57,404
381,358
358,965
$
52,462
$
51,429
15,468
16,378
4,499
4,612
$
32,495
$
30,439
473,714
517,409
$
41,928
$
46,943
7,133
8,953
7,464
7,497
$
27,331
$
30,493
$
220,792
$
659,557
229,806
78,298
184,609
33,149
64,895
109,345
180,247
11,321
26,553
$
98,024
$
153,694
(a) | Throughput related to newly acquired assets included in the table above is calculated based on throughput for the period from the date of acquisition through December 31 of the year of acquisition divided by the number of days in the applicable year. |
79
Annual Highlights |
Refined Product Terminals |
| the Kaneb acquisition, which contributed $115.4 million of storage lease revenues and $252.4 million of bunkering revenues; and | |
| higher throughputs at Valero L.P.s asphalt terminals, which charge a higher terminalling fee than Valero L.P.s other refined product terminals, resulting in increased revenues of $3.1 million. |
Refined Product Pipelines |
| the Kaneb acquisition, which increased throughputs by 115,096 barrels per day, resulting in additional revenues of $57.4 million; | |
| the Dos Laredos pipeline system, which only operated for part of 2004, contributed $3.4 million of additional revenue since it operated for a full year in 2005 and due to a change in the contract terms with Petroleos Mexicanos (PEMEX), allowing for an increase in volumes from 5,000 barrels per day to 10,000 barrels per day; |
80
| the supply dynamics in the Denver market resulted in increased throughputs transported on the McKee to Denver refined product pipeline, a high tariff rate pipeline, resulting in higher revenues of $3.3 million, despite the McKee turnaround; and | |
| the expansion of the Corpus Christi to Harlingen to Edinburg refined product pipeline, which commenced operations in October 2005, increased revenue by $0.9 million. |
| the Kaneb acquisition, which contributed depreciation and amortization expense of $12.1 million; | |
| the expansion of the Corpus Christi to Harlingen to Edinburg refined product pipeline, which commenced operations in October 2005, resulting in additional depreciation expense of $0.5 million; and | |
| the Dos Laredos pipeline system, which only operated for part of 2004, resulted in higher depreciation expense of $0.2 million for the full year of 2005. |
Crude Oil Pipelines |
Crude Oil Storage Tanks |
General |
81
Year Ended December 31, 2003 Compared to Year Ended December 31, 2004 |
Year Ended December 31, | ||||||||||
2003 | 2004 | |||||||||
Statement of Income Data:
|
||||||||||
Revenues
|
$ | 181,450 | $ | 220,792 | ||||||
Costs and expenses:
|
||||||||||
Operating expenses
|
64,609 | 78,298 | ||||||||
General and administrative expenses
|
7,537 | 11,321 | ||||||||
Depreciation and amortization
|
26,267 | 33,149 | ||||||||
Total costs and expenses
|
98,413 | 122,768 | ||||||||
Operating income
|
83,037 | 98,024 | ||||||||
Equity income from joint ventures
|
2,416 | 1,344 | ||||||||
Interest and other expense, net
|
(15,860 | ) | (20,950 | ) | ||||||
Net income
|
69,593 | 78,418 | ||||||||
Less general partners interest and incentive distributions
|
(3,959 | ) | (5,927 | ) | ||||||
Limited partners interest in net income
|
$ | 65,634 | $ | 72,491 | ||||||
Weighted-average units outstanding
|
21,706,164 | 23,041,394 | ||||||||
Net income per unit applicable to limited partners
|
$ | 3.02 | $ | 3.15 | ||||||
December 31, | |||||||||
2003 | 2004 | ||||||||
Balance Sheet Data:
|
|||||||||
Long-term debt, including current portion
|
$ | 354,192 | $ | 385,161 | |||||
Partners equity
|
438,163 | 438,311 | |||||||
Debt-to-capitalization ratio (a)
|
44.7 | % | 46.8 | % |
(a) | Valero L.P.s debt-to-capitalization ratio is defined as its long-term debt, including current portion, divided by the sum of its long-term debt, including current portion, and partners equity. |
82
Year Ended December 31,
2003
2004
225,426
256,576
$
31,269
$
39,984
15,447
18,365
3,508
6,471
$
12,314
$
15,148
392,145
442,596
$
72,276
$
86,418
28,914
37,332
12,380
14,715
$
30,982
$
34,371
355,008
381,358
$
50,741
$
52,462
15,196
15,468
5,379
4,499
$
30,166
$
32,495
366,986
473,714
$
27,164
$
41,928
5,052
7,133
5,000
7,464
$
17,112
$
27,331
$
181,450
$
220,792
64,609
78,298
26,267
33,149
90,574
109,345
7,537
11,321
$
83,037
$
98,024
(a) | During the years ended December 31, 2003 and 2004, Valero L.P. completed several acquisitions as discussed below. The throughput related to these newly acquired assets included in the table above is calculated based on throughput for the period from the date of acquisition through December 31, divided by the number of days in the applicable year. |
83
Annual Highlights |
| The acquisitions of the South Texas Pipelines and Terminals and the crude oil storage tanks in March 2003, the Southlake pipeline in August 2003 and the Paulsboro terminal in September 2003. These assets were included in the results of operations for a full year in 2004 compared to a partial year in 2003; | |
| The acquisition of the Royal Trading asphalt terminals in February 2004; | |
| The commencement of operations in June 2004 of the Dos Laredos pipeline system, which ships propane to the Nuevo Laredo, Mexico propane terminal; | |
| Valero Energys addition of a new crude unit at its Texas City refinery in the fourth quarter of 2003, which allowed that refinery to process more throughput, which benefited Valero L.P.s storage tank business; | |
| Increased tariff rates effective April 2004 and the implementation of a Corpus Christi North Beach storage facility lease agreement effective January 2004; and | |
| Lower throughput volumes in 2003 due to economic-based production cuts at Valero Energys McKee refinery, a major turnaround at Valero Energys Ardmore refinery and planned and unplanned crude unit outages at the Texas City refinery. |
| Crude unit outages at Valero Energys McKee refinery in the second and third quarters of 2004 and a turnaround at Valero Energys Benicia refinery in the fourth quarter of 2004; | |
| Increased operating expense due to the following (excluding the impact of 2003 and 2004 acquisitions): |
| Higher incentive compensation expense; | |
| Higher power costs as a result of higher natural gas prices; and | |
| Increased internal overhead costs due to the amendment to the Services Agreement, under which overhead previously allocated to Valero Energy is now borne by Valero L.P. |
| Higher general and administrative expense primarily due to the amendment to the Services Agreement effective April 1, 2004, between Valero L.P. and Valero Energy for services rendered by Valero Energy corporate employees. In addition, general and administrative expenses in 2004 were higher due to increased external public company expenses, incentive compensation and employee headcount; | |
| Less equity income from Skelly-Belvieu Pipeline Company due primarily to a 21% decline in throughput barrels in the Skellytown to Mont Belvieu refined product pipeline in addition to higher maintenance expenses associated with pipeline integrity inspection costs; and | |
| Higher interest expense, which resulted from several factors, including (a) a full year of interest expense in 2004 related to the $250.0 million of 6.05% senior notes issued in March 2003; (b) borrowings of $43.0 million under the revolving credit facility in the first quarter of 2004 to fund the acquisition of the Royal Trading asphalt terminals and a portion of the construction costs related to the Dos Laredos pipelines and terminal; and (c) less interest income from interest rate swaps as interest rates increased in 2004. |
84
Refined Product Terminals |
Refined Product Pipelines |
Crude Oil Pipelines |
85
Crude Oil Storage Tanks |
| Valero L.P.s ownership of the crude oil storage tanks for only 288 days of the year ended December 31, 2003, compared to 366 days in the year ended December 31, 2004; and | |
| Valero Energys addition of a new crude unit at its Texas City refinery in the fourth quarter of 2003, which allowed that refinery to process more throughput in 2004. In addition, there were several planned and unplanned crude unit outages at the Texas City refinery in 2003 which lowered the amount of throughput processed in 2003. |
Outlook |
General |
86
Cash Flows for the Three Months Ended March 31, 2005 and 2006 |
Cash Flows for the Years Ended December 31, 2004 and 2005 |
Equity |
87
Three Months | |||||||||||||||||||||
Year Ended December 31, | Ended March 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
General partner interest
|
$ | 1,404 | $ | 1,595 | $ | 2,589 | $ | 399 | $ | 916 | |||||||||||
General partner incentive distribution
|
2,620 | 4,449 | 8,711 | 1,112 | 3,480 | ||||||||||||||||
Total general partner distribution
|
4,024 | 6,044 | 11,300 | 1,511 | 4,396 | ||||||||||||||||
Limited partners distribution
|
66,179 | 73,733 | 118,178 | 18,433 | 41,427 | ||||||||||||||||
Total cash distributions
|
$ | 70,203 | $ | 79,777 | $ | 129,478 | $ | 19,944 | $ | 45,823 | |||||||||||
Cash distributions per unit applicable to limited partners
|
$ | 2.950 | $ | 3.200 | $ | 3.365 | $ | 0.800 | $ | 0.885 | |||||||||||
88
Capital Requirements |
| reliability capital expenditures, such as those required to maintain equipment reliability and safety and to address environmental and safety regulations; and | |
| expansion capital expenditures, such as those to expand and upgrade pipeline capacity and to construct new pipelines, terminals and storage tanks. In addition, expansion capital expenditures may include acquisitions of pipelines, terminals or storage tank assets. |
Long-Term Contractual Obligations |
6.05% Senior Notes |
6.875% Senior Notes |
89
7.75% and 5.875% Senior Notes |
$525 Million Term Loan Agreement |
$400 Million Revolving Credit Agreement |
90
$175 Million Revolving Credit Facility |
UK Term Loan |
Credit Agreement Provisions |
Port Authority of Corpus Christi Note Payable |
91
Other |
Interest Rate Swaps |
Contractual Obligations |
Payments Due by Period | ||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | ||||||||||||||||||||||
(Thousands of dollars) | ||||||||||||||||||||||||||||
Long-term debt (stated maturities)
|
$ | 1,046 | $ | 611 | $ | 660 | $ | 713 | $ | 265,901 | $ | 901,774 | $ | 1,170,705 | ||||||||||||||
Operating leases
|
9,544 | 6,424 | 5,274 | 4,434 | 4,217 | 81,028 | 110,921 | |||||||||||||||||||||
Purchase obligations
|
216,426 | 959 | 25 | 25 | 25 | 77 | 217,537 |
92
Other Contingencies |
Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2003 | 2004 | 2005(a) | 2005 | 2006 | ||||||||||||||||
Revenues
|
$ | 178,605 | $ | 217,608 | $ | 234,485 | $ | 55,341 | $ | 60,671 | ||||||||||
Operating expenses
|
24,196 | 31,960 | 60,921 | 8,041 | 20,457 | |||||||||||||||
General and administrative expenses
|
6,110 | 10,539 | 19,356 | 2,757 | 5,700 |
(a) | The amounts reflected in the table include revenues and operating expenses of $1,867 and $1,850, respectively, which are included in income from discontinued operations in the consolidated statement of income. |
93
Services Agreement |
Amended and Restated Omnibus Agreement |
| any business retained by Ultramar Diamond Shamrock Corporation (UDS) as of April 16, 2001, the closing of Valero L.P.s initial public offering, or any business owned by Valero Energy at the date of its acquisition of UDS on December 31, 2001; |
94
| any business with a fair market value of less than $10 million; | |
| any business acquired by Valero Energy in the future that constitutes less than 50% of the fair market value of a larger acquisition, provided Valero L.P. has been offered and declined the opportunity to purchase the business; and | |
| any newly constructed pipeline, terminalling or storage assets that Valero L.P. has not offered to purchase at fair market value within one year of construction. |
Non-Compete Agreement |
Pipelines and Terminals Usage Agreement McKee, Three Rivers and Ardmore |
| to transport in Valero L.P.s crude oil pipelines at least 75% of the aggregate volumes of crude oil shipped to the McKee, Three Rivers and Ardmore refineries; | |
| to transport in Valero L.P.s refined product pipelines at least 75% of the aggregate volumes of refined products shipped from the McKee, Three Rivers and Ardmore refineries; and | |
| to use Valero L.P.s refined product terminals for terminalling services for at least 50% of all refined products shipped from the McKee, Three Rivers and Ardmore refineries. |
95
Crude Oil Storage Tank Agreements |
| Handling and Throughput Agreement , dated March 2003, pursuant to which Valero Energy agreed to pay Valero L.P. a fee for 100% of crude oil and certain other feedstocks delivered to each of the Corpus Christi West refinery, the Texas City refinery and the Benicia refinery and to use Valero L.P.s logistic assets for handling all deliveries to these refineries. The throughput fees are adjustable annually, generally based on 75% of the regional consumer price index applicable to the location of each refinery. The initial term of the handling and throughput agreement is ten years, which may be extended by Valero Energy for up to an additional five years. | |
| Services and Secondment Agreements , dated March 2003, pursuant to which Valero Energy agreed to provide personnel to Valero L.P. who perform operating and routine maintenance services related to the crude oil storage tank operations. The annual reimbursement for those services is an aggregate $3.5 million. The initial term of the services and secondment agreements is ten years which Valero L.P. has the option to extend for an additional five years. In addition to the fees Valero L.P. has agreed to pay Valero Energy under the services and secondment agreements, Valero L.P. is responsible for operating expenses and specified capital expenditures related to the tank assets that are not addressed in the services and secondment agreements. These operating expenses and capital expenditures include tank safety inspections, maintenance and repairs, certain environmental expenses, insurance premiums and ad valorem taxes. | |
| Lease and Access Agreements , dated March 2003, pursuant to which Valero Energy leases to Valero L.P. the land on which the crude oil storage tanks are located for an aggregate amount of $0.7 million per year. The initial term of each lease is 25 years, subject to automatic renewal for successive one-year periods thereafter. Valero L.P. may terminate any of these leases upon 30 days notice after the initial term or at the end of a renewal period. In addition, Valero L.P. may terminate any of these leases upon 180 days notice prior to the expiration of the current term if Valero L.P. ceases to operate the crude oil storage tanks or cease business operations. |
South Texas Pipelines and Terminals Agreements |
| Terminalling Agreement , dated March 2003, pursuant to which Valero Energy agreed, during the initial period of five years, to pay a terminalling fee for each barrel of refined product stored or handled by or on behalf of Valero Energy at the terminals, including an additive fee for gasoline additive blended at the terminals. At the Houston Hobby Airport terminal, Valero Energy agreed to pay a filtering fee for each barrel of jet fuel stored or handled at the terminal. |
96
| Throughput Commitment Agreement , dated March 2003, pursuant to which Valero Energy agreed, for an initial period of seven years: |
| to transport in the Houston and Valley pipeline systems an aggregate of 40% of the Corpus Christi refineries gasoline and distillate production but only if the combined throughput in these pipelines is less than 110,000 barrels per day; | |
| to transport in the Pettus to San Antonio refined product pipeline 25% of the Three Rivers refinery gasoline and distillate production and in the Pettus to Corpus Christi refined product pipeline 90% of the Three Rivers refinery raffinate production; | |
| to use the Houston asphalt terminal for an aggregate of 7% of the asphalt production of the Corpus Christi refineries; | |
| to use the Edinburg refined product terminal for an aggregate of 7% of the gasoline and distillate production of the Corpus Christi refineries, but only if the throughput at this terminal is less than 20,000 barrels per day; and | |
| to use the San Antonio East terminal for 75% of the throughput in the Pettus to San Antonio refined product pipeline. |
Hydrogen Tolling Agreement |
Pittsburg Asphalt Terminal Throughput Agreement |
Royal Trading Throughput Agreement |
Corpus Christi North Beach Storage Facility Lease |
97
Office Rental Agreement |
Other Agreements |
Equity Ownership |
Environmental, Health and Safety |
Depreciation |
98
Impairment of Long-Lived Assets and Goodwill |
Asset Retirement Obligations |
Environmental Reserve |
99
Contingencies |
December 31, 2004 | ||||||||||||||||||||||||||||||||||
Expected Maturity Dates | ||||||||||||||||||||||||||||||||||
Fair | ||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | Total | Value | |||||||||||||||||||||||||||
Long-term Debt:
|
||||||||||||||||||||||||||||||||||
Fixed rate
|
$ | 990 | $ | 566 | $ | 611 | $ | 660 | $ | 713 | $ | 355,652 | $ | 359,192 | $ | 389,933 | ||||||||||||||||||
Average interest rate
|
8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % | 6.3 | % | 6.3 | % | ||||||||||||||||||||
Variable rate
|
$ | | $ | 28,000 | $ | | $ | | $ | | $ | | $ | 28,000 | $ | 28,000 | ||||||||||||||||||
Average interest rate
|
| 3.4 | % | | | | | 3.4 | % | |||||||||||||||||||||||||
Interest Rate Swaps Fixed to Variable:
|
||||||||||||||||||||||||||||||||||
Notional amount
|
$ | | $ | | $ | | $ | | $ | | $ | 167,500 | $ | 167,500 | $ | (1,217 | ) | |||||||||||||||||
Average pay rate
|
5.1 | % | 5.7 | % | 6.0 | % | 6.2 | % | 6.6 | % | 7.0 | % | 6.4 | % | ||||||||||||||||||||
Average receive rate
|
6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % |
December 31, 2005 | ||||||||||||||||||||||||||||||||||
Expected Maturity Dates | ||||||||||||||||||||||||||||||||||
Fair | ||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | Value | |||||||||||||||||||||||||||
Long-term Debt:
|
||||||||||||||||||||||||||||||||||
Fixed rate
|
$ | 1,046 | $ | 611 | $ | 660 | $ | 713 | $ | 36,901 | $ | 854,881 | $ | 894,812 | $ | 954,039 | ||||||||||||||||||
Average interest rate
|
8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % | 6.7 | % | 6.6 | % | 6.6 | % | ||||||||||||||||||||
Variable rate
|
$ | | $ | | $ | | $ | | $ | 229,000 | $ | | $ | 229,000 | $ | 229,000 | ||||||||||||||||||
Average interest rate
|
| | | | 5.2 | % | | 5.2 | % | |||||||||||||||||||||||||
Interest Rate Swaps Fixed to Variable:
|
||||||||||||||||||||||||||||||||||
Notional amount
|
$ | | $ | | $ | | $ | | $ | | $ | 167,500 | $ | 167,500 | $ | (4,002 | ) | |||||||||||||||||
Average pay rate
|
6.6 | % | 6.6 | % | 6.6 | % | 6.6 | % | 6.7 | % | 6.6 | % | 6.6 | % | ||||||||||||||||||||
Average receive rate
|
6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % | 6.3 | % |
100
March 31, 2006
Expected Maturity Dates
Fair
2006
2007
2008
2009
2010
Thereafter
Total
Value
$
566
$
611
$
660
$
713
$
37,239
$
854,881
$
894,670
$
926,685
8.0
%
8.0
%
8.0
%
8.0
%
6.7
%
6.6
%
6.6
%
$
$
$
$
$
252,000
$
$
252,000
$
252,000
5.6
%
5.6
%
$
$
$
$
$
$
167,500
$
167,500
$
(7,910
)
7.1
%
7.0
%
7.0
%
7.0
%
7.1
%
7.1
%
7.1
%
6.3
%
6.3
%
6.3
%
6.3
%
6.3
%
6.3
%
6.3
%
101
| the 2% general partner interest in Valero L.P., which we hold through our 100% ownership interest in Riverwalk Logistics, L.P.; | |
| 100% of the incentive distribution rights issued by Valero L.P., which entitle us to receive increasing percentages of the cash distributed by Valero L.P., currently at the maximum percentage of 23%; and | |
| 10,225,491 common units of Valero L.P. representing a 21.4% limited partner interest in Valero L.P. |
102
| the increases in Valero L.P.s per unit quarterly distribution from $0.60 declared and paid for the third quarter of 2001 to $0.885 declared and paid for the first quarter of 2006; and | |
| the increases in Valero L.P.s distributions with respect to the 2% general partner interest resulting from the issuance of a total of 31,420,855 common units by Valero L.P. during such period to finance acquisitions and capital improvements. |
(a) | Actual distributions paid to Valero GP Holdings for quarters prior to the March 18, 2003 redemption were as follows (in millions, except per unit amounts): |
Per Unit | Total Distribution Paid to | |||||||
Distribution | Valero GP Holdings, LLC | |||||||
2001:
|
||||||||
Second Quarter
|
$ | 0.501 | (b) | $ | 7.2 | |||
Third Quarter
|
0.600 | 8.6 | ||||||
Fourth Quarter
|
0.600 | 8.7 | ||||||
2002:
|
||||||||
First Quarter
|
0.650 | 9.5 | ||||||
Second Quarter
|
0.700 | 10.5 | ||||||
Third Quarter
|
0.700 | 10.5 | ||||||
Fourth Quarter
|
0.700 | 10.5 |
(b) | The second quarter distribution was prorated for the period from April 16, 2001, the effective date of Valero L.P.s initial public offering, to June 30, 2001. |
| 8.0% of all cash distributed in a quarter after $0.60 per unit has been distributed with respect to all units of Valero L.P. for that quarter until $0.66 per unit has been distributed; and | |
| 23.0% of all cash distributed in a quarter after $0.66 per unit has been distributed with respect to all units of Valero L.P. for that quarter. |
103
| Valero L.P.s 46,809,749 common units outstanding as of May 8, 2006; and | |
| our ownership of the general partner interest in Valero L.P., the incentive distribution rights, and 10,225,491 common units. |
(a) | This represents the most recent distribution (first quarter 2006) presented on an annualized basis. |
104
105
| 67 refined product terminal facilities providing approximately 58.2 million barrels of storage capacity; | |
| 8,389 miles of refined product pipelines, including 2,000 miles of anhydrous ammonia pipelines, with 21 associated terminals providing storage capacity of 4.9 million barrels; | |
| 854 miles of crude oil pipelines with 11 associated storage tanks providing storage capacity of 1.7 million barrels; and | |
| 60 crude oil storage tanks providing storage capacity of 12.5 million barrels. |
| charging tariffs for transporting crude oil, refined products and ammonia through its pipelines; | |
| charging fees for the use of its terminals and crude oil storage tanks and related ancillary services; and | |
| selling bunker fuel, the fuel consumed by marine vessels. |
| continuous improvement of its operations, by improving safety and environmental stewardship, cost controls and asset reliability and integrity; | |
| external growth from acquisitions that meet its financial and strategic criteria; and | |
| internal growth through enhancing the utilization of its existing assets by expanding its business with current and new customers as well as investing in strategic expansion projects. Currently, Valero L.P. has identified over $250 million of potential terminal expansion opportunities primarily on the East, West, and Gulf Coasts of the United States and at Valero L.P.s facilities in St. Eustatius, Point Tupper, the United Kingdom and Amsterdam. Additionally, Valero L.P. has identified over $30 million of potential debottlenecking and pipeline extension projects on its ammonia pipeline and approximately $13 million of growth projects to increase its ethanol blending and biodiesel capabilities. | |
106
| 57 terminals in the United States, with a total storage capacity of approximately 32.6 million barrels; | |
| A terminal on the island of St. Eustatius, Netherlands Antilles with a tank capacity of 11.3 million barrels and a transshipment facility; | |
| A terminal located in Point Tupper, Nova Scotia with a tank capacity of 7.6 million barrels and a transshipment facility; | |
| Six terminals located in the United Kingdom and one terminal located in the Netherlands, having a total storage capacity of approximately 6.7 million barrels; and | |
| A terminal located in Nuevo Laredo, Mexico. |
107
Description of Largest Terminal Facilities |
108
Tankage | No. of | |||||||||
Facility | Capacity | Tanks | Primary Products Handled | |||||||
(Barrels) | ||||||||||
Major U.S. Terminals:
|
||||||||||
Piney Point, MD
|
5,403,000 | 28 | Petroleum | |||||||
Linden, NJ (a)
|
3,906,000 | 28 | Petroleum | |||||||
Selby, CA
|
3,042,000 | 24 | Petroleum, ethanol | |||||||
Jacksonville, FL
|
2,069,000 | 30 | Petroleum | |||||||
Texas City, TX
|
2,008,000 | 124 | Chemicals, petrochemicals, petroleum | |||||||
Other U.S. Terminals:
|
||||||||||
Montgomery, AL
|
162,000 | 7 | Petroleum, jet fuel | |||||||
Moundville, AL
|
310,000 | 6 | Petroleum | |||||||
Tucson, AZ (b)
|
87,000 | 4 | Petroleum | |||||||
Los Angeles, CA
|
607,000 | 20 | Petroleum | |||||||
Pittsburg, CA
|
380,000 | 8 | Asphalt | |||||||
Stockton, CA
|
706,000 | 32 | Petroleum, ethanol, fertilizer | |||||||
Colorado Springs, CO
|
324,000 | 8 | Petroleum | |||||||
Denver, CO
|
111,000 | 10 | Petroleum | |||||||
Bremen, GA
|
182,000 | 9 | Petroleum | |||||||
Brunswick, GA
|
303,000 | 5 | Fertilizer, pulp liquor | |||||||
Columbus, GA
|
175,000 | 24 | Petroleum, chemicals, caustic | |||||||
Macon, GA
|
307,000 | 10 | Petroleum | |||||||
Savannah, GA
|
903,000 | 28 | Petroleum, caustic | |||||||
Blue Island, IL
|
752,000 | 19 | Petroleum, ethanol | |||||||
Chillicothe, IL (a)
|
270,000 | 6 | Petroleum | |||||||
Peru, IL (c)
|
221,000 | 8 | Fertilizer | |||||||
Indianapolis, IN
|
410,000 | 18 | Petroleum | |||||||
Westwego, LA
|
849,000 | 53 | Molasses, caustic, chemicals, lube oil, fertilizer | |||||||
Andrews AFB Pipeline, MD
|
72,000 | 3 | Petroleum | |||||||
Baltimore, MD
|
832,000 | 50 | Chemicals, asphalt | |||||||
Salisbury, MD
|
177,000 | 14 | Petroleum | |||||||
Winona, MN
|
267,000 | 8 | Fertilizer | |||||||
Reno, NV
|
107,000 | 7 | Petroleum | |||||||
Linden, NJ
|
371,000 | 13 | Petroleum | |||||||
Paulsboro, NJ
|
71,000 | 9 | Petroleum | |||||||
Alamogordo, NM
|
120,000 | 5 | Petroleum | |||||||
Albuquerque, NM
|
248,000 | 11 | Petroleum | |||||||
Rosario, NM
|
160,000 | 8 | Asphalt | |||||||
Catoosa, OK
|
340,000 | 24 | Asphalt | |||||||
Drumright, OK (c)
|
315,000 | 4 | Petroleum | |||||||
Portland, OR
|
1,119,000 | 31 | Petroleum, ethanol | |||||||
Abernathy, TX
|
171,000 | 11 | Petroleum | |||||||
Almeda, TX (c)
|
106,000 | 6 | Petroleum | |||||||
Amarillo, TX
|
270,000 | 11 | Petroleum |
109
Tankage
No. of
Facility
Capacity
Tanks
Primary Products Handled
(Barrels)
359,000
12
Petroleum
189,000
7
Petroleum
348,000
14
Petroleum
315,000
7
Petroleum
106,000
6
Petroleum
90,000
6
Asphalt
202,000
6
Petroleum
97,000
4
Petroleum
151,000
10
Petroleum
219,000
8
Petroleum
286,000
6
Petroleum
153,000
12
Petroleum
554,000
16
Petroleum, asphalt
40,000
2
Petroleum
377,000
15
Petroleum, ethanol
227,000
49
Chemicals
316,000
6
Petroleum
308,000
7
Petroleum, ethanol
32,570,000
917
11,315,000
51
Petroleum, crude oil
7,555,000
37
Petroleum, crude oil
1,945,000
53
Petroleum
2,185,000
162
Chemicals, petroleum, animal fats
146,000
4
Molten sulfur
530,000
46
Petroleum, chemicals and molasses
344,000
16
Petroleum
407,000
41
Petroleum
1,129,000
44
Petroleum
34,000
5
Petroleum
25,590,000
459
(a) | Valero L.P. owns 50% of this terminal through a joint venture. |
(b) | Valero L.P. owns a 66.67% undivided interest in the El Paso refined product terminal and a 50% undivided interest in the Tucson refined product terminal. The tankage capacity and number of tanks represent the proportionate share of capacity attributable to Valero L.P.s ownership interest. |
(c) | Terminal is temporarily idled. |
Terminal Operations |
110
Demand for Refined Petroleum Products |
Customers |
Competition and Business Considerations |
111
| 24 refined product pipelines with an aggregate length of 3,834 miles, that connect Valero Energys McKee, Three Rivers, Corpus Christi and Ardmore refineries to certain of Valero L.P.s terminals, or to interconnections with third-party pipelines for further distribution, and a 25-mile crude hydrogen pipeline (collectively, the Central West System); | |
| a 2,090-mile refined product pipeline originating in southern Kansas and terminating at Jamestown, North Dakota, with a western extension to North Platte, Nebraska and an eastern extension into Iowa (collectively, the East Pipeline); | |
| a 440-mile refined product pipeline originating at Tesoro Corporations Mandan, North Dakota refinery (the Tesoro Mandan refinery) and terminating in Minneapolis, Minnesota (the North Pipeline); and | |
| a 2,000-mile anhydrous ammonia pipeline originating at the Louisiana delta area that travels through the midwestern United States and terminates in Nebraska and Indiana (the Ammonia Pipeline). |
112
Description of Valero L.P.s Pipelines |
Three Months Ended | |||||||||||||||||||||||
March 31, 2006 | |||||||||||||||||||||||
Valero Energy | Capacity | ||||||||||||||||||||||
Origin and Destination | Refinery | Length | Ownership | Capacity | Throughput | Utilization | |||||||||||||||||
(Miles) | (Barrels/Day) | (Barrels/Day) | |||||||||||||||||||||
McKee to El Paso, TX
|
McKee | 408 | 67% | 40,000 | 33,570 | 84% | |||||||||||||||||
McKee to Colorado Springs, CO (a)
|
McKee | 256 | 100% | 38,000 | 11,844 | 81% | |||||||||||||||||
Colorado Springs, CO to Airport
|
McKee | 2 | 100% | 14,000 | 1,084 | 8% | |||||||||||||||||
Colorado Springs to Denver, CO
|
McKee | 101 | 100% | 32,000 | 19,457 | 61% | |||||||||||||||||
McKee to Denver, CO
|
McKee | 321 | 30% | 9,870 | 8,973 | 91% | |||||||||||||||||
McKee to Amarillo, TX (6) (a)(b)
|
McKee | 49 | 100% | 51,000 | 30,832 | 68% | |||||||||||||||||
McKee to Amarillo, TX (8) (a)(b)
|
McKee | 49 | 100% | ||||||||||||||||||||
Amarillo to Abernathy, TX (a)
|
McKee | 102 | 67% | 11,733 | 6,516 | 63% | |||||||||||||||||
Amarillo, TX to Albuquerque, NM
|
McKee | 293 | 50% | 17,150 | 9,270 | 54% | |||||||||||||||||
Abernathy to Lubbock, TX (a)
|
McKee | 19 | 46% | 8,029 | 888 | 11% | |||||||||||||||||
McKee to Skellytown, TX
|
McKee | 53 | 100% | 52,000 | 6,607 | 13% | |||||||||||||||||
Skellytown to Mont Belvieu, TX
|
McKee | 572 | 50% | 26,000 | 12,026 | 46% | |||||||||||||||||
McKee to Southlake, TX
|
McKee | 375 | 100% | 27,300 | 23,749 | 87% | |||||||||||||||||
Three Rivers to San Antonio, TX
|
Three Rivers | 81 | 100% | 33,600 | 30,442 | 91% | |||||||||||||||||
Three Rivers to US/Mexico International Border near Laredo, TX
|
Three Rivers | 108 | 100% | 32,000 | 22,741 | 71% | |||||||||||||||||
Corpus Christi to Three Rivers, TX
|
Corpus Christi | 68 | 100% | 32,000 | 7,468 | 23% | |||||||||||||||||
Three Rivers to Corpus Christi, TX
|
Three Rivers | 72 | 100% | 15,000 | 11,762 | 78% | |||||||||||||||||
Three Rivers to Pettus to San Antonio, TX
|
Three Rivers | 103 | 100% | 24,000 | 22,419 | 93% | |||||||||||||||||
Three Rivers to Pettus to Corpus Christi, TX (c)
|
Three Rivers | 95 | 100% | 15,000 | | 0% | |||||||||||||||||
Ardmore to Wynnewood, OK (d)
|
Ardmore | 31 | 100% | 90,000 | 64,389 | 72% | |||||||||||||||||
El Paso, TX to Kinder Morgan
|
McKee | 12 | 67% | 40,000 | 26,725 | 67% | |||||||||||||||||
Corpus Christi to Pasadena, TX
|
Corpus Christi | 208 | 100% | 105,000 | 95,895 | 91% | |||||||||||||||||
Corpus Christi to Harlingen, TX
