Document and Company Informatio
Document and Company Information (USD $) | |||
In Billions, except Share data | 6 Months Ended
Jun. 30, 2009 | Jul. 31, 2009
| Jun. 30, 2008
|
Document and Company Information [Abstract] | |||
Entity Registrant Name | VALERO ENERGY CORPORATION | ||
Entity Central Index Key | 0001035002 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-06-30 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | 21.6 | ||
Entity Common Stock, Shares Outstanding (actual number) | 562,761,441 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Millions | Jun. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and temporary cash investments | $1,623 | $940 |
Restricted cash | 141 | 131 |
Receivables, net | 4,217 | 2,897 |
Inventories | 4,561 | 4,637 |
Income taxes receivable | 27 | 197 |
Deferred income taxes | 132 | 98 |
Prepaid expenses and other | 472 | 550 |
Total current assets | 11,173 | 9,450 |
Property, plant and equipment, at cost | 29,688 | 28,103 |
Accumulated depreciation | (5,404) | (4,890) |
Property, plant and equipment, net | 24,284 | 23,213 |
Intangible assets, net | 221 | 224 |
Deferred charges and other assets, net | 1,543 | 1,530 |
Total assets | 37,221 | 34,417 |
Current liabilities: | ||
Current portion of debt and capital lease obligations | 137 | 312 |
Accounts payable | 5,840 | 4,446 |
Accrued expenses | 350 | 374 |
Taxes other than income taxes | 557 | 592 |
Income taxes payable | 36 | 0 |
Deferred income taxes | 404 | 485 |
Total current liabilities | 7,324 | 6,209 |
Debt and capital lease obligations, less current portion | 7,231 | 6,264 |
Deferred income taxes | 4,105 | 4,163 |
Other long-term liabilities | 2,154 | 2,161 |
Stockholders' equity: | ||
Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 627,501,593 shares issued | 7 | 6 |
Additional paid-in capital | 7,987 | 7,190 |
Treasury stock, at cost; 110,853,320 and 111,290,436 common shares | (6,856) | (6,884) |
Retained earnings | 15,384 | 15,484 |
Accumulated other comprehensive loss | (115) | (176) |
Total stockholders' equity | 16,407 | 15,620 |
Total liabilities and stockholders' equity | $37,221 | $34,417 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Jun. 30, 2009
| Dec. 31, 2008
| |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized (actual number) | 1,200,000,000 | 1,200,000,000 |
Common stock, shares issued (actual number) | 673,501,593 | 627,501,593 |
Treasury stock, common shares (actual number) | 110,853,320 | 111,290,436 |
Consolidated Statements of Inco
Consolidated Statements of Income (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Operating revenues (1) | $17,925 | $36,640 | $31,749 | $64,585 |
Costs and expenses: | ||||
Cost of sales | 16,543 | 33,673 | 28,171 | 59,342 |
Operating expenses | 1,015 | 1,133 | 2,012 | 2,247 |
Retail selling expenses | 171 | 190 | 340 | 378 |
General and administrative expenses | 124 | 117 | 269 | 252 |
Depreciation and amortization expense | 389 | 369 | 767 | 736 |
Total costs and expenses | 18,242 | 35,482 | 31,559 | 62,955 |
Operating income (loss) | (317) | 1,158 | 190 | 1,630 |
Other income (expense), net | (24) | 15 | (25) | 35 |
Interest and debt expense: | ||||
Incurred | (118) | (107) | (237) | (223) |
Capitalized | 36 | 24 | 76 | 43 |
Income (loss) before income tax expense (benefit) | (423) | 1,090 | 4 | 1,485 |
Income tax expense (benefit) | (169) | 356 | (51) | 490 |
Net income (loss) | (254) | 734 | 55 | 995 |
Earnings (loss) per common share | -0.48 | 1.39 | 0.11 | 1.88 |
Weighted-average common shares outstanding (in millions) | 525 | 526 | 520 | 529 |
Earnings (loss) per common share - assuming dilution | -0.48 | 1.37 | 0.11 | 1.85 |
Weighted-average common shares outstanding - assuming dilution (in millions) | 525 | 534 | 525 | 537 |
Dividends per common share | 0.15 | 0.15 | 0.3 | 0.27 |
Supplemental information: | ||||
(1) Includes excise taxes on sales by our U.S. retail system | $229 | $204 | $433 | $398 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Cash flows from operating activities: | ||
Net income | $55 | $995 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 767 | 736 |
Stock-based compensation expense | 23 | 24 |
Deferred income tax benefit | (125) | (93) |
Changes in current assets and current liabilities | 557 | 189 |
Changes in deferred charges and credits and other operating activities, net | 130 | (49) |
Net cash provided by operating activities | 1,407 | 1,802 |
Cash flows from investing activities: | ||
Capital expenditures | (1,351) | (1,178) |
Deferred turnaround and catalyst costs | (249) | (203) |
Purchase of certain VeraSun Energy Corporation facilities | (556) | 0 |
Return of investment in Cameron Highway Oil Pipeline Company | 8 | 12 |
Advance proceeds related to sale of assets | 0 | 17 |
Contingent payment in connection with acquisition | 0 | (25) |
Minor acquisitions | (29) | (57) |
Other investing activities, net | 3 | 14 |
Net cash used in investing activities | (2,174) | (1,420) |
Cash flows from financing activities: | ||