|
Corpus Christi | 167 | 100% | 27,100 | 35,918 | 133% | |||||||||||||||||
Other refined product pipeline (e)
|
289 | 50% | N/A | N/A | N/A | ||||||||||||||||||
Total
|
3,834 | 740,782 | 482,575 | 68% | |||||||||||||||||||
113
(a) | This pipeline transports barrels relating to two tariff routes, one of which begins at this pipelines origin and ends at this pipelines destination and one of which is a longer tariff route with an origin or destination on another pipeline of Valero L.P.s that connects to this pipeline. Throughput disclosed above for this pipeline reflects only the barrels subject to the tariff route beginning at this pipelines origin and ending at this pipelines destination. To accurately determine the actual capacity utilization of the pipeline, as well as aggregate capacity utilization, all barrels passing through the pipeline have been taken into account. |
(b) | The throughput, capacity and capacity utilization information disclosed above for the McKee to Amarillo, Texas 6-inch pipeline reflects both McKee to Amarillo, Texas pipelines on a combined basis. |
(c) | The refined product pipeline from Three Rivers to Pettus to Corpus Christi, Texas is temporarily idled. In the fourth quarter of 2005, an eight-mile portion of this pipeline was permanently idled. As a result, Valero L.P. recorded an impairment charge of $2.1 million for the year ended December 31, 2005 included in interest and other expenses, net in its consolidated statements of income. |
(d) | Included in this segment are two refined product storage tanks with a total capacity of 180,000 barrels located in Wynnewood, Oklahoma. Refined products may be stored and batched prior to shipment into a third-party pipeline. |
(e) | This category consists of the temporarily idled 6-inch Amarillo, Texas to Albuquerque, New Mexico refined product pipeline. |
Related Pipeline | |||||||||||
Location of Terminals | Number of Tanks | Tank Capacity | System | ||||||||
(Barrels) | |||||||||||
Iowa:
|
|||||||||||
LeMars
|
9 | 103,000 | East | ||||||||
Milford
|
11 | 172,000 | East | ||||||||
Rock Rapids
|
12 | 366,000 | East |
114
Related Pipeline
Location of Terminals
Number of Tanks
Tank Capacity
System
(Barrels)
7
79,000
East
9
161,000
East
10
98,000
East
17
498,000
North
11
114,000
North
13
594,000
North
12
191,000
East
39
678,000
East
16
187,000
East
22
197,000
East
8
79,000
East
6
141,000
North
13
188,000
East
12
181,000
East
8
72,000
East
9
381,000
East
21
149,000
East
25
246,000
East
290
4,875,000
Other Systems |
Pipeline Operations |
115
Demand for and Sources of Refined Products |
116
Demand for and Sources of Anhydrous Ammonia |
117
Customers |
Competition and Business Considerations |
118
Three Months Ended | |||||||||||||||||||||||
March 31, 2006 | |||||||||||||||||||||||
Valero Energy | Capacity | Capacity | |||||||||||||||||||||
Origin and Destination | Refinery | Length | Ownership | (Barrels/Day) | Throughput | Utilization | |||||||||||||||||
(Miles) | (Barrels/Day) | (Barrels/Day) | |||||||||||||||||||||
Cheyenne Wells, CO to McKee
|
McKee | 252 | 100.0% | 17,500 | 9,807 | 56% | |||||||||||||||||
Dixon, TX to McKee
|
McKee | 44 | 100.0% | 85,000 | 38,493 | 45% | |||||||||||||||||
Hooker, OK to Clawson, TX(a)
|
McKee | 41 | 50.0% | 22,000 | 18,421 | 84% | |||||||||||||||||
Clawson, TX to McKee(b)
|
McKee | 31 | 100.0% | 36,000 | 15,873 | 95% | |||||||||||||||||
Wichita Falls, TX to McKee
|
McKee | 272 | 100.0% | 110,000 | 67,315 | 61% | |||||||||||||||||
Corpus Christi, TX to Three Rivers
|
Three Rivers | 70 | 100.0% | 120,000 | 75,398 | 63% | |||||||||||||||||
Ringgold, TX to Wasson, OK(b)
|
Ardmore | 44 | 100.0% | 90,000 | 62,865 | 70% | |||||||||||||||||
Healdton to Ringling, OK
|
Ardmore | 4 | 100.0% | 52,000 | 3,585 | 7% | |||||||||||||||||
Wasson, OK to Ardmore (8-10)(c)
|
Ardmore | 24 | 100.0% | 90,000 | 67,897 | 75% | |||||||||||||||||
Wasson, OK to Ardmore (8)(c)
|
Ardmore | 15 | 100.0% | 40,000 | 22,162 | 55% | |||||||||||||||||
Patoka, IL to Wood River, IL
|
N/A | 57 | 23.8% | 60,600 | 45,859 | 76% | |||||||||||||||||
Total
|
854 | 723,100 | 427,675 | 62% | |||||||||||||||||||
(a) | Valero L.P. receives 50% of the tariff with respect to 100% of the barrels transported in the Hooker, Oklahoma to Clawson, Texas pipeline. Accordingly, the capacity, throughput and capacity utilization are given with respect to 100% of the pipeline. |
(b) | This pipeline transports barrels relating to two tariff routes, one beginning at the pipelines origin and ending at its destination, and one with an origin or destination on another connecting Valero L.P. pipeline. Throughput disclosed above for this pipeline reflects only the barrels subject to the tariff route beginning at this pipelines origin and ending at this pipelines destination. To accurately determine the actual capacity utilization of the pipeline, as well as aggregate capacity utilization, all barrels passing through the pipeline have been taken into account. |
(c) | The Wasson, Oklahoma to Ardmore (8 - 10) pipelines referred to above originate at Wasson as two pipelines but merge into one pipeline prior to reaching Ardmore. |
Throughput | |||||||||||||||||||||||
Valero Energy | Number | Mode of | Mode of | Three Months Ended | |||||||||||||||||||
Location | Refinery | Capacity | of Tanks | Receipt | Delivery | March 31, 2006 | |||||||||||||||||
(Barrels) | (Barrels/Day) | ||||||||||||||||||||||
Dixon, TX
|
McKee | 240,000 | 3 | pipeline | pipeline | 38,493 | |||||||||||||||||
Ringgold, TX
|
Ardmore | 600,000 | 2 | pipeline | pipeline | 62,865 | |||||||||||||||||
Wichita Falls, TX
|
McKee | 660,000 | 4 | pipeline | pipeline | 67,315 | |||||||||||||||||
Wasson, OK
|
Ardmore | 225,000 | 2 | pipeline | pipeline | 90,059 | |||||||||||||||||
Total
|
1,725,000 | 11 | 258,732 | ||||||||||||||||||||
119
Competition and Business Considerations |
Throughput | ||||||||||||||||||||
Valero Energy | Number | Mode of | Three Months Ended | |||||||||||||||||
Location | Refinery | Capacity | of Tanks | Mode of Receipt | Delivery | March 31, 2006 | ||||||||||||||
(Barrels) | (Barrels/Day) | |||||||||||||||||||
Benicia, CA
|
Benicia | 3,815,000 | 16 | marine/pipeline | pipeline | 147,412 | ||||||||||||||
Corpus Christi, TX
|
Corpus Christi | 4,023,000 | 26 | marine | pipeline | 163,926 | ||||||||||||||
Texas City, TX
|
Texas City | 3,087,000 | 14 | marine | pipeline | 201,735 | ||||||||||||||
Corpus Christi, TX (North Beach)(a)
|
Three Rivers | 1,600,000 | 4 | marine | pipeline | | ||||||||||||||
12,525,000 | 60 | 513,073 | ||||||||||||||||||
(a) | Valero L.P. does not report throughput for the Corpus Christi North Beach storage facility, as revenues for this facility are based on a lease agreement with Valero Energy. |
Principal Customers |
Competition and Business Considerations |
120
Valero L.P.s Pipelines Rates |
121
General |
Water |
Air Emissions |
122
Solid Waste |
Hazardous Substances |
Pipeline Integrity and Safety |
123
Capital Expenditures Attributable to Compliance with Environmental Regulations |
Valero L.P. |
124
125
126
127
Name | Age | Position with Our Company | ||||
William E. Greehey
|
70 | Chairman of the Board | ||||
Curtis V. Anastasio
|
50 | President and Chief Executive Officer | ||||
Steven A. Blank
|
51 | Senior Vice President, Chief Financial Officer and Treasurer | ||||
Thomas R. Shoaf
|
47 | Vice President and Controller | ||||
Bradley C. Barron
|
40 | Vice President General Counsel and Secretary |
128
129
Name | Age | Position Held with Valero GP, LLC | ||||
William E. Greehey
|
70 | Chairman of the Board | ||||
Curtis V. Anastasio
|
50 | President, Chief Executive Officer and Director | ||||
J. Dan Bates
|
61 | Director | ||||
Dan J. Hill
|
65 | Director | ||||
Gregory C. King
|
45 | Director | ||||
William R. Klesse
|
59 | Director | ||||
Stan McLelland
|
61 | Director | ||||
Rodman D. Patton
|
63 | Director | ||||
Steven A. Blank
|
51 | Senior Vice President, Chief Financial Officer and Treasurer | ||||
James R. Bluntzer
|
51 | Senior Vice President-Operations | ||||
Mary F. Morgan
|
53 | Vice President-Marketing and Business Development | ||||
Brad R. Ramsey
|
37 | Vice President-Engineering | ||||
Rodney L. Reese
|
55 | Vice President-Regional Operations | ||||
Thomas R. Shoaf
|
47 | Vice President and Controller | ||||
Bradley C. Barron
|
40 | Vice President General Counsel and Secretary |
130
131
Compensation Committee |
Conflicts Committee |
Annual Compensation | Long-Term Compensation Awards | ||||||||||||||||||||||||||||
Number of | |||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||
Restricted | Underlying | All | |||||||||||||||||||||||||||
Unit | Options | LTIP | Other | ||||||||||||||||||||||||||
Name and Principal Position (a) | Year | Salary | Bonus (b) | Awards (c) | Granted | Payouts (d) | Compensation (e) | ||||||||||||||||||||||
Curtis V. Anastasio,
|
|||||||||||||||||||||||||||||
President and Chief Executive
|
2005 | $ | 338,500 | $ | 315,000 | $ | 258,795 | 13,450 | $ | 236,101 | $ | 300,151 | |||||||||||||||||
Officer | 2004 | 321,000 | 359,700 | 217,564 | 9,625 | 176,266 | 192,180 | ||||||||||||||||||||||
2003 | 307,506 | 250,000 | 245,672 | 11,800 | 49,235 | 112,350 | |||||||||||||||||||||||
Steven A. Blank,
|
|||||||||||||||||||||||||||||
Senior Vice President and Chief
|
2005 | $ | 287,000 | $ | 220,500 | $ | 139,174 | 7,225 | $ | 236,101 | $ | 143,525 | |||||||||||||||||
Financial Officer | 2004 | 276,500 | 260,000 | 155,403 | 6,875 | 234,982 | 107,010 | ||||||||||||||||||||||
James R. Bluntzer,
|
2005 | $ | 193,833 | $ | 165,000 | $ | 104,093 | 5,400 | | $ | 11,582 | ||||||||||||||||||
Senior Vice President-Operations
|
2004 | 177,961 | 126,700 | 55,945 | 2,475 | | 6,305 | ||||||||||||||||||||||
2003 | 171,558 | 107,000 | 24,943 | 2,675 | | | |||||||||||||||||||||||
Brad R. Ramsey,
|
|||||||||||||||||||||||||||||
Vice President-Engineering
|
2005 | $ | 169,000 | $ | 103,800 | $ | 51,184 | 2,650 | $ | | $ | 8,873 | |||||||||||||||||
Rodney L. Reese,
|
|||||||||||||||||||||||||||||
Vice President-Regional
|
2005 | $ | 182,123 | $ | 105,000 | $ | 44,858 | 2,450 | $ | | $ | 10,927 | |||||||||||||||||
Operations | 2004 | 172,071 | 110,000 | 54,250 | 2,400 | | 10,324 | ||||||||||||||||||||||
2003 | 163,835 | 95,000 | 24,036 | 2,575 | | 11,506 |
132
(a) | The named executive officers hold or held the indicated offices in Valero GP, LLC, the general partner of Riverwalk Logistics, L.P., Valero L.P.s general partner. Valero L.P. does not have any officers or directors. |
(b) | In 2005, 2004 and 2003, executive bonuses were paid 100% in cash, but recipients could elect to use 25% of their cash bonus award to purchase Valero L.P. common units at market price. |
(c) | Cash distributions are paid on restricted common units at the same rate as on Valero L.P.s unrestricted common units. Restricted common units granted in 2005, 2004 and October 2003 vest 1/5 annually over a five-year period, and restricted common units granted in January 2003 vest 1/3 annually over a three-year period. The aggregate number of unvested restricted common units held at December 31, 2005 and the market value of such common units on that date (calculated according to SEC regulations without regard to restrictions on such common units) were: Mr. Anastasio, 9,790 common units, $506,730; Mr. Blank, 5,609 common units, $290,322; Mr. Bluntzer, 2,932 common units, $151,760; Mr. Ramsey, 2,098 common units, $108,592; and Mr. Reese, 1,866 common units, $96,584. |
(d) | LTIP payouts are the number of performance share awards vested for the applicable years performance multiplied by the market price per share of Valero Energy common stock on the vesting date. These performance shares were granted under Valero Energys Executive Stock Incentive Plan. Total shareholder return, or TSR, during a specified performance period was established as the performance measure for determining what portion of an award may vest. TSR is measured by dividing the sum of (a) the net change in the price of a share of Valero Energys common stock between the beginning of the performance period and the end of the performance period, and (b) the total dividends paid on the common stock during the performance period, by (c) the price of a share of Valero Energys common stock at the beginning of the performance period. Each performance share award is subject to vesting in three equal increments, based upon Valero Energys TSR. At the end of each performance period, Valero Energys TSR is compared to the TSR for a target group of comparable companies. Valero Energy and the companies in the target group are then ranked by quartile. Participants then earn 0%, 50%, 100% or 150% of that portion of the initial grant amount that is vesting for such period, depending on whether Valero Energys TSR is in the last, 3rd, 2nd or 1st quartile of the target group; 200% will be earned if Valero Energy ranks highest in the group. Amounts not earned in the given performance period can be carried forward for one additional performance period and up to 100% of the carried-forward amount can still be earned, depending upon the quartile achieved for such subsequent period. |
(e) | Amounts include contributions made to Valero Energys Thrift Plan and Excess Thrift Plan, and unused portions of amounts provided by Valero Energy under Valero Energys Flexible Benefits Plan. Messrs. Anastasio, Blank, Bluntzer, Ramsey and Reese were allocated $20,252, $17,185, $11,582, $8,873 and $10,927, respectively, as a result of contributions to the Thrift Plan (and, in the case of Messrs. Anastasio, Blank and Bluntzer, the Excess Thrift Plan) for 2005. Also included for Mr. Anastasio in 2005 was $7,247 received as reimbursement of certain membership dues. Amounts for 2005 also include vesting of restricted units issued to Mr. Anastasio and Mr. Blank under Valero GP, LLCs long-term incentive plan, for which Mr. Anastasio was vested for $272,652 and Mr. Blank was vested for $126,340. |
133
Option Grants in the Last Fiscal Year |
Number of | Percent of | |||||||||||||||||||||||
Securities | Total Options | Market | ||||||||||||||||||||||
Underlying | Granted to | Price at | Grant Date | |||||||||||||||||||||
Options | Employees in | Exercise Price | Grant Date | Expiration | Present Value | |||||||||||||||||||
Name | Granted (#) | Fiscal Year | ($/Security)(a) | ($/Security) | Date | ($)(b) | ||||||||||||||||||
Curtis V. Anastasio
|
13,450 | 6.81 | $ | 57.5100 | $ | 57.5100 | 10/27/2012 | $ | 77,607 | |||||||||||||||
Steven A. Blank
|
7,225 | 3.66 | 57.5100 | 57.5100 | 10/27/2012 | 41,688 | ||||||||||||||||||
James R. Bluntzer
|
5,400 | 2.74 | 57.5100 | 57.5100 | 10/27/2012 | 31,158 | ||||||||||||||||||
Brad R. Ramsey
|
2,650 | 1.34 | 57.5100 | 57.5100 | 10/27/2012 | 15,291 | ||||||||||||||||||
Rodney L. Reese
|
2,450 | 1.24 | 57.5100 | 57.5100 | 10/27/2012 | 14,137 |
(a) | All options reported vest in equal increments over a five-year period from the date of grant, unless otherwise noted. Under the terms of Valero GP, LLCs 2000 Long Term Incentive Plan, a participant may satisfy the tax withholding obligations related to exercise by tendering cash payment, by authorizing Valero GP, LLC to withhold common units otherwise issuable to the participant or by delivering to Valero GP, LLC already owned and unencumbered common units, subject to certain conditions. |
(b) | The Black-Scholes option pricing model was used to determine grant date present value. This model is designed to value publicly traded options. Options issued under Valero GP, LLCs option plan are not freely traded, and the exercise of such options is subject to substantial restrictions. Moreover, the Black-Scholes model does not give effect to either risk of forfeiture or lack of transferability. The estimated values under the Black-Scholes model are based on assumptions as to variables such as interest rates, unit price volatility and future cash distribution yield. The estimated grant date present values presented in this table were calculated using an expected average option life of five years, risk-free rate of return of 4.43%, average volatility rate of 18.66% based on daily volatility rates from the initial public offering by Valero L.P. through December 31, 2005, and cash distribution yield of 5.95%, which is the expected annualized quarterly cash distribution rate in effect at the date of grant expressed as a percentage of the market value of the common units at the date of grant. The actual value of unit options could be zero; realization of any positive value depends upon the actual future performance of the common units, the continued employment of the option holder throughout the vesting period and the timing of the exercise of the option. Accordingly, the values set forth in this table may not be achieved. |
134
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values |
Number of Securities | |||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | ||||||||||||||||||||||||
Securities | Options at | In-the-Money Options at | |||||||||||||||||||||||
Acquired | December 31, 2005 (#) | December 31, 2005($) | |||||||||||||||||||||||
on Exercise | Value | ||||||||||||||||||||||||
Name | (#) | Realized ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||
Curtis V. Anastasio
|
|||||||||||||||||||||||||
Valero L.P. common units
|
| $ | | 30,645 | 28,320 | $ | 374,415 | $ | 45,383 | (a) | |||||||||||||||
Valero Energys common stock
|
34,000 | 1,136,822 | 146,600 | | 6,357,385 | | (b) | ||||||||||||||||||
Steven A. Blank
|
|||||||||||||||||||||||||
Valero L.P. common units
|
| $ | | 11,521 | 17,945 | $ | 118,964 | $ | 33,460 | (a) | |||||||||||||||
Valero Energys common stock
|
25,322 | 690,161 | | 20,320 | | 806,501 | (b) | ||||||||||||||||||
James R. Bluntzer
|
|||||||||||||||||||||||||
Valero L.P. common units
|
| $ | | 6,065 | 8,985 | $ | 67,789 | $ | 10,288 | (a) | |||||||||||||||
Valero Energys common stock
|
| | 74,420 | | 3,334,025 | | (b) | ||||||||||||||||||
Brad R. Ramsey
|
|||||||||||||||||||||||||
Valero L.P. common units
|
| $ | | 240 | 3,610 | $ | | $ | | (a) | |||||||||||||||
Valero Energys common stock
|
| | 24,680 | 2,220 | 1,070,332 | 92,385 | (b) | ||||||||||||||||||
Rodney L. Reese
|
|||||||||||||||||||||||||
Valero L.P. common units
|
3,267 | $ | 75,696 | 3,143 | 5,915 | $ | 28,713 | $ | 9,903 | (a) | |||||||||||||||
Valero Energys common stock
|
| | 17,120 | | 784,989 | | (b) |
(a) | Represents the dollar value obtained by multiplying the number of unexercised in-the-money options by the difference between the stated exercise price per unit of the options and the closing market price per unit of Valero L.P.s common units on December 31, 2005. |
(b) | Represents the dollar value obtained by multiplying the number of unexercised in-the-money options by the difference between the stated exercise price per share of the options and the closing market price per share of Valero Energys common stock on December 31, 2005. |
135
Estimated Annual Pension Benefits at Age 65 |
Years of Service | ||||||||||||||||||||||||
Covered | ||||||||||||||||||||||||
Compensation | 15 | 20 | 25 | 30 | 35 | |||||||||||||||||||
$ | 200,000 | $ | 54,000 | $ | 71,000 | $ | 89,000 | $ | 107,000 | $ | 125,000 | |||||||||||||
300,000 | 83,000 | 110,000 | 138,000 | 166,000 | 193,000 | |||||||||||||||||||
400,000 | 112,000 | 149,000 | 187,000 | 224,000 | 261,000 | |||||||||||||||||||
500,000 | 142,000 | 188,000 | 236,000 | 283,000 | 330,000 | |||||||||||||||||||
600,000 | 171,000 | 227,000 | 284,000 | 341,000 | 398,000 | |||||||||||||||||||
700,000 | 200,000 | 266,000 | 333,000 | 400,000 | 466,000 | |||||||||||||||||||
800,000 | 229,000 | 305,000 | 382,000 | 458,000 | 534,000 | |||||||||||||||||||
900,000 | 259,000 | 344,000 | 431,000 | 517,000 | 603,000 | |||||||||||||||||||
1,000,000 | 288,000 | 383,000 | 479,000 | 575,000 | 671,000 | |||||||||||||||||||
1,100,000 | 317,000 | 422,000 | 528,000 | 634,000 | 739,000 | |||||||||||||||||||
1,200,000 | 346,000 | 461,000 | 577,000 | 692,000 | 807,000 | |||||||||||||||||||
1,300,000 | 375,000 | 500,000 | 626,000 | 751,000 | 876,000 | |||||||||||||||||||
1,400,000 | 405,000 | 539,000 | 674,000 | 810,000 | 944,000 | |||||||||||||||||||
1,500,000 | 434,000 | 578,000 | 723,000 | 868,000 | 1,012,000 | |||||||||||||||||||
1,600,000 | 463,000 | 617,000 | 772,000 | 926,000 | 1,080,000 | |||||||||||||||||||
1,700,000 | 492,000 | 656,000 | 821,000 | 985,000 | 1,149,000 | |||||||||||||||||||
1,800,000 | 522,000 | 695,000 | 869,000 | 1,043,000 | 1,217,000 | |||||||||||||||||||
1,900,000 | 551,000 | 734,000 | 918,000 | 1,102,000 | 1,285,000 | |||||||||||||||||||
2,000,000 | 580,000 | 773,000 | 967,000 | 1,160,000 | 1,353,000 |
136
137
| each person who will beneficially own more than 5% of our units; | |
| each of our named executive officers; | |
| all of our directors and director nominees; and | |
| all of our directors, director nominees and executive officers as a group. |
Units | Units | |||||||||||||||
Beneficially Owned | Beneficially Owned | |||||||||||||||
Prior to Offering | After Offering | |||||||||||||||
Name of Beneficial Owner (a) | Units | Percent | Units | Percent | ||||||||||||
Diamond Shamrock Refining and Marketing Company (b)
|
21,926,636 | 51.6 | % | 21,926,636 | 51.6 | % | ||||||||||
Sigmor Corporation (b)
|
12,523,275 | 29.5 | 4,073,364 | 9.6 | (c) | |||||||||||
The Shamrock Pipe Line Corporation (b)
|
5,750,032 | 13.5 | | 0.00 | ||||||||||||
Diamond Shamrock Refining Company, L.P. (b)
|
2,298,782 | 5.4 | | 0.00 | ||||||||||||
Valero Refining New Orleans, L.L.C. (b)
|
425 | * | | 0.00 | ||||||||||||
Valero Refining Company California (b)
|
425 | * | | 0.00 | ||||||||||||
Valero Refining Texas, L.P. (b)
|
425 | * | | 0.00 | ||||||||||||
William E. Greehey
|
| | | | ||||||||||||
Curtis V. Anastasio
|
| | | | ||||||||||||
Steven A. Blank
|
| | | | ||||||||||||
Thomas R. Shoaf
|
| | | | ||||||||||||
All current directors and executive officers as a group
(8 persons)
|
| | | |
* | Represents less than 1%. | |
(a) | The business address for all beneficial owners listed above is One Valero Way, San Antonio, Texas 78249. | |
(b) | Valero Energy directly or indirectly owns 100% of the interests in these entities. Therefore, Valero Energy indirectly beneficially owns 100% of the units before the offering and 61.2% of the units after the offering. Valero Energy intends to further reduce and ultimately sell all of its indirect ownership interest in us, pending market conditions. | |
(c) | If the underwriters exercise their option to purchase additional units in full, Sigmor Corporations beneficial interest will be reduced to 3.8%. | |
138
Units | Shares of Valero | |||||||||||||||||||||||
Units | Under | Shares of Valero | Energy Stock | |||||||||||||||||||||
Beneficially | Exercisable | Percentage of | Energy Stock | under | Percentage of | |||||||||||||||||||
Owned | Options | Outstanding | Beneficially | Exercisable | Outstanding | |||||||||||||||||||
Name of Beneficial Owner (a) | (b)(c) | (d) | Units (b) | Owned (e)(f) | Options (g) | Shares (f) | ||||||||||||||||||
William E. Greehey
|
76,609 | | * | 4,248,895 | 8,402,376 | 2.02 | % | |||||||||||||||||
Curtis V. Anastasio
|
28,706 | 30,645 | * | 52,555 | 146,600 | * | ||||||||||||||||||
J. Dan Bates (h)
|
135 | | * | 90 | | * | ||||||||||||||||||
Dan J. Hill
|
1,932 | | * | 3,000 | | * | ||||||||||||||||||
Gregory C. King
|
10,215 | | * | 376,005 | 654,800 | * | ||||||||||||||||||
William R. Klesse
|
27,132 | | * | 528,820 | 856,064 | * | ||||||||||||||||||
Stan McLelland
|
344 | | * | 9,034 | | * | ||||||||||||||||||
Rodman D. Patton
|
9,082 | | * | 10,000 | | * | ||||||||||||||||||
Steven A. Blank
|
18,638 | 11,521 | * | 6,897 | 20,320 | * | ||||||||||||||||||
James R. Bluntzer
|
3,885 | 6,065 | * | 77,103 | 74,420 | * | ||||||||||||||||||
Brad R. Ramsey
|
2,697 | 240 | * | 994 | 12,680 | * | ||||||||||||||||||
Rodney L. Reese
|
7,937 | 3,143 | * | 28,453 | 17,120 | * | ||||||||||||||||||
All directors and executive officers as a group
(12 persons) |
187,312 | 51,614 | 0.64 | % | 5,341,816 | 10,184,380 | 2.48 | % |
* | Indicates that the percentage of beneficial ownership does not exceed 1% of the class. |
(a) | The business address for all beneficial owners listed above is One Valero Way, San Antonio, Texas 78249. | |
(b) | As of March 31, 2006, 37,210,427 common units were issued and outstanding. No executive officer or director owns any class of equity securities of Valero L.P. other than common units. The calculation for Percentage of Outstanding common units includes common units listed under the captions Units Beneficially Owned and Units under Exercisable Options. | |
(c) | Includes restricted common units issued under Valero L.P.s long-term incentive plans. Restricted common units granted under Valero GP, LLCs long-term incentive plans may not be disposed of until vested. Does not include common units that could be acquired under options, which information is set forth in the next column. | |
(d) | Consisting of common units that may be acquired within 60 days of March 31, 2006 through the exercise of common unit options. | |
(e) | As of March 31, 2006, 615,141,352 shares of Valero Energys common stock were issued and outstanding. No executive officer or director owns any class of equity securities of Valero Energy other than common stock. The calculation for Percentage of Outstanding Shares includes shares listed under the captions Shares of Valero Energy Stock Beneficially Owned and Shares of Valero Energy Stock under Exercisable Options. | |
(f) | Includes shares allocated pursuant to the Valero Energy Corporation Thrift Plan through March 31, 2006, as well as shares of restricted stock granted under Valero Energys Executive Stock Incentive Plan and Valero Energys Restricted Stock Plan for Non-Employee Directors. Except as otherwise noted, each person named in the table, and each other executive officer, has sole power to vote or direct the vote and to dispose or direct the disposition of all such shares beneficially owned by him. Restricted stock granted under Valero Energys Executive Stock Incentive Plan and Valero Energys Restricted Stock Plan for Non-Employee |
139
Directors may not be disposed of until vested. Does not include shares that could be acquired under options, which information is set forth in the next column. | ||
(g) | Consisting of shares of common stock that may be acquired within 60 days of March 31, 2006 through the exercise of stock options. Such shares may not be voted unless the stock options are exercised. Stock options that may become exercisable within such 60-day period only in the event of a change of control of Valero Energy are excluded. Except as set forth herein, none of the current executive officers or directors of Valero L.P. hold any rights to acquire Valero Energy common stock, except through exercise of stock options. | |
(h) | J. Dan Bates was elected to the board of directors on April 18, 2006, and his ownership reported above is as of that date. |
Percentage of | |||||||||
Common | Common | ||||||||
Name and Address of Beneficial Owner | Units | Units | |||||||
Valero Energy Corporation (a)
|
10,225,491 | 21.8 | % | ||||||
One Valero Way
|
|||||||||
San Antonio, Texas 78249
|
(a) | Valero Energy owns the common units through its wholly owned subsidiaries, Valero GP, LLC and Riverwalk Holdings, LLC. Valero Energy shares voting and investment power with certain of its wholly owned subsidiaries with respect to the common units. | |
140
| the 2% general partner interest in Valero L.P., which we hold through our 100% ownership interest in Riverwalk Logistics, L.P.; | |
| 100% of the incentive distribution rights issued by Valero L.P., which entitle us to receive increasing percentages of the cash distributed by Valero L.P., currently at the maximum percentage of 23%; and | |
| 10,225,491 common units of Valero L.P., representing a 21.4% limited partner interest in Valero L.P. |
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Administration Agreement |
| all of our employees will be employees of our wholly owned subsidiary Valero GP, LLC; and | |
| Valero GP, LLC will provide all executive management, accounting, legal, cash management, corporate finance and other administrative services to us. |
Non-Compete Agreement |
Rights of Valero GP, LLC |
Valero L.P.s Relationship with Valero Energy |
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Office Rental Agreement |
Amended and Restated Omnibus Agreement |
| any business retained by UDS as of April 16, 2001, the closing of Valero L.P.s initial public offering, or any business owned by Valero Energy at the date of its acquisition of UDS on December 31, 2001; | |
| any business with a fair market value of less than $10 million; | |
| any business acquired by Valero Energy in the future that constitutes less than 50% of the fair market value of a larger acquisition, provided Valero L.P. has been offered and declined the opportunity to purchase the business; and | |
| any newly constructed pipeline, terminalling or storage assets that Valero L.P. has not offered to purchase at fair market value within one year of construction. |
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Pipelines and Terminals Usage Agreement McKee, Three Rivers and Ardmore |
| transport in Valero L.P.s crude oil pipelines at least 75% of the aggregate volumes of crude oil shipped to the McKee, Three Rivers and Ardmore refineries; | |
| transport in Valero L.P.s refined product pipelines at least 75% of the aggregate volumes of refined products shipped from the McKee, Three Rivers and Ardmore refineries; and | |
| use Valero L.P.s refined product terminals for terminalling services for at least 50% of the refined products shipped from the McKee, Three Rivers and Ardmore refineries. |
Crude Oil Storage Tanks Agreements |
| Handling and Throughput Agreement, dated March 2003 Valero Energy has agreed to pay Valero L.P. a fee, for an initial period of ten years, for all crude oil and certain other feedstocks delivered to each of the Corpus Christi West refinery, the Texas City refinery and the Benicia refinery and to use Valero L.P. for handling all deliveries to these refineries. The throughput fees are adjustable annually, generally based on 75% of the regional consumer price index applicable to the location of each refinery. The agreement may be extended by Valero Energy for up to an additional five years. |
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| Services and Secondment Agreements, dated March 2003 Valero Energy has agreed to provide to Valero L.P. personnel who perform operating and routine maintenance services related to the crude oil storage tank operations. The annual reimbursement for services is an aggregate $3.5 million for the initial year and is subject to adjustment based on the actual expenses incurred and increases in the regional consumer price index. The initial term of the Services and Secondment Agreements is ten years with a Valero L.P. option to extend for an additional five years. In addition to the fees Valero L.P. has agreed to pay, Valero L.P. is responsible for operating expenses and specified capital expenditures related to the tank assets that are not addressed in the agreement. These operating expenses and capital expenditures include tank safety inspections, maintenance and repairs, certain environmental expenses, insurance premiums and ad valorem taxes. | |
| Lease and Access Agreements, dated March 2003 Valero L.P. leases from Valero Energy the real property on which the crude oil storage tanks are located for an aggregate of $0.7 million per year. The initial term of each lease is 25 years, subject to automatic renewal for successive one-year periods thereafter. Valero L.P. may terminate any of these leases upon 180 days notice prior to the expiration of the current term if Valero L.P. ceases to operate the crude oil storage tanks or ceases business operations. |
South Texas Pipelines and Terminals Agreements |
| Terminalling Agreement, dated March 2003, pursuant to which Valero Energy agreed, during the initial period of five years, to pay a terminalling fee for each barrel of refined product stored or handled by or on behalf of Valero Energy at the terminals, including an additive fee for gasoline additive blended at the terminals. At the Houston Hobby Airport terminal, Valero Energy agreed to pay a filtering fee for each barrel of jet fuel stored or handled at the terminal. | |
| Throughput Commitment Agreement, dated March 2003, pursuant to which Valero Energy agreed, for an initial period of seven years to: |
| transport in the Houston and Valley pipeline systems an aggregate of 40% of the Corpus Christi refineries gasoline and distillate production but only if the combined throughput in these pipelines is less than 110,000 barrels per day; | |
| transport in the Pettus to San Antonio refined product pipeline 25% of the Three Rivers refinery gasoline and distillate production and in the Pettus to Corpus Christi refined product pipeline 90% of the Three Rivers refinery raffinate production; | |
| use the Houston asphalt terminal for an aggregate of 7% of the asphalt production of the Corpus Christi refineries; | |
| use the Edinburg refined product terminal for an aggregate of 7% of the gasoline and distillate production of the Corpus Christi refineries, but only if the throughput at this terminal is less than 20,000 barrels per day; and | |
| use the San Antonio east terminal for 75% of the throughput in the Pettus to San Antonio refined product pipeline. |
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Other Operating Agreements |
| A hydrogen tolling agreement, which provides that Valero Energy will pay Valero L.P. minimum annual revenues of $1.4 million for transporting crude hydrogen from the BOC Groups chemical facility in Clear Lake, Texas to Valero Energys Texas City refinery. | |
| A terminal storage and throughput agreement related to the Pittsburg asphalt terminal, which provides that Valero Energy will pay Valero L.P. a monthly lease fee of $0.2 million, a minimum annual throughput fee of $0.4 million and will reimburse Valero L.P. for utility costs. | |
| In conjunction with the Royal Trading acquisition in February 2004, Valero L.P. entered into a five-year terminal storage and throughput agreement with Valero Energy. The agreement provides a base throughput and blending fee schedule with volume incentive discounts once certain thresholds are met. In addition, Valero Energy has agreed to utilize the acquired terminals for a minimum of 18.5% of the McKee and Ardmore refineries aggregate asphalt production. | |
| Valero L.P. and Valero Energy entered into a one-year shell barrel capacity lease agreement on January 1, 2004 for the 1.6 million barrels of capacity at the Corpus Christi North Beach storage facility, renewable annually. The use of this storage facility was previously included as part of the crude oil pipeline tariff for the Corpus Christi to Three Rivers crude oil pipeline. | |
| Valero L.P. has other minor storage and throughput contracts with Valero Energy resulting from the Kaneb acquisition. |
Summary of Transactions with Valero Energy |
Year Ended | Three Months Ended | |||||||||||||||||||
December 31, | March 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
Revenues
|
$ | 178,605 | $ | 217,608 | $ | 234,485 | $ | 55,341 | $ | 60,671 | ||||||||||
Operating expenses
|
24,196 | 31,960 | 60,921 | 8,041 | 20,457 | |||||||||||||||
General and administrative expenses
|
6,110 | 10,539 | 19,356 | 2,757 | 5,700 |
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We may compete with Valero L.P. and Valero Energy for the time and effort of our Chairman and officers who also serve Valero L.P. and Valero Energy. |
Valero Energy may purchase assets or receive services from Valero L.P., giving rise to conflicts of interest. |
Owners of the units will have no right to enforce obligations of Valero L.P., Valero Energy or their affiliates under any agreements with us. |
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Contracts between us, on the one hand, and Valero L.P., Valero Energy and their respective affiliates, on the other hand, may not be the result of an arms-length negotiation. |
Valero Energy and its affiliates may compete with Valero L.P. |
Valero Energy may cause its subsidiaries to exercise their purchase rights at any time or price that may be undesirable to you. |
Fiduciary Duties |
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| surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; | |
| special charges for services requested by a holder of a unit; and | |
| other similar fees or charges. |
| becomes the record holder of the units; | |
| represents that the transferee has the capacity, power and authority to enter into and become bound by our limited liability company agreement; | |
| automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our limited liability company agreement; | |
| grants powers of attorney to our officers and any liquidator of our company as specified in the limited liability company agreement; and | |
| makes the consents and waivers contained in our limited liability company agreement. |
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| with regard to distributions of available cash, please read Our Cash Distribution Policy and Restrictions on Distributions and How We Make Cash Distributions; | |
| with regard to rights of holders of units, please read Description of Our Units; | |
| with regard to the election of members of our board of directors, please read Management Our Board of Directors; and | |
| with regard to allocations of taxable income and other matters, please read Material Tax Consequences. |
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the approval of a unit majority. Please read
Amendment of Our Limited Liability Company
Agreement.
Merger of our company or the sale of all or substantially all of
our assets
Unit majority. Please read Merger, Sale or
Other Disposition of Assets.
Dissolution of our company
Unit majority. Please read Termination and
Dissolution.
| enlarge the obligations of any unitholder without its consent, unless approved by at least a majority of the type or class of member interests so affected; | |
| provide that we are not dissolved upon an election to dissolve our company by our board of directors that is approved by a unit majority; | |
| change the term of existence of our company; or | |
| give any person the right to dissolve our company other than our board of directors right to dissolve our company with the approval of a unit majority. |
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| a change in our name, the location of our principal place of our business, our registered agent or our registered office; | |
| the admission, substitution, withdrawal or removal of members in accordance with our limited liability company agreement; | |
| the merger of our company or any of its subsidiaries into, or the conveyance of all of our assets to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity; | |
| a change that our board of directors determines to be necessary or appropriate for us to qualify or continue our qualification as a company in which our members have limited liability under the laws of any state or to ensure that neither we, our operating subsidiaries nor any of their subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; | |
| an amendment that is necessary, in the opinion of our counsel, to prevent us, members of our board, or our officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or plan asset regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed; | |
| an amendment that our board of directors determines to be necessary or appropriate for the authorization of additional securities or rights to acquire securities; | |
| any amendment expressly permitted in our limited liability company agreement to be made by our board of directors acting alone; | |
| an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our limited liability company agreement; | |
| any amendment that our board of directors determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our limited liability company agreement; | |
| a change in our fiscal year or taxable year and related changes; | |
| a merger, conversion or conveyance effected in accordance with the limited liability company agreement; and | |
| any other amendments substantially similar to any of the matters described in the clauses above. |
| do not adversely affect the unitholders (including any particular class of unitholders as compared to other classes of unitholders) in any material respect; | |
| are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; | |
| are necessary or appropriate to facilitate the trading of units or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the units are or will be listed for trading, |
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compliance with any of which our board of directors deems to be in the best interests of us and our unitholders; | ||
| are necessary or appropriate for any action taken by our board of directors relating to splits or combinations of units under the provisions of our limited liability company agreement; or | |
| are required to effect the intent expressed in this prospectus or the intent of the provisions of our limited liability company agreement or are otherwise contemplated by our limited liability company agreement. |
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| prior to such time, our board of directors approved either the business combination or the transaction that resulted in the unitholders becoming an interested unitholder; | |
| upon consummation of the transaction that resulted in the unitholders becoming an interested unitholder, the interested unitholder owned at least 85% of our outstanding units at the time the transaction commenced, excluding for purposes of determining the number of units outstanding those units owned: |
| by persons who are directors and also officers; and | |
| by employee unit plans in which employee participants do not have the right to determine confidentially whether units held subject to the plan will be tendered in a tender or exchange offer; or | |
| at or subsequent to such time the business combination is approved by our board of directors and authorized at an annual or special meeting of our unitholders (and not by written consent), by the affirmative vote of at least a majority of our outstanding voting units that are not owned by the interested unitholder. |
| any merger or consolidation involving the company and the interested unitholder; | |
| any sale, transfer, pledge or other disposition of 10% or more of the assets of the company involving the interested unitholder; | |
| subject to certain exceptions, any transaction that results in the issuance or transfer by the company of any units of the company to the interested unitholder; | |
| any transaction involving the company that has the effect of increasing the proportionate share of the units of any class or series of the company beneficially owned by the interested unitholder; or | |
| the receipt by the interested unitholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the company. |
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| the highest cash price paid by our affiliates for any membership interests of the class purchased within the 90 days preceding the date on which our affiliates first mail notice of their election to purchase those membership interests; or | |
| the closing market price as of the date three days before the date the notice is mailed. |
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| a current list of the name and last known address of each unitholder; | |
| a copy of our tax returns; | |
| information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each unitholder and the date on which each became a unitholder; |
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| copies of our limited liability company agreement, the certificate of formation of the company, any related amendments and powers of attorney under which they have been executed; | |
| information regarding the status of our business and financial condition; and | |
| any other information regarding our affairs as is just and reasonable. |
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| to remove or replace the general partner; | |
| to approve some amendments to the partnership agreement; or | |
| to take other action under the partnership agreement; |
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General |
Prohibited Amendments |
| enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; | |
| enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by Valero L.P. to the general partner or any of its affiliates without the consent of the general partner, which may be given or withheld in its sole discretion; | |
| change the term of Valero L.P.; | |
| provide that Valero L.P. is not dissolved upon an election to dissolve Valero L.P. by the general partner that is approved by the holders of a majority of the outstanding common units; or | |
| give any person the right to dissolve Valero L.P. other than the general partners right to dissolve Valero L.P. with the approval of the holders of a majority of the outstanding common units. |
No Unitholder Approval |
| a change in the name of Valero L.P., the location of the principal place of business of Valero L.P., the registered agent or the registered office of Valero L.P.; | |
| the admission, substitution, withdrawal or removal of partners in accordance with the partnership agreement; | |
| a change that, in the sole discretion of the general partner, is necessary or advisable to qualify or continue the qualification of Valero L.P. as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither Valero L.P. nor Valero Logistics Operations will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; | |
| an amendment that is necessary, in the opinion of counsel to Valero L.P., to prevent Valero L.P., the general partner, Valero GP, LLC, or any of the directors, officers, agents or trustees of Valero GP, LLC from in any manner being subjected to the provisions of the Investment Company Act of 1940, the |
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Investment Advisors Act of 1940, or plan asset regulations adopted under ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed; | ||
| subject to the limitations on the issuance of additional common units or other limited or general partner interests described above, an amendment that in the discretion of the general partner is necessary or advisable for the authorization of additional limited or general partner interests; | |
| any amendment expressly permitted in the partnership agreement to be made by the general partner acting alone; | |
| an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of the partnership agreement; | |
| any amendment that, in the discretion of the general partner, is necessary or advisable for the formation by Valero L.P. of, or its investment in, any corporation, partnership or other entity, as otherwise permitted by the partnership agreement; | |
| a change in the fiscal year or taxable year of Valero L.P. and related changes; and | |
| any other amendments substantially similar to any of the matters described above. |
| do not adversely affect the limited partners (or any particular class of limited partners) in any material respect; | |
| are necessary or advisable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; | |
| are necessary or advisable to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading, compliance with any of which the general partner deems to be in the best interests of Valero L.P. and the limited partners; | |
| are necessary or advisable for any action taken by the general partner relating to splits or combinations of common units under the provisions of the partnership agreement; or | |
| are required to effect the intent expressed in this prospectus or the intent of the provisions of the partnership agreement or are otherwise contemplated by the partnership agreement. |
Opinion of Counsel and Unitholder Approval |
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Merger/ Consolidation |
Disposal of Assets |
| the election of the general partner to dissolve Valero L.P., if approved by the holders of common units representing a unit majority; | |
| the sale, exchange or other disposition of all or substantially all of the assets and properties of Valero L.P.; | |
| the entry of a decree of judicial dissolution of Valero L.P.; or | |
| the withdrawal or removal of the general partner or any other event that results in its ceasing to be the general partner other than by reason of a transfer of its general partner interest in accordance with the partnership agreement or withdrawal or removal following approval and admission of a successor. |
| the action would not result in the loss of limited liability of any limited partner; and | |
| neither Valero L.P., the reconstituted limited partnership, nor any operating subsidiary would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue. |
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| Any units held by a person that owns 20% or more of any class of units then outstanding, other than the general partner and its affiliates, cannot be voted on any matter. | |
| The partnership agreement contains provisions limiting the ability of unitholders to call meetings or to acquire information about the partnerships operations, as well as other provisions limiting the unitholders ability to influence the manner or direction of management. |
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| the general partner; | |
| any departing general partner; | |
| any person who is or was an affiliate of the general partner or any departing general partner; | |
| any person who is or was a partner, officer, director, employee, agent, or trustee of the general partner, Valero GP, LLC, or departing general partner or any affiliate of the general partner, Valero GP, LLC, or departing general partner; or | |
| any person who is or was serving at the request of the general partner or departing general partner or any affiliate of the general partner or departing general partner as an officer, director, employee, member, partner, agent, or trustee of another person. |
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| a current list of the name and last known address of each partner; | |
| a copy of Valero L.P.s tax returns; | |
| information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner; | |
| copies of the partnership agreement, the certificate of limited partnership of the partnership, related amendments and powers of attorney under which they have been executed; | |
| information regarding the status of Valero L.P.s business and financial condition; and | |
| any other information regarding Valero L.P.s affairs as is just and reasonable. |
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General |
Definition of Available Cash |
| provide for the proper conduct of Valero L.P.s business, including reserves for future capital expenditures and anticipated credit needs; | |
| comply with applicable law or any debt instrument or other agreement or obligation; or | |
| provide funds for distributions with respect to any one or more of the next four fiscal quarters. |
Intent to Distribute the Minimum Quarterly Distribution |
General |
Definition of Operating Surplus |
| $10 million plus all cash and cash equivalents on hand as of the close of business on April 16, 2001, the closing date of its initial public offering of its common units; | |
| plus all cash receipts since April 16, 2001, other than from interim capital transactions such as borrowings that are not working capital borrowings, sales of equity and debt securities and sales or other dispositions of assets for cash, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of normal retirements or replacements of assets; | |
| plus all cash receipts resulting from working capital borrowings after the end of such period but on or before the date of determination of the operating surplus for such period; | |
| less all operating expenditures since April 16, 2001; and | |
| less the amount of cash reserves that Valero L.P.s general partner deems necessary or advisable to provide funds for future operating expenditures. |
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Definition of Capital Surplus |
| borrowings other than working capital borrowings; | |
| sales of debt and equity securities; and | |
| sales or other dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or as part of normal retirements or replacements of assets. |
Characterization of Cash Distributions |
| First, 98% to the unitholders, pro rata, and 2% to the general partner, until Valero L.P. has distributed for each outstanding unit an amount equal to the minimum quarterly distribution of $0.60 for that quarter; | |
| Second, 90% to all unitholders, pro rata, 8% to the holders of the incentive distribution rights, and 2% to the general partner, until Valero L.P. has distributed with respect to each unit then outstanding an amount equal to the excess of the first target distribution ($0.66 per unit) over the minimum quarterly distribution; and | |
| Thereafter, 75% to all unitholders, pro rata, 23% to the holders of the incentive distribution rights, and 2% to the general partner. |
How Distributions from Capital Surplus are Made |
| First, 98% to all unitholders, pro rata, and 2% to the general partner, until a hypothetical holder of a common unit acquired on April 16, 2001 has received an aggregate amount equal to the $24.50 initial public offering price of the common units; |
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| Second, 98% to the common unitholders, pro rata, and 2% to the general partner, until there has been distributed with respect to each common unit then outstanding an amount equal to any cumulative arrearage existing with respect to the common units; and | |
| Thereafter, all distributions of available cash from capital surplus will be distributed as if they were from operating surplus. |
Effect of a Distribution from Capital Surplus |
| the minimum quarterly distribution; | |
| the first target distribution level; | |
| any common unit arrearage; | |
| any cumulative common unit arrearage; and | |
| the unrecovered capital. |
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Manner of Adjustments for Gain |
| first, to each partner having a negative balance in its capital account, in the proportion that such negative balance bears to the total negative balances of all partners, until each partner has been allocated net gain equal to its negative balance; | |
| second, 98% to the common unitholders, pro rata, and 2% to the general partner, until the capital account for each common unit then outstanding is equal to the sum of: |
| the unrecovered capital with respect to such common unit; | |
| the amount of any unpaid minimum quarterly distribution for the quarter during which the liquidation occurs; and | |
| the amount of any cumulative arrearage existing with respect to the common units; |
| third, 90% to all unitholders, pro rata, 8% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until the capital account for each common unit then outstanding is equal to the sum of: |
| the unrecovered capital with respect to each common unit; | |
| the amount of any unpaid minimum quarterly distribution for the quarter during which the liquidation occurs; | |
| the amount of any cumulative arrearage existing with respect to the common units; and |
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| the excess of (a) the first target distribution less the minimum quarterly distribution for each quarter of the partnerships existence, over (b) the cumulative per unit amount of any distributions of available cash from operating surplus that were distributed 90% to all unitholders, pro rata, 8% to the holders of incentive distribution rights, pro rata, and 2% to the general partner; and |
| thereafter, 75% to all unitholders, pro rata, 23% to the holders of incentive distribution rights, pro rata, and 2% to the general partner. |
Manner of Adjustments for Losses |
| first, 98% to the common unitholders, pro rata, and 2% to the general partner, until the capital account for each common unit has been reduced to zero; and | |
| thereafter, 100% to the general partner. |
Adjustments to Capital Accounts |
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| 1% of the total number of the securities outstanding; or | |
| the average weekly reported trading volume of the units for the four calendar weeks prior to the sale. |
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(1) | the treatment of a unitholder whose units are loaned to a short seller to cover a short sale of units (please read Tax Consequences of Unit Ownership Treatment of Short Sales); | |
(2) | whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations (please read Disposition of Units Allocations Between Transferors and Transferees); and | |
(3) | whether our method for depreciating Section 743 adjustments is sustainable in certain cases (please read Tax Consequences of Unit Ownership Section 754 Election). |
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| Neither we, nor Valero L.P., have elected nor will elect to be treated as a corporation; and | |
| For each taxable year, more than 90% of our gross income will be income that Andrews Kurth LLP has opined or will opine is qualifying income within the meaning of Section 7704(d) of the Internal Revenue Code. |
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| Valero L.P.s gross income from operations exceeds the amount required to make the minimum quarterly distribution on all Valero L.P.s units, yet Valero L.P. only distributes the minimum quarterly distribution on all its units, or | |
| Valero L.P. makes a future offering of common units and uses the proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to Valero L.P.s assets at the time of this offering. |
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| interest on indebtedness properly allocable to property held for investment; | |
| our interest expense attributed to portfolio income; and | |
| the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
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| his relative contributions to us; | |
| the interests of all the unitholders in profits and losses; | |
| the interest of all the unitholders in cash flow; and | |
| the rights of all the unitholders to distributions of capital upon liquidation. |
| any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder; | |
| any cash distributions received by the unitholder as to those units would be fully taxable; and | |
| all of these distributions would appear to be ordinary income. |
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| a short sale; | |
| an offsetting notional principal contract; or | |
| a futures or forward contract with respect to the partnership interest or substantially identical property. |
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| the name, address and taxpayer identification number of the beneficial owner and the nominee; | |
| whether the beneficial owner is: |
| the amount and description of units held, acquired or transferred for the beneficial owner; and | |
| specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. |
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| accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at Accuracy-related Penalties, | |
| for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability, and | |
| in the case of a listed transaction, an extended statute of limitations. |
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| whether the investment is prudent under Section 404(a)(l)(B) of ERISA; | |
| whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(l)(C) of ERISA; and | |
| whether the investment will result in recognition of unrelated business taxable income (please read Material Tax Consequences Tax-Exempt Organizations and Other Investors) by the plan and, if so, the potential after-tax investment return. |
| the equity interests acquired by employee benefit plans are publicly offered securities; i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, freely transferable and registered under some provisions of the federal securities laws; | |
| the entity is an operating company; i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority owned subsidiary or subsidiaries; or | |
| there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referred to above, IRAs and other employee benefit plans not subject to ERISA, including governmental plans. |
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| the underwriters option to purchase additional units is not exercised; and | |
| the underwriters exercise their option to purchase additional units in full, with the number of units to be sold by each selling unitholder. |
Units Offered By Selling | ||||||||||||||||||||||||||||||||
Unitholders | Units Owned Immediately After This Offering | |||||||||||||||||||||||||||||||
Units Owned | Assuming | Assuming | ||||||||||||||||||||||||||||||
Prior to | Assuming | Underwriters | Assuming | Underwriters | ||||||||||||||||||||||||||||
Offering(b) | Underwriters | Option is | Underwriters | Option is | ||||||||||||||||||||||||||||
Option is Not | Exercised | Option is Not | Exercised | |||||||||||||||||||||||||||||
Name of Selling Unitholder(a) | Units | Percent | Exercised | in Full | Exercised | Percent | in Full | Percent | ||||||||||||||||||||||||
Sigmor Corporation
|
12,523,275 | 29.5% | 8,449,911 | 10,924,911 | 4,073,364 | 9.6% | 1,598,364 | 3.8% | ||||||||||||||||||||||||
The Shamrock Pipe Line Corporation
|
5,750,032 | 13.5 | 5,750,032 | 5,750,032 | | 0.0 | | 0.0 | ||||||||||||||||||||||||
Diamond Shamrock Refining Company, L.P.
|
2,298,782 | 5.4 | 2,298,782 | 2,298,782 | | 0.0 | | 0.0 | ||||||||||||||||||||||||
Valero Refining New Orleans, L.L.C.
|
425 | * | 425 | 425 | | 0.0 | | 0.0 | ||||||||||||||||||||||||
Valero Refining Company California
|
425 | * | 425 | 425 | | 0.0 | | 0.0 | ||||||||||||||||||||||||
Valero Refining Texas, L.P.
|
425 | * | 425 | 425 | | 0.0 | | 0.0 |
* | Represents less than 1%. | |
(a) | The address of each selling unitholder is One Valero Way, San Antonio, Texas 78249. | |
(b) | Gives effect to the 4.25-for-1 unit split to be effected immediately prior to the completion of this offering. | |
191
Number of | |||||
Underwriters | Units | ||||
Lehman Brothers Inc.
|
|||||
Citigroup Global Markets Inc.
|
|||||
Goldman, Sachs & Co.
|
|||||
Morgan Stanley & Co. Incorporated
|
|||||
RBC Capital Markets Corporation
|
|||||
UBS Securities LLC
|
|||||
A.G. Edwards & Sons, Inc.
|
|||||
Wachovia Capital Markets, LLC
|
|||||
Credit Suisse Securities (USA) LLC
|
|||||
Deutsche Bank Securities Inc.
|
|||||
J.P. Morgan Securities Inc.
|
|||||
KeyBanc Capital Markets, a division of McDonald Investments,
Inc.
|
|||||
Raymond James & Associates, Inc.
|
|||||
Oppenheimer & Co. Inc.
|
|||||
Petrie Parkman & Co.
|
|||||
Sanders Morris Harris Inc.
|
|||||
Total
|
16,500,000 | ||||
| the obligation to purchase all of the units offered hereby if any of the units are purchased; | |
| the representations and warranties made by us and the selling unitholders to the underwriters are true; | |
| there has been no material change in our financial condition or in the financial markets; and | |
| we deliver customary closing documents to the underwriters. |
No Exercise | Full Exercise | ||||||||
Per unit
|
$ | $ | |||||||
Total
|
$ | $ | |||||||
192
| during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or | |
| prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, |
193
| the history and prospects for the industry in which we compete, | |
| our financial information, | |
| the ability of our management and our business potential and earnings prospects, | |
| the prevailing securities markets at the time of this offering, and | |
| the recent market prices of, and the demand for, publicly traded common units of generally comparable entities. |
| Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. | |
| A short position involves a sale by the underwriters of units in excess of the number of units the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of units involved in the sales made by the underwriters in excess of the number of units they are obligated to purchase is not greater than the number of units that they may purchase by exercising their option to purchase additional units. In a naked short position, the number of units involved is greater than the number of units in their option to purchase additional units. The underwriters may close out any short position by either exercising their option to purchase additional units and/or purchasing units in the open market. In determining the source of units to close out the short position, the underwriters will consider, among other things, the price of units available for purchase in the open market as compared to the price at which they may purchase units through their option to purchase additional units. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the units in the open market after pricing that could adversely affect investors who purchase in the offering. | |
| Syndicate covering transactions involve purchases of the units in the open market after the distribution has been completed in order to cover syndicate short positions. | |
| Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the units originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
194
195
United Kingdom |
(a) it has not made or will not make an offer of units to the public in the United Kingdom within the meaning of section 102B of the Financial Services and Markets Act 2000 (as amended) (FSMA) except to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities or otherwise in circumstances which do not require the publication by the company of a prospectus pursuant to the Prospectus Rules of the Financial Services Authority (FSA); | |
(b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to Valero GP Holdings; and | |
(c) it has complied with, and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the units in, from or otherwise involving the United Kingdom. | |
European Economic Area |
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; or | |
(c) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. | |
Hong Kong |
196
Singapore |
Japan |
197
| Our ability to pay distributions to our unitholders; | |
| Our expected receipt of distributions from Valero L.P.; | |
| Any reduction in the quantities of crude oil and refined products transported in Valero L.P.s pipelines or handled at Valero L.P.s terminals and storage tanks; | |
| Any significant decrease in the demand for refined products in the markets served by Valero L.P.s pipelines and terminals; | |
| Any material decline in production by any of Valero Energys McKee, Three Rivers, Corpus Christi East, Corpus Christi West, Texas City, Paulsboro, Benicia and Ardmore refineries or Tesoros Mandan, North Dakota refinery; | |
| Any downward pressure on market prices caused by new competing refined product pipelines that could cause Valero Energy to decrease the volumes transported in Valero L.P.s pipelines; | |
| Any challenges to Valero L.P.s tariffs or changes in state or federal ratemaking methodology; | |
| Any changes in laws and regulations to which we or Valero L.P. are subject, including federal, state and local tax laws, safety, environmental and employment laws; | |
| Overall economic conditions; | |
| Any material decrease in the supply of or material increase in the price of crude oil available for transport through Valero L.P.s pipelines and storage in Valero L.P.s storage tanks; | |
| Inability to expand Valero L.P.s business and acquire new assets as well as to attract third-party shippers; | |
| Conflicts of interest with Valero L.P., Valero GP, LLC or Valero Energy; | |
| The loss of Valero Energy as a customer or a significant reduction in its current level of throughput and storage with Valero L.P.; |
198
| Any inability to borrow additional funds; | |
| Any substantial costs related to environmental risks, including increased costs of compliance; | |
| Any change in the credit rating assigned to our or Valero Energy or its subsidiaries indebtedness; | |
| Any reductions in space allocated to Valero L.P. in interconnecting third-party pipelines; | |
| Any material increase in the price of natural gas; | |
| Inability to successfully complete the announced mergers with Kaneb or integrate Kanebs operations; | |
| Terrorist attacks, threat of war or terrorist attacks or political or other disruptions that limit crude oil production; and | |
| Accidents or unscheduled shutdowns affecting Valero L.P.s pipelines, terminals, machinery, or equipment, or those of Valero Energy. |
199
Page | ||||||
VALERO GP HOLDINGS, LLC
|
||||||
Introduction
|
F-2 | |||||
F-3 | ||||||
Unaudited Pro Forma Combined Statement of Income for the Year
Ended December 31, 2005
|
F-4 | |||||
F-5 | ||||||
F-6 | ||||||
Combined Financial Statements:
|
||||||
F-8 | ||||||
F-10 | ||||||
F-11 | ||||||
F-12 | ||||||
F-13 | ||||||
F-14 | ||||||
VALERO L.P. AND SUBSIDIARIES
|
||||||
Unaudited Pro Forma Condensed Combined Financial
Statement:
|
||||||
F-25 | ||||||
F-26 | ||||||
F-27 | ||||||
Consolidated Financial Statements:
|
||||||
F-29 | ||||||
F-31 | ||||||
F-32 | ||||||
F-33 | ||||||
F-34 | ||||||
F-35 | ||||||
KANEB SERVICES LLC
|
||||||
Consolidated Financial Statements:
|
||||||
F-76 | ||||||
F-77 | ||||||
F-78 | ||||||
F-79 | ||||||
F-80 | ||||||
F-81 |
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
Valero GP
Holdings
Offering
Pro Forma
Historical
Adjustments
as Adjusted
(Thousands of dollars)
ASSETS
$
120
$
3,417
(b)
$
3,537
73
73
5
5
198
3,417
3,615
5,507
(b)
5,507
407,458
407,458
339
339
$
407,995
$
8,924
$
416,919
LIABILITIES AND MEMBERS EQUITY
$
14
$
$
14
27
27
1,557
1,557
1,598
1,598
265,354
(7,367
)(a)
(257,987
)(c)
7,367
(a)
7,367
141,043
8,924
(b)
407,954
257,987
(c)
$
407,995
$
8,924
$
416,919
Table of Contents
Valero GP
Kaneb
Pro Forma
Holdings
Pro Forma
Combined
Offering
Pro Forma
Historical
Adjustments
for Kaneb
Adjustments
as Adjusted
(Thousands of dollars)
$
37,646
$
(11,695
)(d)
$
25,951
$
$
25,951
28
28
472
(e)
500
28
28
472
500
37,618
(11,695
)
25,923
(472
)
25,451
456
456
456
111
111
(111
)(f)
(17,778
)
(17,778
)
17,778
(f)
20,407
(11,695
)
8,712
17,195
25,907
114
(12
)(g)
102
(3
)(g)
99
$
20,293
$
(11,683
)
$
8,610
$
17,198
$
25,808
$
0.61
42,500
Table of Contents
Valero GP
Holdings
Offering
Pro Forma
Historical
Adjustments
as Adjusted
(Thousands of dollars)
$
11,175
$
$
11,175
8
117
(e)
125
8
117
125
11,167
(117
)
11,050
1
1
33
(33
)(f)
(4,743
)
4,743
(f)
6,458
4,593
11,051
83
2
(g)
85
$
6,375
$
4,591
$
10,966
$
0.26
42,500
Table of Contents
(a)
To reclass $7.1 million of other postretirement employee
benefit (OPEB) liabilities and $0.3 million of
long-term disability liabilities for Valero
GP Holdings employees from notes payable to
affiliates to other long-term liabilities. See Note (b) for
planned funding of these and other employee benefit plan
liabilities.
(b)
To reflect a planned $8.9 million capital contribution from
Valero Energy to Valero GP Holdings to fund certain employee
benefit plan liabilities of Valero GP Holdings in accordance
with agreements between Valero Energy and Valero
GP Holdings that will become effective upon the effective
date of this offering. The capital contribution will be funded
with $3.4 million of cash and a $5.5 million
receivable from Valero L.P. held by Valero Energy.
(c)
To reflect a planned $258.0 million capital contribution
from Valero Energy subsidiaries to Valero GP Holdings of notes
issued by Valero GP Holdings and held by Valero Energy
subsidiaries.
(d)
To reflect the adjustment to Valero GP Holdings general
partner and limited unitholder interests in Valero L.P.s
income from continuing operations, resulting from (i) the
pro forma effects of the acquisition of Kaneb on net income,
(ii) the issuance of additional common units in connection
with the acquisition of Kaneb, and (iii) an assumed
quarterly per unit distribution by Valero L.P. of
$0.855 per unit, which is the amount of Valero L.P.s
distribution for the quarter ended December 31, 2005.
The following table reflects the calculation of Valero GP
Holdings pro forma adjustment to equity in earnings of
Valero L.P. (in thousands):
Year Ended
December 31,
2005
$
83,084
(12,196
)
$
70,888
$
16,639
12,196
(2,884
)
25,951
(37,646
)
$
(11,695
)
(1)
Represents the amortization of the excess of the fair value over
historical carrying amounts of Valero L.P.s assets and
liabilities at the date of Valero Energys acquisition of
Ultramar Diamond Shamrock Corporation (UDS), related to Valero
Energys interest in Valero L.P. at that date.
Table of Contents
(e)
To reflect an adjustment to general and administrative expenses
as follows (in thousands):
Year Ended
Three Months
December 31,
Ended March 31,
2005
2006
$
500
$
125
(28
)
(8
)
$
472
$
117
(1)
Represents the fee to be charged by Valero GP, LLC to Valero GP
Holdings under the Administration Agreement for executive
management, accounting, legal, cash management, corporate
finance and other administrative services.
(f)
To reflect the elimination of affiliated interest income and
expense resulting from the planned contribution by Valero Energy
subsidiaries to Valero GP Holdings of notes issued by Valero GP
Holdings and held by Valero Energy subsidiaries.
(g)
To reflect the tax effect of the pre-tax income adjustments
related to the Kaneb pro forma and offering adjustments.
Although the net pre-tax income adjustments increase income,
income tax expense is substantially unchanged as the interest
expense reduction primarily affects an entity not subject to
significant state income tax. Amounts in the following table are
in thousands:
Three Months
Year Ended
Ended
December 31,
March 31,
2005
2006
$
99
$
85
114
83
$
(15
)
$
2
(h)
To reflect the weighted-average units outstanding for the year
ended December 31, 2005 and the three months ended
March 31, 2006, assuming the 42,500,000 units of
Valero GP Holdings that will be outstanding after the offering
were outstanding on January 1, 2005.
Table of Contents
/s/
KPMG LLP
Table of Contents
/s/
ERNST & YOUNG
LLP
Table of Contents
Table of Contents
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005
2005
2006
(unaudited)
$
24,868
$
$
$
$
27,418
35,314
37,646
8,660
11,175
52,286
35,314
37,646
8,660
11,175
9,484
1,562
91
28
8
2,975
14,021
91
28
8
38,265
35,223
37,618
8,660
11,167
633
72
375
456
369
1
26
111
12
33
(18,691
)
(17,110
)
(17,778
)
(4,414
)
(4,743
)
(1,592
)
(2,400
)
16,287
18,514
20,407
4,627
6,458
33
67
114
67
83
$
16,254
$
18,447
$
20,293
$
4,560
$
6,375
Table of Contents
Three Months
Year Ended December 31,
Ended
March 31,
2003
2004
2005
2006
(unaudited)
$
244,771
$
105,960
$
113,975
$
141,780
16,254
18,447
20,293
6,375
1,513
29,411
(156,578
)
(10,432
)
(21,899
)
(7,112
)
$
105,960
$
113,975
$
141,780
$
141,043
Table of Contents
Three Months
Year Ended December 31,
Ended March 31,
2003
2004
2005
2005
2006
(unaudited)
$
16,254
$
18,447
$
20,293
$
4,560
$
6,375
2,975
(27,418
)
(35,314
)
(37,646
)
(8,660
)
(11,175
)
25,524
37,208
37,646
8,660
11,175
(633
)
633
(33
)
(375
)
(456
)
(369
)
2,400
(158
)
(7
)
67
56
23
601
2,224
(2,997
)
(1,070
)
98
2,888
(176
)
(46
)
(64
)
23,033
22,183
16,731
3,131
6,432
(1,883
)
(14,807
)
756
7,099
1,043
1,486
18
(1,474
)
(597
)
(29,747
)
(550
)
(1,635
)
1,086
1,362
3,042
2,027
1,435
(17,060
)
1,521
(19,606
)
2,520
1,286
7,388
(13,200
)
(4,636
)
(2,516
)
(607
)
247,819
(174
)
200,342
1,513
29,411
(156,578
)
(10,432
)
(21,899
)
(3,134
)
(7,112
)
(3,631
)
296,679
(23,632
)
2,876
(5,650
)
(7,719
)
(336,139
)
(33,487
)
72
1
1
(1
)
33,535
48
120
120
121
$
48
$
120
$
121
$
121
$
120
Table of Contents
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
a 99.9% limited partner interest in Riverwalk Logistics, L.P.
(Riverwalk), the 2% general partner of Valero L.P., and
9,599,322 subordinated units and 614,572 common units of Valero
L.P. The subordinated units converted to common units on a
one-for-one basis on May 8, 2006.
Basis of Presentation and Principles of Combination
Table of Contents
Initial Public Offering
Valero Energy will contribute its 100% ownership interest in
Valero GP, LLC to Valero GP Holdings;
The existing percentage ownership interests of the members of
Valero GP Holdings will be represented by unit
certificates, and a
4.25-for-1
unit split
will be effected, with the members of Valero GP Holdings
maintaining their current percentage ownership interests after
the split;
Valero GP Holdings will amend its limited liability company
agreement to provide for governance and certain anti-takeover
provisions;
Valero Energy will fund certain employee benefit plan
liabilities of Valero GP Holdings through a capital contribution
to Valero GP Holdings; and
Valero Energy subsidiaries will contribute to Valero GP Holdings
notes issued by Valero GP Holdings and held by Valero Energy
subsidiaries.
Use of Estimates
Equity Investments
Table of Contents
EITF Issue No. 04-5
Revenue Recognition
Segment Disclosures
Income Taxes
Table of Contents
Financial Instruments
Stock-Based Compensation
Table of Contents
2.
INVESTMENT IN AND TRANSACTIONS WITH VALERO L.P. AND VALERO
ENERGY
capped the general partners distribution, including
incentive distributions, at 25% for all distributions in excess
of $0.66 per unit per quarter and
reduced the minimum vote required to remove the general partner
from 58% to a simple majority of Valero L.P.s outstanding
common and subordinated units, excluding the units held by
Valero GP Holdings.
Table of Contents
Summary Financial Information
December 31,
March 31,
2004
2005
2006
$
39,979
$
295,411
$
251,229
784,999
2,160,213
2,156,552
32,529
911,368
915,399
$
857,507
$
3,366,992
$
3,323,180
$
33,609
$
205,588
$
144,741
384,171
1,169,659
1,187,662
1,416
90,966
92,297
419,196
1,466,213
1,424,700
438,311
1,900,779
1,898,480
$
857,507
$
3,366,992
$
3,323,180
Three Months
Year Ended December 31,
Ended March 31,
2003
2004
2005
2005
2006
$
181,450
$
220,792
$
659,557
$
56,635
$
274,004
83,037
98,024
153,694
24,715
55,967
69,593
78,418
111,073
19,264
39,451
Related Party Transactions |
F-19
Three Months Ended | ||||||||||||||||||||
Year Ended December 31, | March 31, | |||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | ||||||||||||||||
Expenses charged by Valero GP Holdings to Valero L.P.
|
$ | 22,736 | $ | 36,869 | $ | 66,421 | $ | 9,713 | $ | 23,903 |
Other |
December 31, | ||||||||||||
March 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Valero L.P. total partners equity
|
$ | 438,311 | $ | 1,900,779 | $ | 1,898,480 | ||||||
Valero GP Holdings ownership interest in Valero L.P.
|
45.7 | % | 23.4 | % | 23.4 | % | ||||||
Valero GP Holdings share of Valero L.P.s
partners equity
|
200,308 | 444,782 | 444,244 | |||||||||
Unrecognized SAB 51 gains
|
(7,094 | ) | (158,170 | ) | (158,170 | ) | ||||||
Step-up in basis related to Valero L.P.s assets and
liabilities, including equity method goodwill
|
195,468 | 122,132 | 121,384 | |||||||||
Investment in Valero L.P.
|
$ | 388,682 | $ | 408,744 | $ | 407,458 | ||||||
F-20
3. | DISTRIBUTIONS FROM VALERO L.P. |
Three Months | |||||||||||||||||||||
Year Ended December 31, | Ended March 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
General partner interest
|
$ | 1,404 | $ | 1,595 | $ | 2,589 | $ | 399 | $ | 916 | |||||||||||
General partner incentive distribution
|
2,620 | 4,449 | 8,711 | 1,112 | 3,480 | ||||||||||||||||
Total general partner distribution
|
4,024 | 6,044 | 11,300 | 1,511 | 4,396 | ||||||||||||||||
Valero GP Holdings limited partner distribution
|
30,319 | 32,805 | 34,421 | 8,190 | 9,050 | ||||||||||||||||
Total distributions to Valero GP Holdings
|
34,343 | 38,849 | 45,721 | 9,701 | 13,446 | ||||||||||||||||
Public unitholders distributions
|
35,860 | 40,928 | 83,757 | 10,243 | 32,377 | ||||||||||||||||
Total cash distributions
|
$ | 70,203 | $ | 79,777 | $ | 129,478 | $ | 19,944 | $ | 45,823 | |||||||||||
Cash distributions per unit applicable to limited partners
|
$ | 2.95 | $ | 3.20 | $ | 3.365 | $ | 0.800 | $ | 0.885 |
Amount | ||||||||
Distribution Related To: | Payment Date | Per Unit | ||||||
4th quarter 2004
|
February 14, 2005 | $ | 0.800 | |||||
1st quarter 2005
|
May 13, 2005 | 0.800 | ||||||
2nd quarter 2005
|
August 12, 2005 | 0.855 | ||||||
3rd quarter 2005
|
November 14, 2005 | 0.855 | ||||||
4th quarter 2005
|
February 14, 2006 | 0.855 |
4. | ACQUISITIONS BY VALERO L.P. PRIOR TO MARCH 18, 2003 |
Telfer Asphalt Terminal |
F-21
5. | NOTES PAYABLE TO AFFILIATES |
6. | DISTRIBUTIONS TO VALERO ENERGY |
7. | STATEMENTS OF CASH FLOWS |
Three Months | |||||||||||||||||||||
Year Ended December 31, | Ended March 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
Decrease (increase) in current assets:
|
|||||||||||||||||||||
Accounts receivable
|
$ | (249 | ) | $ | | $ | | $ | | $ | (5 | ) | |||||||||
Receivable from Valero L.P.
|
2,937 | 985 | (1,151 | ) | | 1,078 | |||||||||||||||
Prepaid expenses and other
|
(1,194 | ) | | | | | |||||||||||||||
Increase (decrease) in current liabilities:
|
|||||||||||||||||||||
Accounts payable
|
823 | | 2 | 3 | 12 | ||||||||||||||||
Income taxes payable
|
| | 11 | 2 | 16 | ||||||||||||||||
Accrued liabilities
|
(362 | ) | 1,239 | (1,859 | ) | (1,075 | ) | (1,003 | ) | ||||||||||||
Taxes other than income taxes
|
(1,354 | ) | | | | | |||||||||||||||
Changes in current assets and liabilities
|
$ | 601 | $ | 2,224 | $ | (2,997 | ) | $ | (1,070 | ) | $ | 98 | |||||||||
F-22
Three Months
Year Ended December 31,
Ended March 31,
2003
2004
2005
2005
2006
$
20,283
$
17,110
$
17,778
$
4,414
$
4,743
191
74
47
11
60
8. | INCOME TAXES |
Year Ended | |||||||||||||
December 31, | |||||||||||||
2003 | 2004 | 2005 | |||||||||||
Current
|
$ | 191 | $ | 74 | $ | 47 | |||||||
Deferred
|
(158 | ) | (7 | ) | 67 | ||||||||
Income tax expense
|
$ | 33 | $ | 67 | $ | 114 | |||||||
9. | EMPLOYEE BENEFIT PLANS |
| the 2000 Long-Term Incentive Plan (the LTIP) under which Valero GP Holdings may award up to 250,000 common units of Valero L.P. to certain key employees of Valero Energys affiliates providing services to Valero L.P. and to directors and officers of Valero GP Holdings. Awards under the LTIP can include unit options, restricted common units, distribution equivalent rights (DERs) and contractual rights to receive common units of Valero L.P. |
F-23
| the 2002 Unit Option Plan (the UOP) under which Valero GP Holdings may award up to 200,000 unit options of Valero L.P. to officers and directors of Valero GP Holdings or its affiliates. | |
| the 2003 Employee Unit Incentive Plan (the UIP) under which Valero GP Holdings may award up to 500,000 common units of Valero L.P. to employees of Valero GP Holdings or its affiliates, excluding officers and directors of Valero GP Holdings and its affiliates. Awards under the UIP can include unit options, unit appreciation rights, restricted units, performance awards, unit compensation and other unit-based awards. |
Year Ended December 31, | |||||||||||||||||||||||||
2003 | 2004 | 2005 | |||||||||||||||||||||||
Granted | Vesting | Granted | Vesting | Granted | Vesting | ||||||||||||||||||||
LTIP:
|
|||||||||||||||||||||||||
Contractual rights
|
30,000 | 1/3 per year | | | | | |||||||||||||||||||
Unit options
|
28,625 | 1/5 per year | | | 25,075 | 1/5 per year | |||||||||||||||||||
Restricted units
|
2,280 | 1/5 per year | 9,425 | 1/5 per year | 14,920 | 1/5 per year | |||||||||||||||||||
Restricted units
|
| | 579 | 1/3 per year | 1,340 | 1/3 per year | |||||||||||||||||||
UOP
|
32,000 | 1/5 per year | 23,775 | 1/5 per year | 14,925 | 1/5 per year | |||||||||||||||||||
UIP:
|
|||||||||||||||||||||||||
Unit options
|
| | 49,575 | 1/5 per year | 128,300 | 1/5 per year | |||||||||||||||||||
Restricted units
|
1,440 | 1/5 per year | 2,680 | 1/5 per year | 31,800 | 1/5 per year |
F-24
F-25
Kaneb Services
LLC Historical
As Adjusted
KSL
Valero L.P.
KPP
Valero L.P.
(Six Months
Merger
Pro Forma
Merger
Pro Forma
Valero L.P.
Ended June 30,
Pro Forma
after KSL
Pro Forma
Combined
Historical
2005)(a)
Adjustment
Merger
Adjustments
with Kaneb
(Thousands of dollars, except unit and per unit data)
$
659,557
$
348,902
$
$
1,008,459
$
(2,797
)(d)
$
1,005,662
229,806
171,551
401,357
401,357
184,609
87,641
272,250
272,250
26,553
38,975
65,528
65,528
64,895
24,649
89,544
4,636
(e)
94,180
42,000
42,000
42,000
505,863
364,816
870,679
4,636
875,315
153,694
(15,914
)
137,780
(7,433
)
130,347
2,319
2,319
2,797
(d)
5,116
(43,625
)
(22,397
)
946
(b)
(65,076
)
3,955
(f)
(61,121
)
112,388
(38,311
)
946
75,023
(681
)
74,342
2,158
2,158
(2,158
)(g)
(4,713
)
13,455
8,742
(h)
8,742
$
107,675
$
(22,698
)
$
946
$
85,923
$
(2,839
)
$
83,084
$
107,675
$
(22,698
)
$
946
$
85,923
$
(2,839
)
$
83,084
(10,758
)
(10,758
)
(3,053
)(i)
(13,811
)
$
96,917
$
(22,698
)
$
946
$
75,165
$
(5,892
)
$
69,273
$
2.76
$
1.48
35,023,250
35,023,250
11,786,696
(c)
46,809,946
F-26
(a)
KSLs historical statement of operations for the six months
ended June 30, 2005 has been adjusted on a pro forma basis
to reflect the elimination of the revenues and expenses of the
Held Separate Businesses, MOC and the Australia and New Zealand
Subsidiaries, as follows (in thousands):
Kaneb Services
Kaneb Services
Pro Forma
LLC Historical,
LLC Historical
Adjustments
As Adjusted
$
626,221
$
(277,319
)
$
348,902
405,165
(233,614
)
171,551
104,731
(17,090
)
87,641
40,897
(1,922
)
38,975
29,501
(4,852
)
24,649
42,000
42,000
622,294
(257,478
)
364,816
3,927
(19,841
)
(15,914
)
(23,671
)
1,274
(22,397
)
(19,744
)
(18,567
)
(38,311
)
2,158
2,158
12,778
677
13,455
$
(4,808
)
$
(17,890
)
$
(22,698
)
(b) | To reflect a net reduction in interest expense of $946,000 calculated on a net reduction in borrowings of $22 million ($525 million of new term debt, less $455 million due to proceeds from the sale of the Held Separate Businesses, less $27 million due to proceeds from the sale of MOC and less $65 million due to proceeds from the sale of the Australia and New Zealand Subsidiaries), offset by the amortization of deferred debt issuance costs of $81,000. A 1/8% change in the interest rate associated with these borrowings would have a $13,750 effect on interest expense. |
(c) | To reflect the purchase of KPPs remaining 82% limited partner interest through an exchange of Valero L.P. common units. |
KPPs limited partner units outstanding as of June 30,
2005
|
28,327,590 | |||
Less: KSLs ownership of KPPs limited partner units
acquired by Valero L.P. in the KSL merger L.P. in the KSL merger
|
5,095,500 | |||
Number of KPP limited partner units exchanged for Valero L.P.
common units
|
23,232,090 | |||
Multiplied by the exchange ratio
|
1.0231 | (1) | ||
Number of Valero L.P. common units issued in the exchange
|
23,768,751 | |||
F-27
The following calculates the weighted average effect of the
common unit issuance for the year ended December 31, 2005:
23,768,751
181/365
11,786,696
(1) | Under the terms of the merger agreement with KPP, each unit of KPP was exchanged for 1.0231 Valero L.P. common units. |
(d) | To reclassify certain revenues as equity income from joint ventures of $2,797,000 for the six months ended June 30, 2005 in order to conform the financial statement presentation to that of Valero L.P. |
(e) | To record depreciation and amortization expense on the excess purchase price allocated to property and equipment and intangible assets (exclusive of the Held Separate Businesses and MOC). The pro forma adjustment to depreciation expense is $1,736,000 based on an estimated life of 25 years and no salvage value. The pro forma adjustment to amortization expense is $2,900,000 based on an estimated life of 10 years. |
(f) | To reflect interest expense reductions attributable to amortization of the $55 million excess of fair value over carrying value of Kanebs debt at June 30, 2005 (i.e., the fair value premium) of $3,955,000 for the six months ended June 30, 2005. For pro forma presentation purposes, the fair value premium associated with each Kaneb debt instrument assumed has been amortized from January 1, 2005 or the date of issuance of the debt, whichever is later, over the remaining term of the instrument using the effective interest method. If market rates underlying the fair value of each debt instrument were to increase 1/8%, the pro forma increase in interest expense would be $266,000 for the six months ended June 30, 2005. |
(g) | To eliminate the deduction from income representing the interest of outside non-controlling partners in KPP of $2,158,000 for the six months ended June 30, 2005. As a result of the Kaneb mergers, Valero L.P. owns 100% of KSLs and KPPs ownership interests. | |
(h) | The pro forma adjustments to the statement of income have not been tax-effected as the effect on income tax is not material. |
(i) | To reflect the adjustment to the general partners interest in income from continuing operations that has been calculated assuming quarterly distributions per limited partner unit of $0.855, which was declared and approved by Valero L.P.s board of directors on January 27, 2006. The general partners incentive distribution rights have been calculated as defined by Valero L.P.s partnership agreement. The income from continuing operations applicable to the general partner is reflected in the KPP merger pro forma adjustments to reflect the effect of both mergers. The following reflects the general partners total interest in the pro forma combined income from continuing operations for the year ended December 31, 2005 (in thousands): |
General partners 2% ownership interest in income from
continuing operations
|
$ | 1,615 | ||
General partners incentive distribution
|
12,196 | |||
Total general partner interest in income from continuing
operations
|
$ | 13,811 | ||
F-28
/s/ KPMG LLP |
F-29
/s/ ERNST & YOUNG LLP |
F-30
F-31
F-32
F-33
F-34
F-35
F-36
F-37
F-38
F-39
F-40
F-41
F-42
F-43
F-44
F-45
F-46
F-47
F-48
F-49
F-50
F-51
F-52
F-53
F-54
F-55
F-56
F-57
F-58
F-59
F-60
F-61
F-62
F-63
F-64
F-65
F-66
F-67
F-68
F-69
F-70
F-71
F-72
F-73
F-74
F-75
F-76
F-77
F-78
F-79
F-80
F-81
F-82
F-83
F-84
F-85
F-86
F-87
F-88
F-89
F-90
F-91
F-92
F-93
F-94
F-95
F-96
F-97
F-98
F-99
F-100
F-101
A-i
A-ii
A-iii
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
Table of Contents
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005
2005
2006
(unaudited)
$
2,845
$
3,184
$
174,576
$
1,294
$
87,258
178,605
217,608
232,618
55,341
60,671
181,450
220,792
407,194
56,635
147,929
252,363
126,075
181,450
220,792
659,557
56,635
274,004
229,806
114,218
40,413
46,338
125,538
11,644
50,613
24,196
31,960
59,071
8,041
20,457
64,609
78,298
184,609
19,685
71,070
1,427
782
7,197
746
2,860
6,110
10,539
19,356
2,757
5,700
7,537
11,321
26,553
3,503
8,560
26,267
33,149
64,895
8,732
24,189
98,413
122,768
505,863
31,920
218,037
83,037
98,024
153,694
24,715
55,967
2,416
1,344
2,319
378
1,206
(15,860
)
(20,950
)
(43,625
)
(5,829
)
(15,465
)
69,593
78,418
112,388
19,264
41,708
4,713
2,119
69,593
78,418
107,675
19,264
39,589
3,398
(138
)
69,593
78,418
111,073
19,264
39,451
(3,959
)
(5,927
)
(10,758
)
(1,476
)
(4,199
)
$
65,634
$
72,491
$
100,315
$
17,788
$
35,252
$
3.02
$
3.15
$
2.76
$
0.77
$
0.75
0.10
$
3.02
$
3.15
$
2.86
$
0.77
$
0.75
21,706,164
23,041,394
35,023,250
23,041,394
46,809,749
Table of Contents
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005
2005
2006
(unaudited)
$
69,593
$
78,418
$
111,073
$
19,264
$
39,451
26,267
33,149
66,667
8,732
24,189
4,283
(2,416
)
(1,344
)
(2,499
)
(378
)
(1,293
)
2,416
1,344
2,499
1,278
(7,299
)
(3,414
)
(2,678
)
250
2,093
(3,831
)
1,938
(39,397
)
1,280
31,738
(6,042
)
2,870
(1,098
)
(260
)
(11,475
)
(872
)
(3,412
)
9,849
(5,683
)
8,634
(828
)
(3,577
)
4,441
47
(259
)
(5,485
)
(6,679
)
4,091
3,339
54,604
(4,385
)
(27,314
)
644
264
(3,323
)
(2,393
)
(295
)
3,451
705
4,343
115
(1,997
)
106,108
108,503
186,430
15,300
57,052
(10,353
)
(9,701
)
(23,707
)
(1,425
)
(6,164
)
(21,208
)
(19,702
)
(44,379
)
(2,860
)
(9,428
)
(1,098
)
(500,973
)
(1,954
)
(411,176
)
(28,085
)
(12,827
)
(3,319
)
(1,512
)
454,109
46
26,836
68,628
387
29
2,433
246
992
(442,350
)
(58,511
)
(89,000
)
(6,239
)
39,935
247,297
25,000
43,000
746,472
4,000
34,000
(25,298
)
(15,468
)
(735,064
)
(466
)
(11,480
)
(65,916
)
(78,240
)
(127,789
)
(19,944
)
(43,950
)
(134,065
)
2,930
29,197
269,026
(520
)
1,118
10,006
(4,273
)
318,454
(49,590
)
(77,178
)
(16,410
)
(25,703
)
(345
)
(1,905
)
(17,788
)
402
19,907
(7,349
)
69,379
33,533
15,745
16,147
16,147
36,054
$
15,745
$
16,147
$
36,054
$
8,798
$
105,433
$
15,701
$
24,120
$
53,162
$
11,546
$
25,179
$
$
$
1,663
$
$
1,839
Table of Contents
Limited Partners
Accumulated
Common
Subordinated
Other
Total
General
Comprehensive
Partners
Units
Amount
Units
Amount
Partner
Income (Loss)
Equity
9,654,572
$
170,655
9,599,322
$
117,042
$
6,198
$
$
293,895
36,832
28,802
3,959
69,593
(34,559
)
(27,839
)
(3,518
)
(65,916
)
7,567,250
269,026
5,787
274,813
(3,809,750
)
(134,065
)
(2,857
)
(136,922
)
30,000
2,700
2,700
13,442,072
310,589
9,599,322
118,005
9,569
438,163
42,290
30,201
5,927
78,418
(30
)
(30
)
42,290
30,201
5,927
(30
)
78,388
(42,342
)
(30,238
)
(5,660
)
(78,240
)
13,442,072
310,537
9,599,322
117,968
9,836
(30
)
438,311
72,383
27,932
10,758
111,073
(1,238
)
(1,238
)
72,383
27,932
10,758
(1,238
)
109,835
(85,138
)
(31,773
)
(10,878
)
(127,789
)
23,768,355
1,451,225
29,197
1,480,422
37,210,427
1,749,007
9,599,322
114,127
38,913
(1,268
)
1,900,779
28,023
7,229
4,199
39,451
2,201
2,201
28,023
7,229
4,199
2,201
41,652
(31,816
)
(8,207
)
(3,928
)
(43,951
)
37,210,427
$
1,745,214
9,599,322
$
113,149
$
39,184
$
933
$
1,898,480
Table of Contents
1.
ORGANIZATION AND OPERATIONS
Organization
Operations
67 refined product terminal facilities providing approximately
58.2 million barrels of storage capacity;
8,389 miles of refined product pipelines, including
2,000 miles of anhydrous ammonia pipelines, with 21
associated terminals providing storage capacity of
4.7 million barrels;
854 miles of crude oil pipelines with 11 associated storage
tanks providing storage capacity of 1.7 million
barrels; and
60 crude oil storage tanks providing storage capacity of
12.5 million barrels.
Table of Contents
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
Use of Estimates
Cash and Cash Equivalents
Accounts Receivable, net
Table of Contents
Inventories
Property and Equipment
Goodwill and Intangible Assets
Investment in Joint Ventures
Table of Contents
Deferred Charges and Other Assets
deferred financing costs amortized over the life of the related
debt obligation using the effective interest method; and
deferred costs incurred in connection with acquiring a customer
contract, which will be amortized over the life of the contract.
Impairment of Long-Lived Assets
Taxes Other than Income Taxes
Income Taxes
Asset Retirement Obligations
Table of Contents
Environmental Remediation Costs
Product Imbalances
Revenue Recognition
Table of Contents
Income Allocation
Net Income per Unit Applicable to Limited Partners
Comprehensive Income
Risk Management Activities
New Accounting Pronouncements
Table of Contents
permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise
would require bifurcation,
clarifies which interest-only and principal-only strips are not
subject to the requirements of Statement No. 133,
establishes a requirement to evaluate interests in securitized
financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation,
clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives, and
amends Statement No. 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
Table of Contents
Reclassifications
3.
ACQUISITIONS
Kaneb Acquisition
Purchase Price Allocation
Table of Contents
$
509,307
1,451,249
10,532
779,707
181,618
$
2,932,413
$
602,910
1,443,289
762,872
58,000
65,342
$
2,932,413
Unaudited Pro Forma Information
we completed the Kaneb Acquisition on January 1, 2004;
we borrowed $525.0 million to purchase all of the
outstanding equity securities of KSL;
we issued approximately 23.8 million common units in
exchange for all of the outstanding common units of KPP;
we received a contribution from our general partner of
$29.2 million to maintain its 2% interest; and
the results of operations of Martin Oil LLC (a marketing
subsidiary of KSL), our Australian and New Zealand subsidiaries,
and certain assets we divested in conjunction with the Kaneb
Acquisition (Held Separate Businesses) are reported as
discontinued operations.
Table of Contents
Three Months Ended
Year Ended December 31,
March 31,
2004
2005
2005
2006
$
787,475
$
1,005,662
$
219,032
$
274,004
179,936
130,347
45,925
55,967
$
132,374
$
83,084
32,393
39,589
13,985
9,853
3,788
(138
)
$
146,359
$
92,937
$
36,181
$
39,451
$
2.52
$
1.48
$
0.61
$
0.75
0.29
0.21
0.08
$
2.81
$
1.69
$
0.69
$
0.75
Royal Trading Asphalt Terminals
Telfer Asphalt Terminal
South Texas Pipelines and Terminals
Table of Contents
Year Ended December 31, 2003
(Thousands of dollars,
except per unit data)
$
187,294
85,028
69,930
$
3.03
Crude Oil Storage Tanks
Shell Pipeline Interest
Southlake Refined Product Pipeline
Table of Contents
Paulsboro Refined Product Terminal
Purchase Price Allocations for 2003 Acquisitions
Property
and
Intangible
Equipment
Assets
Total
$
15,047
$
250
$
15,297
149,575
540
150,115
200,198
200,198
1,600
1,600
29,911
29,911
14,055
14,055
$
410,386
$
790
$
411,176
4.
DISPOSITIONS AND ASSETS AND LIABILITIES OF BUSINESSES HELD
FOR SALE
Sale of Held Separate Businesses
Sale of Martin Oil LLC
Table of Contents
Assets and Liabilities of Businesses Held for Sale
December 31, 2005
$
8,047
68,726
3,034
$
79,807
$
3,606
3,604
3,890
$
11,100
5.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended
December 31, 2005
$
2,265
(289
)
$
1,976
Table of Contents
6.
PROPERTY AND EQUIPMENT
December 31,
Estimated Useful
Lives
2004
2005
$
8,526
$
92,741
15 35 years
3,942
63,465
25 40 years
10,464
26,282
20 35 years
876,905
2,096,415
20 35 years
68,446
96,554
13,077
42,072
981,360
2,417,529
(196,361
)
(257,316
)
$
784,999
$
2,160,213
7.
INTANGIBLE ASSETS
December 31, 2004
December 31, 2005
Accumulated
Accumulated
Cost
Amortization
Cost
Amortization
$
$
$
58,000
$
(2,900
)
1,765
(348
)
1,765
(701
)
1,150
(192
)
1,150
(422
)
2,359
(39
)
2,359
(92
)
$
5,274
$
(579
)
$
63,274
$
(4,115
)
Table of Contents
8.
INVESTMENT IN JOINT VENTURES
December 31,
2004
2005
$
2,928
$
9,138
45,235
71,066
$
48,163
$
80,204
$
378
$
3,686
1,076
47,785
75,442
$
48,163
$
80,204
Year Ended December 31,
2003
2004
2005(a)
$
11,613
$
9,355
$
27,525
4,062
1,916
10,715
2,416
1,344
2,499
2,803
1,373
4,932
(a)
Revenues and net income reflect the amounts for the year ended
December 31, 2005. Our share of net income and
distributions related to investments in the joint ventures
acquired as part of the Kaneb Acquisition reflect amounts for
the six months ended December 31, 2005.
(b)
For 2005, our share of net income shown in the table includes
$0.2 million of income that is included in income from
discontinued operations in the consolidated statement of income.
Skelly-Belvieu Pipeline Company
ST Linden Terminals, LLC
Table of Contents
9.
ACCRUED LIABILITIES
December 31,
2004
2005
$
3,941
$
9,819
48
9,525
265
2,404
17,547
892
7,622
$
5,146
$
46,917
10.
LONG-TERM DEBT
December 31,
2004
2005
$
248,982
$
247,296
98,987
97,990
287,893
263,714
225,000
4,000
28,000
36,131
9,192
8,681
385,161
1,170,705
(990
)
(1,046
)
$
384,171
$
1,169,659
Table of Contents
$
1,046
611
660
713
265,901
854,881
1,123,812
46,893
$
1,170,705
6.05% Senior Notes
6.875% Senior Notes
7.75% and 5.875% Senior Notes
Table of Contents
$525 Million Term Loan Agreement
$400 Million Revolving Credit Agreement
Table of Contents
$175 Million Revolving Credit Facility
UK Term Loan
Credit Agreement Provisions
Port Authority of Corpus Christi Note Payable
Table of Contents
Interest Rate Swaps
11.
HEALTH, SAFETY AND ENVIRONMENTAL MATTERS
Table of Contents
December 31,
2004
2005
$
125
$
343
22,234
271
1,157
(3,137
)
(53
)
(3,097
)
9
$
343
$
17,509
December 31,
2004
2005
$
265
$
2,404
3,051
78
12,054
$
343
$
17,509
12.
COMMITMENTS AND CONTINGENCIES
Contingencies
Table of Contents
Table of Contents
Commitments
$
9,544
6,424
5,274
4,434
4,217
81,028
$
110,921
Table of Contents
13.
RISK MANAGEMENT ACTIVITIES
Interest Rate Risk
Concentration of Credit Risk
14.
RELATED PARTY TRANSACTIONS
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005(a)
2005
2006
$
178,605
$
217,608
$
234,485
$
55,341
$
60,671
24,196
31,960
60,921
8,041
20,457
6,110
10,539
19,356
2,757
5,700
(a)
The amounts reflected in the table include revenues and
operating expenses of $1,867 and $1,850, respectively, which are
included in income from discontinued operations in the
consolidated statement of income.
Table of Contents
Services Agreement
New Omnibus Agreement
Table of Contents
any business retained by Ultramar Diamond Shamrock Corporation
(UDS) as of April 16, 2001, the closing of our initial
public offering, or any business owned by Valero Energy at the
date of its acquisition of UDS on December 31, 2001;
any business with a fair market value of less than
$10 million;
any business acquired by Valero Energy in the future that
constitutes less than 50% of the fair market value of a larger
acquisition, provided we have been offered and declined the
opportunity to purchase the business; and
any newly constructed pipeline, terminalling or storage assets
that we have not offered to purchase at fair market value within
one year of construction.
Pipelines and Terminals Usage Agreement McKee,
Three Rivers and Ardmore
to transport in our crude oil pipelines at least 75% of the
aggregate volumes of crude oil shipped to the McKee, Three
Rivers and Ardmore refineries;
to transport in our refined product pipelines at least 75% of
the aggregate volumes of refined products shipped from the
McKee, Three Rivers and Ardmore refineries; and
to use our refined product terminals for terminalling services
for at least 50% of all refined products shipped from the McKee,
Three Rivers and Ardmore refineries.
Table of Contents
Crude Oil Storage Tank Agreements
Handling and Throughput Agreement,
dated March
2003, pursuant to which Valero Energy agreed to pay us a fee for
100% of crude oil and certain other feedstocks delivered to each
of the Corpus Christi West refinery, the Texas City refinery and
the Benicia refinery and to use our logistic assets for handling
all deliveries to these refineries. The throughput fees are
adjustable annually, generally based on 75% of the regional
consumer price index applicable to the location of each
refinery. The initial term of the handling and throughput
agreement is ten years, which may be extended by Valero Energy
for up to an additional five years.
Services and Secondment Agreements,
dated March
2003, pursuant to which Valero Energy agreed to provide
personnel to us who perform operating and routine maintenance
services related to the crude oil storage tank operations. The
annual reimbursement for those services is an aggregate
$3.5 million. The initial term of the services and
secondment agreements is ten years which we have the option to
extend for an additional five years. In addition to the fees we
have agreed to pay Valero Energy under the services and
secondment agreements, we are responsible for operating expenses
and specified capital expenditures related to the tank assets
that are not addressed in the services and secondment
agreements. These operating expenses and capital expenditures
include tank safety inspections, maintenance and repairs,
certain environmental expenses, insurance premiums and ad
valorem taxes.
Lease and Access Agreements,
dated March 2003,
pursuant to which Valero Energy leases to us the land on which
the crude oil storage tanks are located for an aggregate amount
of $0.7 million per year. The initial term of each lease is
25 years, subject to automatic renewal for successive
one-year periods thereafter. We may terminate any of these
leases upon 30 days notice after the initial term or at the
end of a renewal period. In addition, we may terminate any of
these leases upon 180 days notice prior to the expiration
of the current term if we cease to operate the crude oil storage
tanks or cease business operations.
South Texas Pipelines and Terminals Agreements
Terminalling Agreement,
dated March 2003, pursuant
to which Valero Energy agreed, during the initial period of five
years, to pay a terminalling fee for each barrel of refined
product stored or handled by or on behalf of Valero Energy at
the terminals, including an additive fee for gasoline additive
blended at the terminals. At the Houston Hobby Airport terminal,
Valero Energy agreed to pay a filtering fee for each barrel of
jet fuel stored or handled at the terminal.
Throughput Commitment Agreement,
dated March 2003,
pursuant to which Valero Energy agreed, for an initial period of
seven years:
to transport in the Houston and Valley pipeline systems an
aggregate of 40% of the Corpus Christi refineries gasoline
and distillate production but only if the combined throughput in
these pipelines is less than 110,000 barrels per day;
to transport in the Pettus to San Antonio refined product
pipeline 25% of the Three Rivers refinery gasoline and
distillate production and in the Pettus to Corpus Christi
refined product pipeline 90% of the Three Rivers refinery
raffinate production;
Table of Contents
to use the Houston asphalt terminal for an aggregate of 7% of
the asphalt production of the Corpus Christi refineries;
to use the Edinburg refined product terminal for an aggregate of
7% of the gasoline and distillate production of the Corpus
Christi refineries, but only if the throughput at this terminal
is less than 20,000 barrels per day; and
to use the San Antonio East terminal for 75% of the
throughput in the Pettus to San Antonio refined product
pipeline.
Hydrogen Tolling Agreement
Pittsburg Asphalt Terminal Throughput Agreement
Royal Trading Throughput Agreement
Corpus Christi North Beach Storage Facility Lease
Office Rental Agreement
Table of Contents
Other Agreements
15.
EMPLOYEE BENEFIT PLANS
Long-Term Incentive Plans
16.
PARTNERS EQUITY, ALLOCATIONS OF NET INCOME AND CASH
DISTRIBUTIONS
Partners Equity
Table of Contents
March 2003 Common Unit Offering
Redemption of Common Units and Amendment to Partnership
Agreement
August 2003 Common Unit Offering
Allocations of Net Income
Table of Contents
Cash Distributions
Percentage of Distribution
Quarterly Distribution Amount per Unit
Unitholders
General Partner
98
%
2
%
90
%
10
%
75
%
25
%
Three Months Ended
Years Ended December 31,
March 31,
2003
2004
2005
2005
2006
$
1,404
$
1,595
$
2,589
$
399
$
916
2,620
4,449
8,711
1,112
3,480
4,024
6,044
11,300
1,511
4,396
66,179
73,733
118,178
18,433
41,427
$
70,203
$
79,777
$
129,478
$
19,944
$
45,823
$
2.950
$
3.200
$
3.365
$
0.800
$
0.885
Subordinated Units
Table of Contents
17.
INCOME TAXES
Year Ended
December 31, 2005
$
430
430
892
3,391
4,283
$
4,713
December 31, 2005
$
17,827
14,509
418
(6,106
)
26,648
(40,224
)
$
(13,576
)
Table of Contents
18.
SEGMENT INFORMATION
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005
2005
2006
$
31,269
$
39,984
$
411,332
$
9,937
$
196,148
72,276
86,418
149,853
22,182
52,046
50,741
52,462
51,429
13,185
14,049
27,164
41,928
46,943
11,331
11,761
$
181,450
$
220,792
$
659,557
$
56,635
$
274,004
$
3,508
$
6,471
$
25,008
12,380
14,715
27,778
5,379
4,499
4,612
5,000
7,464
7,497
$
26,267
$
33,149
$
64,895
$
12,314
$
15,148
$
61,911
$
3,581
$
27,045
30,982
34,371
57,404
9,022
22,105
30,166
32,495
30,439
8,216
9,103
17,112
27,331
30,493
7,399
6,274
90,574
109,345
180,247
28,218
64,527
7,537
11,321
26,553
3,503
8,560
$
83,037
$
98,024
$
153,694
$
24,715
$
55,967
Table of Contents
Year Ended December 31,
2003
2004
2005
$
181,450
$
220,792
$
347,765
255,893
35,639
20,260
$
181,450
$
220,792
$
659,557
Three Months Ended
Year Ended December 31,
March 31,
2003
2004
2005(a)
2005
2006
$
30,790
$
39,306
$
46,382
$
9,790
$
11,019
69,910
83,912
89,731
21,035
24,356
50,741
52,462
51,429
13,185
13,535
27,164
41,928
46,943
11,331
11,761
$
178,605
$
217,608
$
234,485
$
55,341
$
60,671
(a)
The amounts reflected in the table include revenues of $1,867
which are included in income from discontinued operations in the
consolidated statement of income.
December 31,
2004
2005
$
800,491
$
1,904,154
210,756
83,916
12,322
105,168
$
812,813
$
2,303,994
Table of Contents
December 31,
March 31,
2004
2005
2006
$
145,966
$
1,701,782
$
1,587,257
347,008
1,286,571
1,293,179
127,668
123,698
123,320
209,919
204,580
202,991
830,561
3,316,631
3,206,747
other noncurrent assets)
26,946
50,361
116,433
$
857,507
$
3,366,992
$
3,323,180
(a)
Total assets of the refined product terminals segment include
the assets of the Australia and New Zealand Subsidiaries. We
sold these subsidiaries for approximately $65.0 million,
plus working capital adjustments.
Refined Product
Refined Product
Crude Oil
Terminals
Pipelines
Pipelines
Total
$
$
519
$
4,196
$
4,715
569,745
193,127
762,872
$
569,745
$
193,646
$
4,196
$
767,587
Year Ended December 31,
2003
2004
2005
$
62,927
$
41,148
$
761,099
176,956
12,009
748,392
2,656
3,275
561
200,198
1,056
1,860
2,781
$
442,737
$
57,488
$
1,514,693
19.
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Table of Contents
Kaneb
Pipe Line
Valero Logistics
Operating
Non-
Operations,
Partnership
Guarantor
Valero L.P.
Valero L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
$
44
$
196,481
$
622,669
$
240,741
$
(764,524
)
$
295,411
783,945
694,374
681,894
2,160,213
4,715
193,127
569,745
767,587
2,403,969
16,920
603,474
1,273,313
(4,297,676
)
15,087
58,899
73,986
228
8,677
771
60,119
69,795
$
2,404,241
$
1,025,825
$
2,114,415
$
2,884,711
$
(5,062,200
)
$
3,366,992
Liabilities and Partners Equity
$
502,194
$
50,252
$
40,341
$
377,325
$
(764,524
)
$
205,588
581,921
551,607
36,131
1,169,659
13,576
13,576
4,821
2,124
70,445
77,390
1,902,047
388,831
1,520,343
2,387,234
(4,297,676
)
1,900,779
$
2,404,241
$
1,025,825
$
2,114,415
$
2,884,711
$
(5,062,200
)
$
3,366,992
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Table of Contents
Kaneb
Pipe Line
Valero Logistics
Operating
Non-
Operations,
Partnership
Guarantor
Valero L.P.
Valero L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
Assets
$
43
$
165,827
$
629,927
$
131,330
$
(675,898
)
$
251,229
784,678
684,804
687,070
2,156,552
4,715
194,509
572,262
771,486
2,399,920
31,691
622,813
1,293,346
(4,347,770
)
15,102
58,692
73,794
228
9,202
722
59,967
70,119
$
2,400,191
$
1,011,215
$
2,132,775
$
2,802,667
$
(5,023,668
)
$
3,323,180
Liabilities and Partners Equity
$
502,644
$
36,687
$
37,634
$
243,674
$
(675,898
)
$
144,741
601,039
550,154
36,469
1,187,662
5,851
5,851
9,477
9,477
8,652
4,549
63,768
76,969
1,897,547
364,837
1,540,438
2,443,428
(4,347,770
)
1,898,480
$
2,400,191
$
1,011,215
$
2,132,775
$
2,802,667
$
(5,023,668
)
$
3,323,180
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Table of Contents
Kaneb
Valero
Pipe Line
Logistics
Operating
Non-
Valero
Operations,
Partnership
Guarantor
Valero L.P.
L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
$
$
234,444
$
57,400
$
368,495
$
(782
)
$
659,557
2,752
133,297
44,152
326,444
(782
)
505,863
(2,752
)
101,147
13,248
42,051
153,694
113,825
(192
)
38,462
40,392
(192,487
)
376
1,943
2,319
(27,870
)
(13,488
)
(2,267
)
(43,625
)
111,073
73,461
38,222
82,119
(192,487
)
112,388
4,713
4,713
111,073
73,461
38,222
77,406
(192,487
)
107,675
2,163
1,235
3,398
$
111,073
$
73,461
$
40,385
$
78,641
$
(192,487
)
$
111,073
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Kaneb
Valero
Pipe Line
Logistics
Operating
Non-
Operations,
Partnership
Guarantor
Valero L.P.
Valero L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
$
$
60,683
$
27,200
$
186,371
$
(250
)
$
274,004
450
33,398
19,729
164,710
(250
)
218,037
(450
)
27,285
7,471
21,661
55,967
39,901
301
19,339
21,213
(79,548
)
1,206
(7,630
)
(7,014
)
(821
)
(15,465
)
39,451
19,956
19,796
42,053
(79,548
)
41,708
2,119
2,119
39,451
19,956
19,796
39,934
(79,548
)
39,589
298
(436
)
(138
)
$
39,451
$
19,956
$
20,094
$
39,498
$
(79,548
)
$
39,451
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Table of Contents
Kaneb
Valero
Pipe Line
Logistics
Operating
Non-
Operations,
Partnership
Guarantor
Valero L.P.
Valero L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
$
111,073
$
73,461
$
40,385
$
78,641
$
(192,487
)
$
111,073
34,828
12,073
19,766
66,667
13,964
192
(38,462
)
(40,392
)
64,698
4,274
12,523
3,645
(11,752
)
8,690
129,311
121,004
17,641
46,263
(127,789
)
186,430
(47,568
)
(3,492
)
(17,026
)
(68,086
)
(522,456
)
850
20,633
(500,973
)
85,466
395,479
480,945
(3,377
)
(1,472
)
3,963
(886
)
(522,456
)
(50,945
)
82,824
397,614
3,963
(89,000
)
(127,789
)
(127,789
)
127,789
(127,789
)
746,472
746,472
(548,010
)
(123,668
)
(63,386
)
(735,064
)
29,197
29,197
491,737
(163,529
)
23,317
(351,525
)
8,346
5,623
(3,963
)
10,006
393,145
(84,510
)
(100,351
)
(409,288
)
123,826
(77,178
)
(345
)
(345
)
(14,451
)
114
34,244
19,907
10
16,041
96
16,147
$
10
$
1,590
$
114
$
34,340
$
$
36,054
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Table of Contents
Kaneb
Valero
Pipe Line
Logistics
Operating
Non-
Valero
Operations,
Partnership
Guarantor
Valero L.P.
L.P.
L.P.
L.P.
Subsidiaries(a)
Eliminations
Consolidated
$
39,451
$
19,956
$
20,094
$
39,498
$
(79,548
)
$
39,451
8,938
6,045
9,206
24,189
4,049
(286
)
(19,339
)
(20,017
)
35,593
(2,521
)
(10,292
)
(7,156
)
13,381
(6,588
)
40,979
18,316
(356
)
42,068
(43,955
)
57,052
(9,516
)
(611
)
(5,465
)
(15,592
)
(12,827
)
(12,827
)
68,628
68,628
(77
)
(1,654
)
4,211
(4,413
)
1,659
(274
)
(77
)
(23,997
)
3,600
58,750
1,659
39,935
(43,950
)
(43,950
)
(5
)
43,955
(43,950
)
34,000
34,000
(11,480
)
(11,480
)
3,048
91,657
(3,031
)
(91,674
)
(3,060
)
(221
)
667
(1,659
)
(4,273
)
(40,902
)
67,167
(3,252
)
(91,012
)
42,296
(25,703
)
(1,905
)
(1,905
)
61,486
(8
)
7,901
69,379
10
1,590
114
34,340
36,054
$
10
$
63,076
$
106
$
42,241
$
$
105,433
(a)
Non-guarantor subsidiaries are wholly owned by Valero L.P.,
Valero Logistics or KPOP.
Table of Contents
20.
QUARTERLY FINANCIAL DATA (UNAUDITED)
First
Second
Third
Fourth
Quarter
Quarter
Quarter(b)
Quarter
Total
(Thousands of dollars, except per unit data)
$
52,324
$
55,707
$
58,075
$
54,686
$
220,792
24,543
24,600
24,448
24,433
98,024
19,970
19,706
19,387
19,355
78,418
0.80
0.79
0.78
0.78
3.15
$
0.800
$
0.800
$
0.800
$
0.800
$
3.200
$
56,635
$
58,306
$
258,385
$
286,231
$
659,557
24,715
24,309
56,007
48,663
153,694
19,264
18,852
45,167
27,790
111,073
0.77
0.74
0.88
0.52
2.86
$
0.800
$
0.855
$
0.855
$
0.855
$
3.365
(a)
The significant increase in revenues, operating income and net
income beginning in the third quarter of 2005 is due primarily
to the Kaneb Acquisition as discussed in Note 3.
Acquisitions.
(b)
On December 13, 2005, we entered into a definitive
agreement to sell the Australia and New Zealand Subsidiaries. As
such, revenues and operating income differ from the reported
amounts disclosed in the
Form
10-Q
for the
period ended September 30, 2005 as the results of
operations for the Australia and New Zealand Subsidiaries have
been reclassified as income from discontinued operations.
Revenue and operating income reported in the
Form
10-Q
were
$263.5 million and $56.7 million, respectively, for
the three months ended September 30, 2005.
Table of Contents
/s/ KPMG LLP
Table of Contents
Six Months Ended
Year Ended December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
$
288,669
$
354,591
$
379,155
$
184,756
$
201,405
381,159
511,200
676,093
302,625
424,816
669,828
865,791
1,055,248
487,381
626,221
367,870
486,310
647,733
289,795
405,165
132,269
169,380
177,829
86,795
104,731
39,471
53,195
56,676
27,645
29,501
(609
)
24,468
28,402
36,231
13,697
40,897
42,000
563,469
737,287
918,469
417,932
622,294
106,359
128,504
136,779
69,449
3,927
3,664
365
336
93
313
(29,171
)
(39,576
)
(43,579
)
(21,349
)
(23,984
)
(3,282
)
77,570
89,293
93,536
48,193
(19,744
)
24,882
10,898
(2,585
)
(4,887
)
(3,251
)
(1,769
)
12,778
(52,639
)
(61,908
)
(65,933
)
(33,034
)
2,158
47,228
33,396
24,352
13,390
(4,808
)
(313
)
$
47,228
$
33,083
$
24,352
$
13,390
$
(4,808
)
$
4.13
$
2.89
$
2.07
$
1.15
$
(.41
)
(.03
)
$
4.13
$
2.86
$
2.07
$
1.15
$
(.41
)
$
4.02
$
2.84
$
2.03
$
1.12
$
(.41
)
(.03
)
$
4.02
$
2.81
$
2.03
$
1.12
$
(.41
)
Table of Contents
Table of Contents
Six Months Ended
Year Ended December 31,
June 30,
2002
2003
2004
2004
2005
(unaudited)
$
47,228
$
33,083
$
24,352
$
13,390
$
(4,808
)
39,471
53,195
56,676
27,645
29,501
42,000
(3,164
)
148
(483
)
(497
)
(889
)
52,639
61,908
65,933
33,034
(2,158
)
(24,882
)
(10,898
)
(609
)
3,105
1,683
(671
)
(230
)
(14,449
)
313
(559
)
1,468
(1,191
)
(792
)
1,334
(16,403
)
1,151
(25,292
)
(14,107
)
(2,114
)
(7,643
)
(4,766
)
(9,775
)
(8,780
)
(7,620
)
(165
)
7,639
17,135
15,270
(18,979
)
89,018
144,924
126,684
64,933
21,818
(468,477
)
(1,644
)
(41,853
)
(12,478
)
(10,034
)
(31,101
)
(44,747
)
(42,214
)
(17,340
)
(22,030
)
1,107
361
(1,388
)
2,684
(722
)
784
(498,110
)
(47,779
)
(81,383
)
(30,540
)
(31,280
)
756,087
291,377
52,001
17,923
39,690
(427,493
)
(388,051
)
(2,500
)
(2,000
)
(18,351
)
(20,473
)
(22,860
)
(11,134
)
(11,724
)
(52,827
)
(73,004
)
(78,732
)
(39,014
)
(39,727
)
(10,026
)
175,527
109,056
648
164
111
87
99
423,565
(80,931
)
(51,980
)
(34,138
)
(11,662
)
2,766
1,637
14,473
18,980
(5,042
)
255
(21,124
)
10,004
24,477
43,457
43,457
38,415
$
24,477
$
43,457
$
38,415
$
43,712
$
17,291
$
27,070
$
35,712
$
42,122
$
20,899
$
22,705
Table of Contents
Accumulated
Other
Shareholders
Comprehensive
Comprehensive
Investment
Income
Total
Income
$
34,428
$
(496
)
$
33,932
47,228
47,228
$
47,228
(18,954
)
(18,954
)
648
648
800
800
800
$
48,028
63,350
304
63,654
33,083
33,083
$
33,083
(21,306
)
(21,306
)
164
164
2,457
2,457
2,457
(331
)
(331
)
(331
)
$
35,209
75,291
2,430
77,721
24,352
24,352
$
24,352
(23,094
)
(23,094
)
587
587
753
753
753
36
36
36
$
25,141
77,136
3,219
80,355
(4,808
)
(4,808
)
$
(4,808
)
(5,923
)
(5,923
)
(596
)
(596
)
(596
)
18
18
18
(481
)
(481
)
$
(5,386
)
$
65,924
$
2,641
$
68,565
Table of Contents
1.
COMPANY ORGANIZATION
General
Valero L.P. Merger Agreement
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Table of Contents
Cash and Cash Equivalents
Inventories
Property and Equipment
Revenue and Income Recognition
Table of Contents
Sales of Securities by Subsidiaries
Foreign Currency Translation
Excess of Cost Over Fair Value of Net Assets of Acquired
Businesses
Environmental Matters
Asset Retirement Obligations
Table of Contents
Comprehensive Income
Income Taxes
Cash Distributions
Table of Contents
Earnings (Loss) Per Share
Derivative Instruments
Stock Option Plans
Table of Contents
Year Ended December 31,
2002
2003
2004
$
47,228
$
33,083
$
24,352
(49
)
(85
)
(178
)
$
47,179
$
32,998
$
24,174
$
4.13
$
2.86
$
2.07
$
4.03
$
2.86
$
2.06
$
4.02
$
2.81
$
2.03
$
3.92
$
2.80
$
2.02
Estimates
Table of Contents
Recent Accounting Pronouncements
3.
VALERO L.P. MERGER
Table of Contents
4.
PUBLIC OFFERING OF UNITS BY KPP
Table of Contents
$
10,898
320,008
53
(39,052
)
(107,746
)
(5,957
)
$
178,204
6.
PROPERTY AND EQUIPMENT
Estimated
December 31,
useful
life (years)
2003
2004
$
75,912
$
84,893
25 35
36,244
39,077
15 40
1,115,458
1,187,323
15 30
87,204
87,937
5 15
11,577
15,390
3 6
7,360
7,790
26,768
28,766
1,360,523
1,451,176
247,503
302,564
$
1,113,020
$
1,148,612
Table of Contents
7.
LONG-TERM DEBT
December 31,
2003
2004
$
16,500
$
14,000
2,112
3,033
54,169
95,669
250,000
250,000
250,000
250,000
29,243
40,770
34,284
35,513
$
636,308
$
688,985
Table of Contents
8.
RETIREMENT PLANS
9.
SHAREHOLDERS EQUITY
Common Shares
Issued and
Outstanding
11,242,746
73,091
11,315,837
206,628
11,522,465
169,863
11,692,328
11,692,328
Table of Contents
Table of Contents
10.
COMMITMENTS AND CONTINGENCIES
$
9,822
8,593
6,238
5,338
4,058
18,140
$
52,189
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
11.
BUSINESS SEGMENT DATA
Year Ended December 31,
Six Months Ended June 30,
2002
2003
2004
2004
2005
$
82,698
$
119,633
$
119,803
$
58,513
$
62,798
205,971
234,958
259,352
126,243
138,607
381,159
511,200
676,093
302,625
424,816
$
669,828
$
865,791
$
1,055,248
$
487,381
$
626,221
$
38,623
$
51,860
$
48,853
$
23,234
$
18,969
65,040
66,532
74,663
39,360
(17,533
)
4,692
12,233
17,262
7,910
11,370
(1,996
)
(2,121
)
(3,999
)
(1,055
)
(8,879
)
106,359
128,504
136,779
69,449
3,927
3,664
365
336
93
313
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
2002
2003
2004
2004
2005
(29,171
)
(39,576
)
(43,579
)
(21,349
)
(23,984
)
(3,282
)
$
77,570
$
89,293
$
93,536
$
48,193
$
(19,744
)
$
6,408
$
14,117
$
14,538
Year Ended December 31,
2002
2003
2004
32,368
38,089
41,232
695
989
906
$
39,471
$
53,195
$
56,676
Year Ended December 31,
2002
2003
2004
$
9,469
$
9,584
$
10,334
20,953
34,572
29,511
679
591
2,369
$
31,101
$
44,747
$
42,214
December 31,
June 30,
2002
2003
2004
2005
$
352,657
$
352,901
$
351,195
$
346,580
844,321
874,185
917,966
886,805
41,297
58,161
83,404
100,092
5,826
6,320
4,323
3,443
$
1,244,101
$
1,291,567
$
1,356,888
$
1,336,920
Table of Contents
Year Ended December 31,
2002
2003
2004
$
485,322
$
535,895
$
658,814
23,937
26,392
29,540
132,387
241,693
298,273
23,207
41,689
43,671
4,975
20,122
24,950
$
669,828
$
865,791
$
1,055,248
$
83,544
$
87,965
$
93,954
7,318
8,583
7,704
9,616
19,223
22,629
4,398
6,777
5,248
1,483
5,956
7,244
$
106,359
$
128,504
$
136,779
December 31,
2002
2003
2004
$
690,262
$
693,345
$
718,257
46,543
51,392
63,968
224,810
217,143
211,382
78,789
74,995
71,374
51,872
76,145
83,631
$
1,092,276
$
1,113,020
$
1,148,612
12.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK
Table of Contents
13.
QUARTERLY FINANCIAL DATA (unaudited)
Quarter Ended
March 31,
June 30,
September 30,
December 31,
$
218,469
$
218,654
$
214,592
$
214,076
$
33,724
$
32,705
$
32,251
$
29,824
$
16,559
(a)(b)
$
5,488
$
5,862
$
5,174
$
1.44
$
0.48
$
0.50
$
0.44
$
1.41
$
0.47
$
0.49
$
0.43
$
233,179
$
254,202
$
272,242
$
295,625
$
32,915
$
36,534
$
34,927
$
32,403
$
5,995
$
7,395
$
6,811
$
4,151
$
0.51
$
0.63
$
0.58
$
0.35
$
0.50
$
0.62
$
0.57
$
0.34
a)
Includes cumulative effect of change in accounting
principle adoption of new accounting standard for
asset retirement obligations of approximately $0.3 million.
b)
See Note 4 regarding gains on issuance of units by KPP.
Table of Contents
Table of Contents
Table of Contents
ARTICLE I Definitions
A-1
Definitions
A-9
Construction
A-9
ARTICLE II Organization
A-9
Formation
A-9
Name
A-9
Registered Office; Registered Agent; Principal Office; Other
Offices
A-10
Purposes and Business
A-10
Powers
A-10
Power of Attorney
A-10
Term
A-11
Title to Company Assets
A-11
Certain Undertakings Relating to the Separateness of the Company
A-12
ARTICLE III Rights
of Members
A-12
Members
A-12
Management of Business
A-13
Outside Activities of the Members
A-13
Rights of Members
A-13
ARTICLE IV Certificates;
Record Holders; Transfer of Interests; Redemption of Interests
A-14
Certificates
A-14
Mutilated, Destroyed, Lost or Stolen Certificates
A-14
Record Holders
A-14
Transfer Generally
A-15
Registration and Transfer of Interests
A-15
Restrictions on Transfers
A-15
Citizenship Certificates; Non-citizen Assignees
A-16
Redemption of Interests of Non-citizen Assignees
A-16
ARTICLE V Capital
Contributions and Issuance of Interests
A-17
Unit Split
A-17
Contributions by Initial Members
A-17
Interest and Withdrawal
A-17
Capital Accounts
A-18
Issuances of Additional Company Securities
A-19
Limitations on Issuance of Additional Company Securities
A-20
No Preemptive Rights
A-20
Splits and Combinations
A-20
Fully Paid and Non-Assessable Nature of Interests
A-21
ARTICLE VI Allocations
and Distributions
A-21
Allocations for Capital Account Purposes
A-21
Allocations for Tax Purposes
A-24
Table of Contents
Requirement of Distributions; Distributions to Record Holders
A-25
Distributions of Available Cash.
A-25
ARTICLE VII Management
and Operation of Business
A-26
Board of Directors
A-26
Certificate of Formation
A-29
Restrictions on the Board of Directors Authority
A-29
Officers
A-30
Outside Activities
A-31
Loans or Contributions from the Company or Group Members
A-31
Indemnification
A-32
Exculpation of Liability of Indemnitees
A-33
Resolution of Conflicts of Interest; Standards of Conduct and
Modification of Duties
A-33
Duties of Officers and Directors
A-34
Purchase or Sale of Company Securities
A-34
Registration Rights of the Initial Members and their Affiliates
A-34
Reliance by Third Parties
A-37
ARTICLE VIII Books,
Records, Accounting and Reports
A-37
Records and Accounting
A-37
Fiscal Year
A-37
Reports
A-37
ARTICLE IX Tax
Matters
A-38
Tax Returns and Information
A-38
Tax Elections
A-38
Tax Controversies
A-38
Withholding
A-38
ARTICLE X Dissolution
and Liquidation
A-38
Dissolution
A-38
Liquidator
A-39
Liquidation
A-39
Cancellation of Certificate of Formation
A-39
Return of Contributions
A-39
Waiver of Partition
A-40
Capital Account Restoration
A-40
Certain Prohibited Acts
A-40
ARTICLE XI Amendment
of Agreement; Meetings of Members; Record Date
A-40
Amendment of Limited Liability Company Agreement
A-40
Amendment Requirements
A-42
Unitholder Meetings
A-42
Notice of Meetings of Members
A-43
Record Date
A-43
Adjournment
A-43
Waiver of Notice; Approval of Meeting
A-43
Table of Contents
Quorum; Required Vote for Member Action; Voting for Directors
A-43
Conduct of a Meeting; Member Lists
A-44
Action Without a Meeting
A-44
Voting and Other Rights
A-44
Proxies and Voting
A-45
Notice of Member Business and Nominations
A-45
ARTICLE XII Merger
A-47
Authority
A-47
Procedure for Merger or Consolidation
A-47
Approval by Members of Merger or Consolidation
A-48
Certificate of Merger
A-49
Effect of Merger
A-49
Business Combination Limitations
A-49
ARTICLE XIII Right
to Acquire Interests
A-49
Right to Acquire Interests
A-49
ARTICLE XIV General
Provisions
A-50
Addresses and Notices
A-50
Further Action
A-51
Binding Effect
A-51
Integration
A-51
Creditors
A-51
Waiver
A-51
Counterparts
A-51
Applicable Law
A-51
Invalidity of Provisions
A-51
Consent of Members
A-51
Facsimile Signatures
A-51
Table of Contents
Table of Contents
(a) the sum of:
(i) all cash and cash equivalents of the Company on hand at
the end of such Quarter; and
(ii) all additional cash and cash equivalents of the
Company Group on hand on the date of determination of Available
Cash for such Quarter,
(b) less the amount of any cash reserves established by the
Board of Directors to:
(i) provide for the proper conduct of the business of the
Company (including reserves for future capital expenditures and
for anticipated future credit needs of the Company Group);
(ii) permit Riverwalk Logistics, L.P. to make capital
contributions to the MLP to maintain its 2% general partner
interest upon the issuance of partnership securities by the MLP;
(iii) comply with applicable law or any loan agreement,
security agreement, mortgage, debt instrument or other agreement
or obligation to which any Group Member is a party or by which
it is bound or its assets are subject; or
(iv) provide funds for distributions under Section 6.3
with respect to any one or more of the next four Quarters;
provided that disbursements made by a Group Member or cash
reserves established, increased or reduced after the end of such
Quarter but on or before the date of determination of Available
Cash with respect to such Quarter shall be deemed to have been
made, established, increased or reduced, for purposes of
determining Available Cash, within such Quarter if the Board of
Directors so determines.
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Table of Contents
(i) any Person or Group who acquired 20% or more of any
Outstanding Company Securities of any class then Outstanding
directly from the Company or its Affiliates;
(ii) any Person or Group who acquired 20% or more of any
Outstanding Company Securities of any class then Outstanding
directly or indirectly from a Person or Group described in
clause (i) provided that the Company shall have notified
such Person or Group in writing that such limitation shall not
apply; or
(iii) any Person or Group who acquired 20% or more of any
Company Securities issued by the company with the prior approval
of the Board of Directors.
Table of Contents
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Table of Contents
(a) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices: |
(i) all certificates, documents and other instruments (including this Agreement and the Certificate of Formation and all amendments or restatements hereof or thereof) that the Chief Executive Officer, President or Secretary, or the Liquidator, determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; | |
(ii) all certificates, documents and other instruments that the Chief Executive Officer, President or Secretary, or the Liquidator, determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; | |
A-10
(iii) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the Board of Directors or the Liquidator determines to be necessary or appropriate to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement; | |
(iv) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Member pursuant to, or other events described in, Articles IV or X; | |
(v) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Company Securities issued pursuant to Section 5.5; and | |
(vi) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Company pursuant to Article XII. | |
(b) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the Board of Directors or the Liquidator determines to be necessary or appropriate to (i) make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Members hereunder or is consistent with the terms of this Agreement or (ii) effectuate the terms or intent of this Agreement; provided, that when required by Section 11.2 or any other provision of this Agreement that establishes a percentage of the Members or of the Members of any class or series required to take any action, the Chief Executive Officer, President or Secretary, or the Liquidator, may exercise the power of attorney made in this Section 2.6(b) only after the necessary vote, consent or approval of the Members or of the Members of such class or series, as applicable. |
(c) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Member and the transfer of all or any portion of such Members Interest and shall extend to such Members heirs, successors, assigns and personal representatives. Each such Member hereby agrees to be bound by any representation made by the Chief Executive Officer, President or Secretary, or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Member, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Chief Executive Officer, President or Secretary, or the Liquidator, taken in good faith under such power of attorney. Each Member shall execute and deliver to the Chief Executive Officer, President or Secretary, or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as any of such Officers or the Liquidator, determines to be necessary or appropriate to effectuate this Agreement and the purposes of the Company. |
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(i) to obtain true and full information regarding the status of the business and financial condition of the Company; | |
(ii) promptly after becoming available, to obtain a copy of the Companys federal, state and local income tax returns for each year; | |
(iii) to have furnished to him a current list of the name and last known business, residence or mailing address of each Member; | |
(iv) to have furnished to him a copy of this Agreement and the Certificate of Formation and all amendments thereto, together with copies of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Formation and all amendments thereto have been executed; | |
(v) to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Member and that each Member has agreed to contribute in the future, and the date on which each became a Member; and | |
(vi) to obtain such other information regarding the affairs of the Company as is just and reasonable and consistent with the stated purposes of the written demand. | |
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(a) The appropriate Officers on behalf of the Company shall execute and deliver, and the Transfer Agent shall countersign a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate: |
(i) makes proof by affidavit, in form and substance satisfactory to the Company, that a previously issued Certificate has been lost, destroyed or stolen; | |
(ii) requests the issuance of a new Certificate before the Company has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim; | |
(iii) if requested by the Company, delivers to the Company a bond, in form and substance satisfactory to the Company, with surety or sureties and with fixed or open penalty as the Company may direct to indemnify the Company and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and | |
(iv) satisfies any other reasonable requirements imposed by the Company. | |
If a Member fails to notify the Company within a reasonable time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Interests represented by the Certificate is registered before the Company or the Transfer Agent receives such notification, the Member shall be precluded from making any claim against the Company or the Transfer Agent for such transfer or for a new Certificate. | |
(b) As a condition to the issuance of any new Certificate under this Section 4.2, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith. | |
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(i) The Board of Directors shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Member, at his last address designated on the records of the Company or the |
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Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Certificate evidencing the Redeemable Interests and that on and after the date fixed for redemption no further allocations or distributions to which the Member would otherwise be entitled in respect of the Redeemable Interests will accrue or be made. | |
(ii) The aggregate redemption price for Redeemable Interests shall be an amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Interests of the class to be so redeemed multiplied by the number of Interests of each such class included among the Redeemable Interests. The redemption price shall be paid, as determined by the Board of Directors, in cash or by delivery of a promissory note of the Company in the principal amount of the redemption price, bearing interest at the Prime Rate annually and payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date. | |
(iii) Upon surrender by or on behalf of the Member, at the place specified in the notice of redemption, of the Certificate evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank, the Member or his duly authorized representative shall be entitled to receive the payment therefor. | |
(iv) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Interests. | |
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(i) Solely for purposes of this Section 5.4, the Company shall be treated as owning directly its proportionate share (as determined by the Board of Directors based upon the provisions of the applicable Group Member Agreement or governing, organizational or similar documents) of all property owned by (x) any other Group Member that is classified as a partnership for federal income tax purposes and (y) any other partnership, limited liability company, unincorporated business or other entity or arrangement that is classified as a partnership for federal income tax purposes, of which a Group Member is, directly or indirectly, a partner. | |
(ii) All fees and other expenses incurred by the Company to promote the sale of (or to sell) an Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Members pursuant to Section 6.1. | |
(iii) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Company and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss. | |
(iv) Any income, gain or loss attributable to the taxable disposition of any Company property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Companys Carrying Value with respect to such property as of such date. | |
(v) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Company were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 5.4(d) to the Carrying Value of any Company property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, | |
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however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any method that the Board of Directors may adopt. | |
(vi) If the Companys adjusted basis in a depreciable or cost recovery property is reduced for federal income tax purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall, solely for purposes hereof, be deemed to be an additional depreciation or cost recovery deduction in the year such property is placed in service and shall be allocated among the Members pursuant to Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the same manner to the Members to whom such deemed deduction was allocated. | |
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(a) Net Income. After giving effect to the special allocations set forth in Section 6.1(d), Net Income for each taxable year and all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable year shall be allocated to the Unitholders in accordance with their respective Percentage Interests. | |
(b) Net Losses. After giving effect to the special allocations set forth in Section 6.1(d), Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated to the Unitholders in accordance with their respective Percentage Interests; provided that Net Losses shall not be allocated pursuant to this Section 6.1(b) to the extent that such allocation would cause any Unitholder to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account). | |
(c) Net Termination Gains and Losses. After giving effect to the special allocations set forth in Section 6.1(d), all items of income, gain, loss and deduction taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 6.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 6.1 and after all distributions of Available Cash provided under Section 6.4 have been made; provided, however, that solely for purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant to Section 10.3. | |
(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 5.4(d)), such Net Termination Gain shall be allocated among the Members in the following manner (and the Capital Accounts of the Members shall be increased by the amount so allocated in each of the following subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause): |
(A) First, to each Member having a deficit balance in its Capital Account, in the proportion that such deficit balance bears to the total deficit balances in the Capital Accounts of all Members, until each such Member has been allocated Net Termination Gain equal to any such deficit balance in its Capital Account; and | |
(B) Second, 100% to all Unitholders in accordance with their respective Percentage Interests. | |
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(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 5.4(d)), such Net Termination Loss shall be allocated among the Members in the following manner: |
(A) First, to the Unitholders, Pro Rata, until the Capital Account in respect of each Unit then Outstanding has been reduced to zero; and | |
(B) Second, the balance, if any, 100% to all Unitholders in accordance with their respective percentage Interests. | |
(d) Special Allocations. Notwithstanding any other provision of this Section 6.1, the following special allocations shall be made for such taxable period: |
(i) Company Minimum Gain Chargeback. Notwithstanding any other provision of this Section 6.1, if there is a net decrease in Company Minimum Gain during any Company taxable period, each Member shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 6.1(d), each Members Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d) with respect to such taxable period (other than an allocation pursuant to Section 6.1(d)(vi) and 6.1(d)(vii)). This Section 6.1(d)(i) is intended to comply with the Company Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. | |
(ii) Chargeback of Member Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Company taxable period, any Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d), each Members Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d), other than Section 6.1(d)(i) and other than an allocation pursuant to Section 6.1(d)(vi) and 6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith. | |
(iii) Intentionally left blank. | |
(iv) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i) or (ii). | |
(v) Gross Income Allocations. In the event any Member has a deficit balance in its Capital Account at the end of any Company taxable period in excess of the sum of (A) the amount such Member is required to restore pursuant to the provisions of this Agreement and (B) the amount such Member is deemed obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Member shall be specially allocated items of Company gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 6.1(d)(v) shall be made only if and to the extent that such Member would have a deficit balance in its Capital Account as adjusted after all other allocations provided for in this Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were not in this Agreement. | |
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(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Members in accordance with their respective Percentage Interests. If the Board of Directors determines that the Companys Nonrecourse Deductions should be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the Board of Directors is authorized, upon notice to the other Members, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements. | |
(vii) Member Nonrecourse Deductions. Member Nonrecourse Deductions for any taxable period shall be allocated 100% to the Member that bears the Economic Risk of Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, such Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss. | |
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of the Company in excess of the sum of (A) the amount of Company Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Members in accordance with their respective Percentage Interests. | |
(ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations. | |
(x) Curative Allocation. | |
(A) Notwithstanding any other provision of this Section 6.1, other than the Required Allocations, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss or deduction allocated to each Member pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Member under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this Section 6.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Company Minimum Gain and (2) Member Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Member Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section 6.1(d)(x)(A) shall only be made with respect to Required Allocations to the extent the Board of Directors reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Members. Further, allocations pursuant to this Section 6.1(d)(x)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the Board of Directors determines that such allocations are likely to be offset by subsequent Required Allocations. | |
(B) The Board of Directors shall, with respect to each taxable period, (1) apply the provisions of Section 6.1(d)(x)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 6.1(d)(x)(A) among the Members in a manner that is likely to minimize such economic distortions. | |
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(xi) Certain Allocations to Initial Members. Any deduction or loss attributable to losses, costs, damages, expenses and compliance costs suffered or incurred by the Company Group, which an Initial Member or an Affiliate (other than a Group Member) has funded or agreed to fund and which constitute Bond Indenture Indemnity Obligations, shall be allocated to such Initial Member. |
(i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Members in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Members in the same manner as its correlative item of book gain or loss is allocated pursuant to Section 6.1. | |
(ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Members in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 5.4(d)(i) or 5.4(d)(ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Members in a manner consistent with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Members in the same manner as its correlative item of book gain or loss is allocated pursuant to Section 6.1. | |
(iii) The Board of Directors shall apply the principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities. | |
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(i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into Company Securities, and the incurring of any other obligations; | |
(ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company; | |
(iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Company or the merger or other combination of the Company with or into another Person (the matters described in this clause (iii) being subject, however, to any prior approval that may be required by Section 7.3 and Article XII); | |
(iv) the use of the assets of the Company (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Company, its Subsidiaries and the MLP; subject to Section 7.6(a), the lending of funds to other Persons (including other Group Members); the repayment of obligations of the Company, its Subsidiaries and the MLP and the making of capital contributions to any member of the Company, its Subsidiaries and the MLP; | |
(v) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Company under contractual arrangements to all or particular assets of the Company); | |
(vi) the distribution of Company cash; | |
(vii) the selection and dismissal of officers, employees, agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring, the creation and operation of employee benefit plans, employee programs and employee practices; | |
(viii) the maintenance of insurance for the benefit of the Company Group, the Members and the Indemnitees; | |
(ix) the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships (including the acquisition of interests in, and the contributions of property to, any Group Member, the MLP and its Subsidiaries from time to time) subject to the restrictions set forth in Section 2.4; | |
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(x) the control of any matters affecting the rights and obligations of the Company, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or remediation, and the incurring of legal expense and the settlement of claims and litigation; | |
(xi) the indemnification of any Person against liabilities and contingencies to the extent permitted by law; | |
(xii) the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 4.6); | |
(xiii) unless restricted or prohibited by Section 5.6, the purchase, sale or other acquisition or disposition of Company Securities, or the issuance of additional options, rights, warrants and appreciation rights relating to Company Securities; | |
(xiv) the undertaking of any action in connection with the Companys participation in any Group Member; and | |
(xv) the entering into of agreements with any of its Affiliates to render services to a Group Member. | |
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(i) each member of the Board of Directors shall have one vote; | |
(ii) the presence at a meeting of the Board of Directors of a majority of the members of the Board of Directors shall constitute a quorum at any such meeting for the transaction of business; and | |
(iii) the act of a majority of the members of the Board of Directors present at a meeting of the Board of Directors at which a quorum is present shall be deemed to constitute the act of the Board of Directors. | |
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(a) an election to dissolve the Company by the Board of Directors that is approved by the holders of a Unit Majority; | |
(b) the sale, exchange or other disposition of all or substantially all of the assets and properties of the Company and the Companys Subsidiaries; or | |
(c) the entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Delaware Act. | |
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(a) The assets may be disposed of by public or private sale or by distribution in kind to one or more Members on such terms as the Liquidator and such Member or Members may agree. If any property is distributed in kind, the Member receiving the property shall be deemed for purposes of Section 10.3(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Members. The Liquidator may defer liquidation or distribution of the Companys assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Companys assets would be impractical or would cause undue loss to the Members. The Liquidator may distribute the Companys assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Members. | |
(b) Liabilities of the Company include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 10.2) and amounts to Members otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds. | |
(c) All property and all cash in excess of that required to discharge liabilities as provided in Section 10.3(b) shall be distributed to the Members in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 10.3(c)) for the taxable year of the Company during which the liquidation of the Company occurs (with such date of occurrence being determined pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable year (or, if later, within 90 days after said date of such occurrence). | |
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(i) a change in the name of the Company, the location of the principal place of business of the Company, the registered agent of the Company or the registered office of the Company; | |
(ii) admission, substitution, withdrawal or removal of Members in accordance with this Agreement; | |
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(iii) a change that the Board of Directors determines to be necessary or appropriate to qualify or continue the qualification of the Company as a limited liability company under the laws of any state or to ensure that the Group Members will not be treated as associations taxable as corporations or otherwise taxed as entities for federal income tax purposes; | |
(iv) a change that the Board of Directors determines (A) does not adversely affect the Members (including any particular class of Interests as compared to other classes of Interests) in any material respect, (B) to be necessary or appropriate to (1) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act) or (2) facilitate the trading of the Units (including the division of any class or classes of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed for trading, compliance with any of which the Board of Directors deems to be in the best interests of the Company and the Members, (C) to be necessary or appropriate in connection with action taken by the Board of Directors pursuant to Section 5.8 or (D) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement; | |
(v) a change in the fiscal year or taxable year of the Company and any other changes that the Board of Directors determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Company including, if the Board of Directors shall so determine, a change in the definition of Quarter and the dates on which distributions are to be made by the Company; | |
(vi) an amendment that is necessary, in the Opinion of Counsel, to prevent the Company or its Directors, Officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or plan asset regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; | |
(vii) subject to the terms of Section 5.6, an amendment that the Board of Directors determines to be necessary or appropriate in connection with the authorization of issuance of any class or series of Company Securities pursuant to Section 5.5; | |
(i) an amendment that the Board of Directors, in its sole discretion, determines to be necessary or appropriate to implement a defensive Unitholder rights plan similar to a shareholder rights plan, or poison pill, for corporations, including the issuance of a dividend of rights to each Unitholder that would become exercisable if any Person or Group acquires ownership in excess of a specified percentage of the Units or initiated a tender offer for in excess of that specified percentage percent of the Units. Each right will entitle Unitholders to purchase a fractional share of a new class of preferred units, which would convert into the right for Unitholders other than such Person or Group to purchase Units [at half of the then Current Market Price of the Units]. The rights issued pursuant to any such Unitholder rights plan must be redeemable by the Company for not more than $0.01 per right; |
(viii) any amendment expressly permitted in this Agreement to be made by the Board of Directors acting alone; | |
(ix) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 12.3; | |
(x) an amendment that the Board of Directors determines to be necessary or appropriate to reflect and account for the formation by the Company of, or investment by the Company in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Company of activities permitted by the terms of Section 2.4; | |
(xi) a merger or conveyance pursuant to Section 12.3(d); or | |
(xii) any other amendments substantially similar to the foregoing. | |
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(a) the names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; | |
(b) the name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the Surviving Business Entity); | |
A-47
(c) the terms and conditions of the proposed merger or consolidation; | |
(d) the manner and basis of exchanging or converting the rights or securities of, or interests in, each constituent business entity for, or into, cash, property, rights, or securities of or interests in, the Surviving Business Entity; and if any rights or securities of, or interests in, any constituent business entity are not to be exchanged or converted solely for, or into, cash, property, rights, or securities of or interests in, the Surviving Business Entity, the cash, property, rights, or securities of or interests in, any limited liability company or other business entity which the holders of such rights, securities or interests are to receive; | |
(e) a statement of any changes in the constituent documents or the adoption of new constituent documents (the certificate of formation or limited liability company agreement, articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; | |
(f) the effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 12.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of the certificate of merger, the effective time shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and | |
(g) such other provisions with respect to the proposed merger or consolidation that the Board of Directors determines to be necessary or appropriate. | |
A-48
(i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity to the extent they were of each constituent business entity; | |
(ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation; | |
(iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and | |
(iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. | |
A-49
A-50
A-51
DIAMOND SHAMROCK REFINING AND | |
MARKETING COMPANY | |
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
SIGMOR CORPORATION |
|
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
THE SHAMROCK PIPE LINE CORPORATION |
|
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
DIAMOND SHAMROCK REFINING COMPANY, L.P. | |
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
A-52
VALERO REFINING NEW ORLEANS, L.L.C. | |
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
VALERO REFINING COMPANY CALIFORNIA |
|
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
VALERO REFINING TEXAS, L.P. |
|
By: _______________________________________ | |
Name: _______________________________________ |
|
Title: _______________________________________ |
|
MEMBERS: |
|
All Members now and hereafter admitted as | |
Members of the Company, pursuant to powers | |
of attorney now and hereafter executed in | |
favor of, and granted and delivered to, the | |
Board of Directors. | |
A-53
No. [ ]
|
[ ] Units |
Dated: | ||||
Countersigned and Registered by: | Valero GP Holdings, LLC | |||
as Transfer Agent and Registrar | By: |
|
||
Name: |
|
|||
Title: |
|
EXHIBIT A-1
TEN COM
|
as tenants in common | UNIF GIFT/TRANSFERS MIN ACT | ||
TEN ENT
|
as tenants by the entireties |
---------------- Custodian
|
||
(Cust) (Minor) | ||||
JT TEN
|
as joint tenants with right of survivorship and not as tenants in common |
under Uniform Gifts/Transfers to CD
Minors Act -------------------- (State) |
EXHIBIT A-2
(Please print or typewrite name and address of Assignee) | (Please insert Social Security or other identifying number of Assignee) |
EXHIBIT A-3
Membership | Pre-Split | Post-Split | ||||||||||
Initial Members | Interest | Units | Units | |||||||||
Diamond Shamrock Refining and Marketing Company
|
0.51592085 | % | 5,159,209 | 21,926,636 | ||||||||
Sigmor Corporation
|
0.29466530 | % | 2,949,653 | 12,523,275 | ||||||||
The Shamrock Pipe Line Corporation
|
0.13529489 | % | 1,352,949 | 5,750,033 | ||||||||
Diamond Shamrock Refining Company, L.P.
|
0.05408899 | % | 540,890 | 2,298,782 | ||||||||
Valero Refining New Orleans, L.L.C.
|
0.00000999 | % | 100 | 425 | ||||||||
Valero Refining Company California
|
0.00000999 | % | 100 | 425 | ||||||||
Valero Refining Texas, L.P.
|
0.00000999 | % | 100 | 425 | ||||||||
1.00000000 | % | 10,000,000 | 42,500,000 | |||||||||
EXHIBIT B-1
II-1
II-2
II-3
II-4
II-5
II-6
II-7
II-8
II-9
Item 13.
Other Expenses of Issuance and Distribution.
$
50,759
47,938
150,000
*
*
*
*
*
$
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and Officers.
Table of Contents
Item 16.
Exhibits
Exhibit
Number
Description
Incorporated by Reference to the Following Document
1
.01*
Form of Underwriting Agreement
3
.01**
Certificate of Formation of UDS Logistics, LLC
3
.02**
Form of Amended and Restated Limited Liability Company Agreement
of Valero GP Holdings, LLC (included as Appendix A to the
Prospectus)
3
.03**
Certificate of Amendment of Certificate of Formation of
UDS Logistics, LLC
4
.01
Amended and Restated Certificate of Limited Partnership of
Valero L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.3
4
.02
Third Amended and Restated Agreement of Limited Partnership of
Valero L.P.
Valero L.P.s Quarterly Report on Form 10-Q for quarter
ended March 31, 2003 (File No. 001-16417),
Exhibit 3.1
4
.03
First Amendment to Third Amended and Restated Agreement of
Limited Partnership of Valero L.P.
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2003 (File No. 001-16417),
Exhibit 4.3
4
.04
Amendment No. 2 to Third Amended and Restated Agreement of
Limited Partnership of Valero L.P., dated as of July 1, 2005
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.01
4
.05
Certificate of Limited Partnership of Valero Logistics
Operations, L.P.
Registration Statement on Form S-1 (File No. 333-
43668), Exhibit 3.4
4
.06
Certificate of Amendment to Certificate of Limited Partnership
of Valero Logistics Operations, L.P.
Registration Statement on Form S-1 (File No. 333-
43668), Exhibit 3.5
4
.07
Second Amended and Restated Agreement of Limited Partnership of
Valero Logistics Operations, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.9
4
.08
Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Valero Logistics Operations, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.10
4
.09
Certificate of Limited Partnership of Riverwalk Logistics, L.P.
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 3.7
4
.10
Agreement of Limited Partnership of Riverwalk Logistics, L.P.
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 3.8
4
.11
First Amended and Restated Limited Partnership Agreement of
Riverwalk Logistics, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.16
4
.12
Certificate of Formation of Valero GP, LLC
Registration Statement on Form S-1 (File
No. 333-43668), Exhibit 3.9
4
.13
Certificate of Amendment to Certificate of Formation of Valero
GP, LLC
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.14
4
.14
First Amended and Restated LLC Agreement of Valero GP, LLC
Registration Statement on Form S-1 (File
No. 333-43668), Exhibit 3.10
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
4
.15
First Amendment to First Amended and Restated Limited Liability
Company Agreement of Valero GP, LLC
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.15
4
.16
Indenture, dated July 15, 2002, among Valero Logistics
Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The
Bank of New York, as Trustee, relating to Senior Debt Securities
Valero L.P.s Current Report on Form 8-K filed
July 15, 2002 (File No. 001-16417), Exhibit 4.1
4
.17
First Supplemental Indenture, dated as of July 15, 2002, to
Indenture dated July 15, 2002, in each case among Valero
Logistics Operations, L.P., as Issuer, Valero L.P., as
Guarantor, and The Bank of New York, as Trustee, relating to
6
7
/
8
% Senior Notes Due 2012
Valero L.P.s Current Report on Form 8-K filed
July 15, 2002 (File No. 001-16417), Exhibit 4.2
4
.18
Second Supplemental Indenture, dated as of March 18, 2003,
to Indenture dated July 15, 2002, as amended and
supplemented by a First Supplemental Indenture thereto dated as
of July 15, 2002, in each case among Valero Logistics
Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The
Bank of New York, as Trustee (including, form of global note
representing $250,000,000 6.05% Senior Notes due 2013)
Valero L.P.s Current Report on Form 8-K filed
May 9, 2003 (File No. 001-16417), Exhibit 4.1
4
.19
Third Supplemental Indenture, dated as of July 1, 2005, to
Indenture dated July 15, 2002, as amended and supplemented,
among Valero Logistics Operations, L.P.; Valero L.P.; Kaneb Pipe
Line Operating Partnership, L.P.; and The Bank of New York
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.02
4
.20
Indenture, dated as of February 21, 2002, between Kaneb
Pipe Line Operating Partnership, L.P. and JPMorgan Chase Bank
(Senior Debt Securities)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.03
4
.21
First Supplemental Indenture, dated as of February 21, 2002, to
Indenture dated as of February 21, 2002, between Kaneb Pipe Line
Operating Partnership, L.P. and JPMorgan Chase Bank (including
form of 7.750% Senior Unsecured Notes due 2012)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.04
4
.22
Second Supplemental Indenture, dated as of August 9, 2002
and effective as of April 4, 2002, to Indenture dated as of
February 21, 2002, as amended and supplemented, between Kaneb
Pipe Line Operating Partnership, L.P.; Statia Terminals Canada
Partnership; and JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.05
4
.23
Third Supplemental Indenture, dated and effective as of
May 16, 2003, to Indenture dated as of February 21, 2002,
as amended and supplemented, between Kaneb Pipe Line Operating
Partnership, L.P.; Statia Terminals Canada Partnership; and
JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.06
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
4
.24
Fourth Supplemental Indenture, dated and effective as of
May 27, 2003, to Indenture dated as of February 21,
2002, as amended and supplemented, between Kaneb Pipe Line
Operating Partnership, L.P. and JPMorgan Chase Bank (including
form of 5.875% Senior Unsecured Notes due 2013)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.07
4
.25
Fifth Supplemental Indenture, dated and effective as of
July 1, 2005, to Indenture dated as of February 21,
2002, as amended and supplemented, among Kaneb Pipe Line
Operating Partnership, L.P.; Valero L.P.; Valero Logistics
Operations, L.P.; and JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.08
4
.26**
Specimen certificate representing units of Valero GP Holdings,
LLC (included in Form of Amended and Restated Limited Liability
Company Agreement of Valero GP Holdings, LLC included as
Appendix A to the Prospectus)
4
.27*
Rights Agreement between Valero GP Holdings, LLC and
Computershare Investor Services, LLC
5
.01**
Opinion of Andrews Kurth LLP as to the legality of the
securities being registered
8
.01**
Opinion of Andrews Kurth LLP relating to tax matters
10
.01*
Form of Valero GP Holdings, LLC Credit Facility
10
.02
5-Year Revolving Credit Agreement dated as of December 20,
2004 among Valero Logistics Operations, L.P., Valero L.P., the
Lenders party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent, Suntrust Bank, as Syndication Agent, and
Barclays Bank PLC, Mizuho Corporate Bank Ltd., and Royal Bank of
Canada, as Co-Documentation Agents
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2004 (File No. 001-16417),
Exhibit 10.02
10
.03
First Amendment dated as of June 30, 2005 to 5-Year
Revolving Credit Agreement, dated as of December 20, 2004,
among Valero Logistics Operations, L.P.; Valero L.P.; JPMorgan
Chase Bank; and the Lenders party thereto
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 10.01
10
.04
5-Year Term Credit Agreement, dated as of July 1, 2005,
among Valero Logistics Operations, L.P.; Valero L.P.; JPMorgan
Chase Bank; and the Lenders party thereto
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 10.02
10
.05
Valero GP, LLC Amended and Restated 2003 Employee Unit Incentive
Plan
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2004 (File No. 001-16417),
Exhibit 10.03
10
.06
Valero GP, LLC Amended and Restated 2002 Unit Option Plan
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2004 (File No. 001-16417),
Exhibit 10.04
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.07
Valero GP, LLC Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Current Report on Form 8-K filed on
January 27, 2006 (File No. 001-16417),
Exhibit 10.01
10
.08
Form of Restricted Unit Agreement under the Valero GP, LLC
Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 (File No. 001-16417),
Exhibit 10.4
10
.09
Form of Unit Option Award Agreement under the Valero GP, LLC
Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 (File No. 001-16417),
Exhibit 10.6
10
.10
Valero GP, LLC Short-Term Incentive Plan
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 10.4
10
.11
Valero GP, LLC Intermediate-Term Incentive Plan
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 10.9
10
.12
Performance Award Agreement dated January 22, 2003 between
Curtis V. Anastasio and Valero Energy Corporation
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2003 (File No. 001-16417),
Exhibit 10.8
10
.13
Pipelines and Terminals Usage Agreement by and among Ultramar
Diamond Shamrock Corporation, Shamrock Logistics Operations,
L.P., Shamrock Logistics, L.P., Riverwalk Logistics, L.P. and
Shamrock Logistics GP, LLC, dated April 16, 2001
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 10.6
10
.14***
Amended and Restated Omnibus Agreement among Valero Energy
Corporation, Valero GP, LLC, Riverwalk Logistics, L.P., Valero
L.P. and Valero Logistics Operations, L.P., dated March 31,
2006.
10
.15***
Third Amended and Restated Services Agreement among Diamond
Shamrock Refining and Marketing Company, Valero Corporate
Services Company; Valero L.P., Valero Logistics Operations,
L.P., Riverwalk Logistics, L.P.; and Valero GP, LLC, effective
as of January 1, 2006
10
.16
Operating Agreement by and between Shamrock Logistics
Operations, L.P. and Valero Pipeline Company, dated
January 1, 2002
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2001 (File No. 001-16417),
Exhibit 10.13
10
.17
Contribution Agreement by and among Valero Refining
Company--California, Riverwalk Holdings, LLC, Valero L.P.,
Valero GP, Inc. and Valero Logistics Operations, L.P. dated as
of March 6, 2003
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2002 (File No. 001-16417),
Exhibit 10.13
10
.18
Contribution Agreement by and among Valero Refining
Company--Texas, L.P., UDS Logistics, LLC, Valero L.P., Valero
GP, Inc. and Valero Logistics Operations, L.P. dated as of
March 6, 2003
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2002 (File No. 001-16417),
Exhibit 10.14
10
.19
Contribution Agreement by and among Valero Pipeline Company, UDS
Logistics, LLC, Valero L.P., Valero GP, Inc. and Valero
Logistics Operations, L.P. dated as of March 6, 2003
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2002 (File No. 001-16417), Exhibit 10.15
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.20
Handling and Throughput Agreement between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.1
10
.21
Amendment Number One to the Handling and Throughput Agreement
between Valero Marketing and Supply Company and Valero Logistics
Operations, L.P., effective as of April 27, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.3
10
.22
Services and Secondment Agreement between Valero Refining-Texas,
L.P. and Valero Logistics Operations, L.P., dated as of March
18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.3
10
.23
Services and Secondment Agreement between Valero Refining
Company-California and Valero Logistics Operations, L.P., dated
as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.2
10
.24
Throughput Commitment Agreement by and among Valero Marketing
and Supply Company, Valero Logistics Operations, L.P. and Valero
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.4
10
.25
Terminalling Agreement (Edinburg) between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.5
10
.26
Terminalling Agreement (Houston Asphalt) between Valero
Marketing and Supply Company and Valero Logistics Operations,
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.6
10
.27
Terminalling Agreement (Hobby Airport) between Valero Marketing
and Supply Company and Valero Logistics Operations, L.P., dated
as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.7
10
.28
Terminalling Agreement (Placedo) between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.8
10
.29
Terminalling Agreement (San Antonio East) between Valero
Marketing and Supply Company and Valero Logistics Operations,
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.9
10
.30
Terminal Storage and Throughput Agreement between Valero
Marketing and Supply Company and Valero Logistics Operation,
L.P. effective as of January 15, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.2
10
.31
Terminal Agreement (Corpus Christi Crude Terminal) between
Valero Marketing Supply Company and Valero Logistics Operation,
L.P. effective as of January 1, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.4
10
.32***
Form of Administration Agreement between Valero GP Holdings, LLC
and Valero GP, LLC
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.33***
Form of Non-Compete Agreement between Valero GP Holdings, LLC,
Valero L.P., Riverwalk Logistics, L.P. and Valero GP, LLC
10
.34**
Valero GP Holdings, LLC Long-Term Incentive Plan
10
.35**
Second Amendment to 5-Year Revolving Credit Agreement among
Valero Logistics Operations, L.P., Valero L.P., JPMorgan Chase
Bank, N.A. and the Lenders party thereto, dated as of
May 15, 2006
10
.36**
First Amendment to 5-Year Term Credit Agreement among Valero
Logistics Operations, L.P., Valero L.P., JPMorgan Chase Bank,
N.A. and the Lenders party thereto, dated as of May 15, 2006
10
.37**
Second Amendment to 5-Year Term Credit Agreement among Valero
Logistics Operations, L.P., Valero L.P., JPMorgan Chase Bank,
N.A. and the Lenders party thereto, dated as of May 31, 2006
10
.38**
Third Amendment to 5-Year Revolving Credit Agreement among
Valero Logistics Operations, L.P., Valero L.P., JPMorgan Chase
Bank, N.A. and the Lenders party thereto, dated as of
May 31, 2006
21
.01**
List of Subsidiaries of Valero GP Holdings, LLC
23
.01**
Consent of KPMG LLP, dated June 14, 2006
23
.02**
Consent of Andrews Kurth LLP (contained in Exhibit 5.01 and
Exhibit 8.01)
23
.03**
Consent of Ernst & Young LLP, dated June 14, 2006
24
.01
Powers of Attorney (included on signature page to this
registration statement)
*
To be filed by amendment.
**
Filed herewith.
***
Previously filed.
Item 17.
Undertakings
Table of Contents
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Table of Contents
Valero GP Holdings, LLC
By:
/s/ Curtis V. Anastasio
Curtis V. Anastasio
President and Chief Executive Officer
Name
Title
Date
*
Chairman of the Board
June 15, 2006
*
President and Chief Executive Officer
June 15, 2006
*
Senior Vice President, Chief Financial Officer and Treasurer
June 15, 2006
*
Vice President and Controller
June 15, 2006
*By:
/s/ Bradley C. Barron
Attorney-in-Fact
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
1
.01*
Form of Underwriting Agreement
3
.01**
Certificate of Formation of UDS Logistics, LLC
3
.02**
Form of Amended and Restated Limited Liability Company Agreement
of Valero GP Holdings, LLC (included as Appendix A to the
Prospectus)
3
.03**
Certificate of Amendment of Certificate of Formation of
UDS Logistics, LLC
4
.01
Amended and Restated Certificate of Limited Partnership of
Valero L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.3
4
.02
Third Amended and Restated Agreement of Limited Partnership of
Valero L.P.
Valero L.P.s Quarterly Report on Form 10-Q for quarter
ended March 31, 2003 (File No. 001-16417),
Exhibit 3.1
4
.03
First Amendment to Third Amended and Restated Agreement of
Limited Partnership of Valero L.P.
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2003 (File No. 001-16417),
Exhibit 4.3
4
.04
Amendment No. 2 to Third Amended and Restated Agreement of
Limited Partnership of Valero L.P., dated as of July 1, 2005
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.01
4
.05
Certificate of Limited Partnership of Valero Logistics
Operations, L.P.
Registration Statement on Form S-1 (File No. 333-
43668), Exhibit 3.4
4
.06
Certificate of Amendment to Certificate of Limited Partnership
of Valero Logistics Operations, L.P.
Registration Statement on Form S-1 (File No. 333-
43668), Exhibit 3.5
4
.07
Second Amended and Restated Agreement of Limited Partnership of
Valero Logistics Operations, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.9
4
.08
Second Amendment to Second Amended and Restated Agreement of
Limited Partnership of Valero Logistics Operations, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.10
4
.09
Certificate of Limited Partnership of Riverwalk Logistics, L.P.
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 3.7
4
.10
Agreement of Limited Partnership of Riverwalk Logistics, L.P.
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 3.8
4
.11
First Amended and Restated Limited Partnership Agreement of
Riverwalk Logistics, L.P.
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.16
4
.12
Certificate of Formation of Valero GP, LLC
Registration Statement on Form S-1 (File
No. 333-43668), Exhibit 3.9
4
.13
Certificate of Amendment to Certificate of Formation of Valero
GP, LLC
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.14
4
.14
First Amended and Restated LLC Agreement of Valero GP, LLC
Registration Statement on Form S-1 (File
No. 333-43668), Exhibit 3.10
4
.15
First Amendment to First Amended and Restated Limited Liability
Company Agreement of Valero GP, LLC
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2001 (File No. 001-16417),
Exhibit 3.15
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
4
.16
Indenture, dated July 15, 2002, among Valero Logistics
Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The
Bank of New York, as Trustee, relating to Senior Debt Securities
Valero L.P.s Current Report on Form 8-K filed
July 15, 2002 (File No. 001-16417), Exhibit 4.1
4
.17
First Supplemental Indenture, dated as of July 15, 2002, to
Indenture dated July 15, 2002, in each case among Valero
Logistics Operations, L.P., as Issuer, Valero L.P., as
Guarantor, and The Bank of New York, as Trustee, relating to
6
7
/
8
% Senior Notes Due 2012
Valero L.P.s Current Report on Form 8-K filed
July 15, 2002 (File No. 001-16417), Exhibit 4.2
4
.18
Second Supplemental Indenture, dated as of March 18, 2003,
to Indenture dated July 15, 2002, as amended and
supplemented by a First Supplemental Indenture thereto dated as
of July 15, 2002, in each case among Valero Logistics
Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The
Bank of New York, as Trustee (including, form of global note
representing $250,000,000 6.05% Senior Notes due 2013)
Valero L.P.s Current Report on Form 8-K filed
May 9, 2003 (File No. 001-16417), Exhibit 4.1
4
.19
Third Supplemental Indenture, dated as of July 1, 2005, to
Indenture dated July 15, 2002, as amended and supplemented,
among Valero Logistics Operations, L.P.; Valero L.P.; Kaneb Pipe
Line Operating Partnership, L.P.; and The Bank of New York
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.02
4
.20
Indenture, dated as of February 21, 2002, between Kaneb
Pipe Line Operating Partnership, L.P. and JPMorgan Chase Bank
(Senior Debt Securities)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.03
4
.21
First Supplemental Indenture, dated as of February 21, 2002, to
Indenture dated as of February 21, 2002, between Kaneb Pipe Line
Operating Partnership, L.P. and JPMorgan Chase Bank (including
form of 7.750% Senior Unsecured Notes due 2012)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.04
4
.22
Second Supplemental Indenture, dated as of August 9, 2002
and effective as of April 4, 2002, to Indenture dated as of
February 21, 2002, as amended and supplemented, between Kaneb
Pipe Line Operating Partnership, L.P.; Statia Terminals Canada
Partnership; and JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.05
4
.23
Third Supplemental Indenture, dated and effective as of
May 16, 2003, to Indenture dated as of February 21, 2002,
as amended and supplemented, between Kaneb Pipe Line Operating
Partnership, L.P.; Statia Terminals Canada Partnership; and
JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.06
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
4
.24
Fourth Supplemental Indenture, dated and effective as of
May 27, 2003, to Indenture dated as of February 21,
2002, as amended and supplemented, between Kaneb Pipe Line
Operating Partnership, L.P. and JPMorgan Chase Bank (including
form of 5.875% Senior Unsecured Notes due 2013)
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.07
4
.25
Fifth Supplemental Indenture, dated and effective as of
July 1, 2005, to Indenture dated as of February 21,
2002, as amended and supplemented, among Kaneb Pipe Line
Operating Partnership, L.P.; Valero L.P.; Valero Logistics
Operations, L.P.; and JPMorgan Chase Bank
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 4.08
4
.26**
Specimen certificate representing units of Valero GP Holdings,
LLC (included in Form of Amended and Restated Limited Liability
Company Agreement of Valero GP Holdings, LLC included as
Appendix A to the Prospectus)
4
.27*
Rights Agreement between Valero GP Holdings, LLC and
Computershare Investor Services, LLC
5
.01**
Opinion of Andrews Kurth LLP as to the legality of the
securities being registered
8
.01**
Opinion of Andrews Kurth LLP relating to tax matters
10
.01*
Form of Valero GP Holdings, LLC Credit Facility
10
.02
5-Year Revolving Credit Agreement dated as of December 20,
2004 among Valero Logistics Operations, L.P., Valero L.P., the
Lenders party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent, Suntrust Bank, as Syndication Agent, and
Barclays Bank PLC, Mizuho Corporate Bank Ltd., and Royal Bank of
Canada, as Co-Documentation Agents
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2004 (File No. 001-16417),
Exhibit 10.02
10
.03
First Amendment dated as of June 30, 2005 to 5-Year
Revolving Credit Agreement, dated as of December 20, 2004,
among Valero Logistics Operations, L.P.; Valero L.P.; JPMorgan
Chase Bank; and the Lenders party thereto
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 10.01
10
.04
5-Year Term Credit Agreement, dated as of July 1, 2005,
among Valero Logistics Operations, L.P.; Valero L.P.; JPMorgan
Chase Bank; and the Lenders party thereto
Valero L.P.s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2005 (File
No. 001-16417), Exhibit 10.02
10
.05
Valero GP, LLC Amended and Restated 2003 Employee Unit Incentive
Plan
Valero L.P.s Annual Report on Form 10-K for year ended
December 31, 2004 (File No. 001-16417),
Exhibit 10.03
10
.06
Valero GP, LLC Amended and Restated 2002 Unit Option Plan
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2004 (File No. 001-16417),
Exhibit 10.04
10
.07
Valero GP, LLC Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Current Report on Form 8-K filed on
January 27, 2006 (File No. 001-16417),
Exhibit 10.01
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.08
Form of Restricted Unit Agreement under the Valero GP, LLC
Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 (File No. 001-16417),
Exhibit 10.4
10
.09
Form of Unit Option Award Agreement under the Valero GP, LLC
Amended and Restated 2000 Long-Term Incentive Plan
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004 (File No. 001-16417),
Exhibit 10.6
10
.10
Valero GP, LLC Short-Term Incentive Plan
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 10.4
10
.11
Valero GP, LLC Intermediate-Term Incentive Plan
Registration Statement on Form S-1 (File No. 333- 43668),
Exhibit 10.9
10
.12
Performance Award Agreement dated January 22, 2003 between
Curtis V. Anastasio and Valero Energy Corporation
Valero L.P.s Annual Report on Form 10-K for year
ended December 31, 2003 (File No. 001-16417),
Exhibit 10.8
10
.13
Pipelines and Terminals Usage Agreement by and among Ultramar
Diamond Shamrock Corporation, Shamrock Logistics Operations,
L.P., Shamrock Logistics, L.P., Riverwalk Logistics, L.P. and
Shamrock Logistics GP, LLC, dated April 16, 2001
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2001 (File No. 001-16417),
Exhibit 10.6
10
.14***
Amended and Restated Omnibus Agreement among Valero Energy
Corporation, Valero GP, LLC, Riverwalk Logistics, L.P., Valero
L.P. and Valero Logistics Operations, L.P., dated March 31,
2006.
10
.15***
Third Amended and Restated Services Agreement among Diamond
Shamrock Refining and Marketing Company, Valero Corporate
Services Company, Valero L.P., Valero Logistics Operations,
L.P., Riverwalk Logistics, L.P., and Valero GP, LLC; effective
as of January 1, 2006.
10
.16
Operating Agreement by and between Shamrock Logistics
Operations, L.P. and Valero Pipeline Company, dated
January 1, 2002
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2001 (File No. 001-16417),
Exhibit 10.13
10
.17
Contribution Agreement by and among Valero Refining
Company--California, Riverwalk Holdings, LLC, Valero L.P.,
Valero GP, Inc. and Valero Logistics Operations, L.P. dated as
of March 6, 2003
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2002 (File No. 001-16417),
Exhibit 10.13
10
.18
Contribution Agreement by and among Valero Refining
Company--Texas, L.P., UDS Logistics, LLC, Valero L.P., Valero
GP, Inc. and Valero Logistics Operations, L.P. dated as of
March 6, 2003
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2002 (File No. 001-16417),
Exhibit 10.14
10
.19
Contribution Agreement by and among Valero Pipeline Company, UDS
Logistics, LLC, Valero L.P., Valero GP, Inc. and Valero
Logistics Operations, L.P. dated as of March 6, 2003
Valero L.P.s Annual Report on Form 10-K
for year ended December 31, 2002 (File No. 001-16417),
Exhibit 10.15
10
.20
Handling and Throughput Agreement between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.1
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.21
Amendment Number One to the Handling and Throughput Agreement
between Valero Marketing and Supply Company and Valero Logistics
Operations, L.P., effective as of April 27, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.3
10
.22
Services and Secondment Agreement between Valero Refining-Texas,
L.P. and Valero Logistics Operations, L.P., dated as of March
18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.3
10
.23
Services and Secondment Agreement between Valero Refining
Company-California and Valero Logistics Operations, L.P., dated
as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.2
10
.24
Throughput Commitment Agreement by and among Valero Marketing
and Supply Company, Valero Logistics Operations, L.P. and Valero
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.4
10
.25
Terminalling Agreement (Edinburg) between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.5
10
.26
Terminalling Agreement (Houston Asphalt) between Valero
Marketing and Supply Company and Valero Logistics Operations,
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.6
10
.27
Terminalling Agreement (Hobby Airport) between Valero Marketing
and Supply Company and Valero Logistics Operations, L.P., dated
as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.7
10
.28
Terminalling Agreement (Placedo) between Valero Marketing and
Supply Company and Valero Logistics Operations, L.P., dated as
of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.8
10
.29
Terminalling Agreement (San Antonio East) between Valero
Marketing and Supply Company and Valero Logistics Operations,
L.P., dated as of March 18, 2003
Valero L.P.s Quarterly Report on Form 10-Q for
quarter ended March 31, 2003 (File No. 001-16417),
Exhibit 10.9
10
.30
Terminal Storage and Throughput Agreement between Valero
Marketing and Supply Company and Valero Logistics Operation,
L.P. effective as of January 15, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.2
10
.31
Terminal Agreement (Corpus Christi Crude Terminal) between
Valero Marketing Supply Company and Valero Logistics Operation,
L.P. effective as of January 1, 2004
Valero L.P.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004 (File No. 001-16417),
Exhibit 10.4
10
.32***
Form of Administration Agreement between Valero GP Holdings, LLC
and Valero GP, LLC
10
.33***
Form of Non-Compete Agreement between Valero GP Holdings, LLC,
Valero L.P., Riverwalk Logistics, L.P. and Valero GP, LLC
Table of Contents
Exhibit
Number
Description
Incorporated by Reference to the Following Document
10
.34**
Valero GP Holdings, LLC Long-Term Incentive Plan
10
.35**
Second Amendment to 5-Year Revolving Credit Agreement among
Valero Logistics Operations, L.P., Valero L.P., JPMorgan Chase
Bank, N.A. and the Lenders party thereto, dated as of
May 15, 2006
10
.36**
First Amendment to 5-Year Term Credit Agreement among Valero
Logistics Operations, L.P., Valero L.P., JPMorgan Chase Bank,
N.A. and the Lenders party thereto, dated as of May 15, 2006
10
.37**
Second Amendment to 5-Year Term Credit Agreement among Valero
Logistics Operations, L.P., Valero L.P., JPMorgan Chase Bank,
N.A. and the Lenders party thereto, dated as of May 31, 2006
10
.38**
Third Amendment to 5-Year Revolving Credit Agreement among
Valero Logistics Operations, L.P., Valero L.P., JPMorgan Chase
Bank, N.A. and the Lenders party thereto, dated as of
May 31, 2006
21
.01**
List of Subsidiaries of Valero GP Holdings, LLC
23
.01**
Consent of KPMG LLP, dated June 14, 2006
23
.02**
Consent of Andrews Kurth LLP (contained in Exhibit 5.01 and
Exhibit 8.01)
23
.03**
Consent of Ernst & Young LLP, dated June 14, 2006
24
.01
Powers of Attorney (included on signature page to this
registration statement)
*
To be filed by amendment.
**
Filed herewith.
***
Previously filed.
STATE OF DELAWARE
SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 11 : 00 AM 06/06/2000 001286426 - 3206568 |
1. | The name of the Company is UDS Logistics, LLC. | ||
2. | The name and address of the registered agent of the Company shall be The Corporation Trust Company. 1209 Orange Street, Wilmington, Delaware 19801. | ||
3. | The address of the registered office of the Company in Delaware is 1209 Orange Street, Wilmington, Delaware 19801. |
State of Delaware
Secretary of State Division of Corporations Delivered 07:49 PM 01/19/2006 FILED 07:45 PM 01/19/2006 SRV 060055756 3206568 FILE |
1. | Name of Limited Liability Company: | |
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UDS Logistics, LLC | ||
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2. | The Certificate of Formation of the limited liability company is hereby amended as follows: | |
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The name of the Company is Valero GP Holdings, LLC. | ||
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By: | /s/ Joseph F. Varro, Jr. | ||
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Authorized Person(s) | |||
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Name: | Joseph F. Varro, Jr. | ||
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Print or Type | |||
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Authorized Person |
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600 Travis, Suite 4200
Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com |
-2-
-3-
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-8-
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3
4
VALERO LOGISTICS OPERATIONS, L.P. | ||||||||
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By: | Valero | GP, Inc., its General Partner | |||||
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By: | /s/ Steven A. Blank | ||||||
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Steven A. Blank | |||||||
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Senior Vice President and | |||||||
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Chief Financial Officer | |||||||
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VALERO L.P. | ||||||||
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By: |
Riverwalk
Partner |
Logistics, L.P., its General | |||||
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By: | Valero | GP, LLC, its General Partner | |||||
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By: | /s/ Steven A. Blank | ||||||
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Steven A. Blank | |||||||
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Senior Vice President and | |||||||
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Chief Financial Officer |
S-1
JPMORGAN CHASE BANK, N.A., individually and as
Administrative Agent |
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By: | /s/ Robert W. Traband | |||
Name: | Robert W. Traband | |||
Title: | Vice President |
S-2
SUNTRUST BANK, individually and as Syndication Agent
|
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By: | /s/ Peter Panos | |||
Name: | Peter Panos | |||
Title: | Vice President |
S-3
BARCLAYS BANK PLC, individually and as
Co-Documentation Agent |
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By: | /s/ Alison McGuigan | |||
Name: | Alison McGuigan | |||
Title: | Associate Director |
S-4
MIZUHO CORPORATE BANK (USA), individually and as
Co-Documentation Agent
|
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By: | /s/ Raymond Ventura | |||
Name: | Raymond Ventura | |||
Title: | Senior Vice President |
S-5
ROYAL BANK OF CANADA, individually and as
Co-Documentation Agent |
||||
By: | /s/ Don J. McKinnerney | |||
Name: | Don J. McKinnerney | |||
Title: | Authorized Signatory |
S-6
THE BANK OF TOKYO-MITSUBISHI,
LTD.,
individually and as Co-Managing Agent |
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By: | /s/ Kelton Glasscock | |||
Name: | Kelton Glasscock | |||
Title: | Vice President & Manager |
S-7
BANK OF AMERICA, N.A., individually and as
Co-Managing Agent |
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By: | /s/ Claire Liu | |||
Name: | Claire Liu | |||
Title: | Senior Vice President |
S-8
THE BANK OF NOVA SCOTIA, individually and as
Co-Managing Agent |
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By: | /s/ William E. Zarrett | |||
Name: | William E. Zarrett | |||
Title: | Managing Director |
S-9
BNP PARIBAS, individually and as
Co-Managing Agent |
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By: | /s/ Larry Robinson | |||
Name: | Larry Robinson | |||
Title: | Director | |||
By: | /s/ Greg Smothers | |||
Name: | Greg Smothers | |||
Title: | Vice President |
S-10
CITIBANK, N.A., individually and as
Co-Managing Agent |
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By: | /s/ Amy K. Pincu | |||
Name: | Amy K. Pincu | |||
Title: | Attorney-in-Fact |
S-11
THE ROYAL BANK OF SCOTLAND plc,
individually and as Co-Managing Agent |
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By: | /s/ Paul McDonagh | |||
Name: | Paul McDonagh | |||
Title: | Managing Director |
S-12
BAYERISCHE HYPO-UND VEREINSBANK
AG, NEW YORK BRANCH, individually and as Co-Managing Agent |
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By | ||||
Name: | ||||
Title: | ||||
By | ||||
Name: | ||||
Title: |
S-13
KEYBANK NATIONAL ASSOCIATION,
individually and as Co-Managing Agent |
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By: | /s/ Thomas Rajan | |||
Name: | Thomas Rajan | |||
Title: | Senior Vice President |
S-14
SUMITOMO MITSUI BANKING CORPORATION,
individually and as Co-Managing Agent |
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By: | /s/ David A. Buck | |||
Name: | David A. Buck | |||
Title: | Senior Vice President |
S-15
CALYON NEW YORK BRANCH, individually
and as Co-Managing Agent |
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By: | /s/ Bertrand Cordhomme | |||
Name: | Bertrand Cordhomme | |||
Title: | Director | |||
By: | /s/ Page Dillehunt | |||
Name: | Page Dillehunt | |||
Title: | Managing Director |
S-16
WELLS FARGO BANK, NATIONAL
ASSOCIATION, individually and as Co-Managing Agent |
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By: | /s/ Jo Ann Vasquez | |||
Name: | Jo Ann Vasquez | |||
Title: | Vice President |
S-17
LEHMAN BROTHERS BANK, FSB
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By: | /s/ Janine M. Shugan | |||
Name: | Janine M. Shugan | |||
Title: | Authorized Signatory |
S-18
UBS LOAN FINANCE LLC
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By: | /s/ Irja R. Otsa | |||
Name: | Irja R. Otsa | |||
Title: | Associate Director, Banking Products Services, US | |||
By: | /s/ Richard L. Tavrow | |||
Name: | Richard L. Tavrow | |||
Title: | Director, Banking Products Services, US |
S-19
COMPASS BANK
|
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By: | /s/ David G. Mills | |||
Name: | David G. Mills | |||
Title: | Senior Vice President |
S-20
BANK HAPOALIM B.M.
|
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By | ||||
Name: | ||||
Title: | ||||
By | ||||
Name: | ||||
Title: | ||||
S-21
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3
4
VALERO LOGISTICS OPERATIONS, L.P. | ||||||||
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By: | Valero GP, Inc., its General Partner | |||||||
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By: | /s/ Steven A. Blank | ||||||
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Steven A. Blank | |||||||
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Senior Vice President and | |||||||
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Chief Financial Officer | |||||||
VALERO L.P. | ||||||||
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By: | Riverwalk Logistics, L.P., its General Partner | |||||||
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By: | Valero GP, LLC, its General Partner | |||||||
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By: | /s/ Steven A. Blank | ||||||
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Steven A. Blank | |||||||
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Senior Vice President and | |||||||
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Chief Financial Officer |
S-1
JPMORGAN CHASE BANK, N.A., individually and as
Administrative Agent |
||||
By | /s/ Robert W. Traband | |||
Name: | Robert W. Traband | |||
Title: | Vice President |
S-2
BARCLAYS BANK PLC, individually and as Syndication
Agent |
||||
By: | /s/ Alison McGuigan | |||
Name: | Alison McGuigan | |||
Title: | Associate Director |
S-3
MIZUHO CORPORATE BANK, individually and as
Co-Documentation Agent |
||||
By | /s/ Raymond Ventura | |||
Name: | Raymond Ventura | |||
Title: | Senior Vice President |
S-4
ROYAL BANK OF CANADA, individually and as
Co-Documentation Agent |
||||
By | /s/ Don J. McKinnerney | |||
Name: | Don J. McKinnerney | |||
Title: | Authorized Signatory |
S-5
THE ROYAL BANK OF SCOTLAND, plc,
individually and as Co-Documentation Agent |
||||
By | /s/ Paul McDonagh | |||
Name: | Paul McDonagh | |||
Title: | Managing Director |
S-6
SCOTIABANC INC., individually and as Co-Documentation Agent | ||||
By | /s/ William E. Zarrett | |||
Name: | William E. Zarrett | |||
Title: | Managing Director |
S-7
SUNTRUST BANK, individually and as Co-Documentation Agent | ||||
By | /s/ Peter Panos | |||
Name: | Peter Panos | |||
Title: | Vice President |
S-8
THE BANK OF TOKYO-MITSUBISHI,
LTD.,
individually and as Managing Agent |
||||
By | /s/ Kelton Glasscock | |||
Name: | Kelton Glasscock | |||
Title: | Vice President & Manager |
S-9
BAYERISCHE HYPO-UND VEREINSBANK
AG, NEW YORK BRANCH, individually and as Managing Agent |
||||
By | ||||
Name: | ||||
Title: | ||||
By | ||||
Name: | ||||
Title: |
S-10
SUMITOMO MITSUI BANKING CORPORATION,
individually and as Managing Agent |
||||
By | /s/ David A. Buck | |||
Name: | David A. Buck | |||
Title: | Senior Vice President |
S-11
BANK OF AMERICA, N.A., individually and as
Co-Agent |
||||
By | /s/ Claire Liu | |||
Name: | Claire Liu | |||
Title: | Senior Vice President |
S-12
BNP PARIBAS, individually and as
Co-Agent |
||||
By | /s/ Larry Robinson | |||
Name: | Larry Robinson | |||
Title: | Director | |||
By | /s/ Greg Smothers | |||
Name: | Greg Smothers | |||
Title: | Vice President |
S-13
CALYON NEW YORK BRANCH, individually
and as Co-Agent |
||||
By | /s/ Bertrand Cordhomme | |||
Name: | Bertrand Cordhomme | |||
Title: | Director | |||
By | /s/ Page Dillehunt | |||
Name: | Page Dillehunt | |||
Title: | Managing Director |
S-14
CITIBANK, N.A., individually and as
Co-Agent |
||||
By | /s/ Amy K. Pincu | |||
Name: | Amy K. Pincu | |||
Title: | Attorney-in-fact |
S-15
WELLS FARGO BANK, NATIONAL
ASSOCIATION, individually and as Co-Agent |
||||
By | /s/ Jo Ann Vasquez | |||
Name: | Jo Ann Vasquez | |||
Title: | Vice President |
S-16
LEHMAN BROTHERS BANK, FSB
|
||||
By | /s/ Janine M. Shugan | |||
Name: | Janine M. Shugan | |||
Title: | Authorized Signatory |
S-17
UBS LOAN FINANCE LLC
|
||||
By: | /s/ Irja R. Otsa | |||
Name: | Irja R. Otsa | |||
Title: | Associate Director, Banking Products Services, US | |||
By: | /s/ Richard L. Tavrow | |||
Name: | Richard L. Tavrow | |||
Title: | Director, Banking Products Services, US |
S-18
BANK HAPOALIM B.M.
|
||||
By | ||||
Name: | ||||
Title: | ||||
By | ||||
Name: | ||||
Title: |
S-19
COMPASS BANK
|
||||
By | /s/ David G. Mills | |||
Name: | David G. Mills | |||
Title: | Senior Vice President | |||
S-20
ABR | Eurodollar | |||||||
Index Debt Ratings: | Spread | Spread | ||||||
Tier 1
|
||||||||
Greater than BBB or Baa2
|
0.00 | % | 0.400 | % | ||||
|
||||||||
Tier 2
|
||||||||
BBB or Baa2
|
0.00 | % | 0.550 | % | ||||
|
||||||||
Tier 3
|
||||||||
BBB- or Baa3
|
0.000 | % | 0.650 | % | ||||
|
||||||||
Tier 4
|
||||||||
BB+ or Ba1
|
0.000 | % | 0.800 | % | ||||
|
||||||||
Tier 5
|
||||||||
Less than BB+ or Ba1
|
0.000 | % | 0.950 | % |
2
3
4
5
6
7
VALERO LOGISTICS OPERATIONS, L.P. | |||||||||
|
|||||||||
By: | Valero GP, Inc., its General Partner | ||||||||
|
|||||||||
|
By: | /s/ | Steven A. Blank | ||||||
|
Steven A. Blank | ||||||||
|
Senior Vice President and | ||||||||
|
Chief Financial Officer | ||||||||
|
|||||||||
VALERO L.P. | |||||||||
|
|||||||||
By: | Riverwalk Logistics, L.P., its General Partner | ||||||||
|
|||||||||
By: | Valero GP, LLC, its General Partner | ||||||||
|
|||||||||
|
By: | /s/ | Steven A. Blank | ||||||
|
Steven A. Blank | ||||||||
|
Senior Vice President and | ||||||||
|
Chief Financial Officer |
S-1
JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent |
||||
By | /s/ Robert Traband | |||
Name: | Robert Traband | |||
Title: | Vice President |
S-2
BARCLAYS BANK PLC,
individually and as Syndication Agent |
||||
By | /s/ Peter Harrington | |||
Name: | Peter Harrington | |||
Title: | Director |
S-3
MIZUHO CORPORATE BANK,
individually and as Co-Documentation Agent |
||||
By | /s/ Raymond Ventura | |||
Name: | Raymond Ventura | |||
Title: | Deputy General Manager |
S-4
ROYAL BANK OF CANADA,
individually and as Co-Documentation Agent |
||||
By | /s/ Don J. McKinnerney | |||
Name: | Don J. McKinnerney | |||
Title: | Authorized Signatory |
S-5
THE ROYAL BANK OF SCOTLAND, plc,
individually and as Co-Documentation Agent |
||||
By | /s/ Matthew Main | |||
Name: | Matthew Main | |||
Title: | Managing Director |
S-6
SCOTIABANC INC.,
individually and as Co-Documentation Agent |
||||
By | /s/ William E. Zarrett | |||
Name: | William E. Zarrett | |||
Title: | Managing Director |
S-7
SUNTRUST BANK,
individually and as Co-Documentation Agent |
||||
By | /s/ Peter Panos | |||
Name: | Peter Panos | |||
Title: | Vice President |
S-8
THE BANK OF TOKYO-MITSUBISHI, LTD.,
individually and as Managing Agent |
||||
By | /s/ Kelton Glasscock | |||
Name: | Kelton Glasscock | |||
Title: | Vice President & Manager |
S-9
BAYERISCHE LANDESBANK, CAYMAN ISLANDS BRANCH
|
||||
By | /s/ Stephen Christenson | |||
Name: | Stephen Christenson | |||
Title: | First Vice President |
By | /s/ Norman McClave | |||
Name: | Norman McClave | |||
Title: | First Vice President |
S-10
SUMITOMO MITSUI BANKING CORPORATION,
individually and as Managing Agent |
||||
By | /s/ William M. Ginn | |||
Name: | William M. Ginn | |||
Title: | General Manager |
S-11
BANK OF AMERICA, N.A.,
individually and as Co-Agent |
||||
By | /s/ Claire Liu | |||
Name: | Claire Liu | |||
Title: | Senior Vice President |
S-12
BNP PARIBAS,
individually and as Co-Agent |
||||
By | /s/ Mark A. Cox | |||
Name: | Mark A. Cox | |||
Title: | Director |
By | /s/ Larry Robinson | |||
Name: | Larry Robinson | |||
Title: | Director |
S-13
S-14
CITIBANK, N.A.,
individually and as Co-Agent |
||||
By | /s/ Amy K. Pincu | |||
Name: | Amy K. Pincu | |||
Title: | Attorney-in-Fact |
S-15
WELLS FARGO BANK, NATIONAL ASSOCIATION,
individually and as Co-Agent |
||||
By | /s/ Jo Ann Vasquez | |||
Name: | Jo Ann Vasquez | |||
Title: | Vice President |
S-16
LEHMAN BROTHERS BANK, FSB
|
||||
By | /s/ Janine M. Shugan | |||
Name: | Janine M. Shugan | |||
Title: | Authorized Signatory |
S-17
UBS LOAN FINANCE LLC
|
||||
By: | /s/ Richard L. Tavrow | |||
Name: | Richard L. Tavrow | |||
Title: | Director, Banking Products Services, US |
By: | /s/ Irja R. Otsa | |||
Name: | Irja R. Otsa | |||
Title: | Associate Director, Banking Products Services, US |
S-18
S-19
COMPASS BANK | ||||
By | /s/ Payton K. Swope | |||
Name: | Payton K. Swope | |||
Title: | Vice President |
S-20
ABR | Eurodollar | Facility Fee | ||||||||||
Index Debt Ratings: | Spread | Spread | Rate | |||||||||
Tier 1
|
||||||||||||
Greater than BBB or Baa2
|
0.00 | % | 0.270 | % | 0.080 | % | ||||||
|
||||||||||||
Tier 2
|
||||||||||||
BBB or Baa2
|
0.00 | % | 0.400 | % | 0.100 | % | ||||||
|
||||||||||||
Tier 3
|
||||||||||||
BBB- or Baa3
|
0.000 | % | 0.500 | % | 0.125 | % | ||||||
|
||||||||||||
Tier 4
|
||||||||||||
BB+ or Ba1
|
0.000 | % | 0.575 | % | 0.175 | % | ||||||
|
||||||||||||
Tier 5
|
||||||||||||
Less than BB+ or Ba1
|
0.000 | % | 0.700 | % | 0.200 | % |
2
3
4
5
6
7
VALERO LOGISTICS OPERATIONS, L.P. | |||||||||
|
|||||||||
By: | Valero GP, Inc., its General Partner | ||||||||
|
|||||||||
|
By: | /s/ | Steven A. Blank | ||||||
|
Steven A. Blank | ||||||||
|
Senior Vice President and | ||||||||
|
Chief Financial Officer | ||||||||
|
|||||||||
VALERO L.P. | |||||||||
|
|||||||||
By: | Riverwalk Logistics, L.P., its General Partner | ||||||||
|
|||||||||
By: | Valero GP, LLC, its General Partner | ||||||||
|
|||||||||
|
By: | /s/ | Steven A. Blank | ||||||
|
Steven A. Blank | ||||||||
|
Senior Vice President and | ||||||||
|
Chief Financial Officer |
S-1
JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent |
||||
By | /s/ Robert Traband | |||
Name: | Robert Traband | |||
Title: | Vice President |
S-2
SUNTRUST BANK,
individually and as Syndication Agent |
||||
By | /s/ Peter Panos | |||
Name: | Peter Panos | |||
Title: | Vice President |
S-3
BARCLAYS BANK PLC,
individually and as Co-Documentation Agent |
||||
By | /s/ Peter Harrington | |||
Name: | Peter Harrington | |||
Title: | Director |
S-4
MIZUHO CORPORATE BANK (USA),
individually and as Co-Documentation Agent |
||||
By | /s/ Raymond Ventura | |||
Name: | Raymond Ventura | |||
Title: | Senior Vice President |
S-5
ROYAL BANK OF CANADA,
individually and as Co-Documentation Agent |
||||
By | /s/ Don J. McKinnerney | |||
Name: | Don J. McKinnerney | |||
Title: | Authorized Signatory |
S-6
THE BANK OF TOKYO-MITSUBISHI, LTD.,
individually and as Co-Managing Agent |
||||
By | /s/ Kelton Glasscock | |||
Name: | Kelton Glasscock | |||
Title: | Vice President & Manager |
S-7
BANK OF AMERICA, N.A.,
individually and as Co-Managing Agent |
||||
By | /s/ Clair Liu | |||
Name: | Claire Liu | |||
Title: | Senior Vice President |
S-8
THE BANK OF NOVA SCOTIA,
individually and as Co-Managing Agent |
||||
By | /s/ N. Bell | |||
Name: | N. Bell | |||
Title: | Senior Manager |
S-9
BNP PARIBAS,
individually and as Co-Managing Agent |
||||
By | /s/ Mark A. Cox | |||
Name: | Mark A. Cox | |||
Title: | Director |
By | /s/ Larry Robinson | |||
Name: | Larry Robinson | |||
Title: | Director |
S-10
CITIBANK, N.A.,
individually and as Co-Managing Agent |
||||
By | /s/ Amy Pincu | |||
Name: | Amy K. Pincu | |||
Title: | Attorney-in-Fact |
S-11
THE ROYAL BANK OF SCOTLAND plc,
individually and as Co-Managing Agent |
||||
By | /s/ Matthew Main | |||
Name: | Matthew Main | |||
Title: | Managing Director |
S-12
S-13
KEYBANK NATIONAL ASSOCIATION,
individually and as Co-Managing Agent |
||||
By | /s/ Thomas Rajan | |||
Name: | Thomas Rajan | |||
Title: | Senior Vice President |
S-14
SUMITOMO MITSUI BANKING CORPORATION,
individually and as Co-Managing Agent |
||||
By | /s/ William M. Ginn | |||
Name: | William M. Ginn | |||
Title: | General Manager |
S-15
S-16
WELLS FARGO BANK, NATIONAL ASSOCIATION,
individually and as Co-Managing Agent |
||||
By | /s/ Jo Ann Vasquez | |||
Name: | Jo Ann Vasquez | |||
Title: | Vice President |
S-17
LEHMAN BROTHERS BANK, FSB
|
||||
By | /s/ Janine M. Shugan | |||
Name: | Janine M. Shugan | |||
Title: | Authorized Signatory |
S-18
UBS LOAN FINANCE LLC
|
||||
By: | /s/ Richard L. Tavrow | |||
Name: | Richard L. Tavrow | |||
Title: | Director, Banking Products Services, US |
By: | /s/ Irja R. Otsa | |||
Name: | Irja R. Otsa | |||
Title: | Associate Director, Banking Products Services, US |
S-19
COMPASS BANK
|
||||
By | /s/ Payton K. Swope | |||
Name: | Payton K. Swope | |||
Title: | Vice President |
S-20
BANK HAPOALIM B.M.
|
||||
By | ||||
Name: | ||||
Title: |
By | ||||
Name: | ||||
Title: | ||||
S-21
Name of Entity
State of Incorporation/Organization
Delaware
Netherlands Antilles
Bermuda
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Netherlands
England
England
Mexico
Nova Scotia
Delaware
Name of Entity
State of Incorporation/Organization
Delaware
England
Netherlands Antilles
Netherlands Antilles
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Cayman Islands
Delaware
Netherlands Antilles
Nova Scotia
Nova Scotia
Nova Scotia
Curacao, NA
Delaware
Delaware
Name of Entity
State of Incorporation/Organization
Curacao, NA
Netherlands Antilles
Delaware
Netherlands Antilles
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Mexico
Delaware
Delaware