Proceeds from the sale of common stock, net of issuance costs | 799 | 0 |
Non-bank debt: | ||
Borrowings | 998 | 0 |
Repayments | (209) | (374) |
Bank Credit agreements: | ||
Borrowings | 0 | 296 |
Repayments | 0 | (296) |
Accounts receivable sales program: | ||
Proceeds from sale of receivables | 500 | 0 |
Repayments | (500) | 0 |
Purchase of common stock for treasury | 0 | (700) |
Issuance of common stock in connection with employee benefit plans | 4 | 11 |
Benefit from tax deduction in excess of recognized stock-based compensation cost | 1 | 13 |
Common stock dividends | (155) | (143) |
Debt issuance costs | (8) | 0 |
Other financing activities | (2) | (2) |
Net cash provided by (used in) financing activities | 1,428 | (1,195) |
Effect of foreign exchange rate changes on cash | 22 | (7) |
Net increase (decrease) in cash and temporary cash investments | 683 | (820) |
Cash and temporary cash investments at beginning of period | 940 | 2,464 |
Cash and temporary cash investments at end of period | $1,623 | $1,644 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (USD $) | ||||
In Millions | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Net income (loss) | ($254) | $734 | $55 | $995 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 191 | 15 | 110 | (62) |
Pension and other postretirement benefits net (gain) loss reclassified into income, net of income tax expense of $-, $1, $-, and $1 | 0 | (1) | 0 | (1) |
Net gain (loss) on derivative instruments designated and qualifying as cash flow hedges: | ||||
Net gain (loss) arising during the period, net of income tax (expense) benefit of $(2), $27, $(34), and $54 | 3 | (51) | 63 | (100) |
Net (gain) loss reclassified into income, net of income tax expense (benefit) of $39, $(17), $60, and $(9) | (72) | 32 | (112) | 17 |
Net loss on cash flow hedges | (69) | (19) | (49) | (83) |
Other comprehensive income (loss) | 122 | (5) | 61 | (146) |
Comprehensive income (loss) | ($132) | $729 | $116 | $849 |
1_Consolidated Statements of Co
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) | ||||
In Millions | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Tax expense (benefit) on pension and other postretirement benefits net (gain) loss reclassified into income | $0 | $1 | $0 | $1 |
Tax (expense) benefit on net gain (loss) arising during the period | (2) | 27 | (34) | 54 |
Tax expense (benefit) on net (gain) loss reclassified into income | $39 | ($17) | $60 | ($9) |
Basis of Presentation, Principl
Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies [Abstract] | |
BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION, AND SIGNIFICANT ACCOUNTING POLICIES | 1. BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION, AND SIGNIFICANT ACCOUNTING POLICIES As used in this report, the terms Valero, we, us, or our may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole. These unaudited consolidated financial statements include the accounts of Valero and subsidiaries in which Valero has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Investments in significant non-controlled entities are accounted for using the equity method. These unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP)for interim financial information and with the instructions to Form 10-Q and Article10 of RegulationS-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three and six months ended June30, 2009 and 2008 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited consolidated financial statements. Operating results for the three and six months ended June30, 2009 are not necessarily indicative of the results that may be expected for the year ending December31, 2009. The consolidated balance sheet as of December31, 2008 has been derived from the audited financial statements as of that date. For further information, refer to the consolidated financial statements and notes thereto included in our annual report on Form10-K for the year ended December 31, 2008. We have evaluated subsequent events that occurred after June30, 2009 through the filing of this Form 10-Q on August7, 2009. Any material subsequent events that occurred during this time have been properly recognized or disclosed in our financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. Reclassifications Certain amounts previously reported for the three and six months ended June30, 2008 have been reclassified to conform to the 2009 presentation. |
Accounting Pronouncements
Accounting Pronouncements | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Accounting Pronouncements [Abstract] | |
ACCOUNTING PRONOUNCEMENTS | 2. ACCOUNTING PRONOUNCEMENTS FSP No.FAS 157-2 In February2008, the Financial Accounting Standards Board (FASB)issued Staff Position No.FAS 157-2 (FSP No.157-2), which delayed the effective date of Statement No.157, Fair Value Measurements, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November15, 2008. The exceptions apply to the following: nonfinancial assets and nonfinancial liabilities measured at fair value in a business combination; impaired property, plant and equipment; goodwill; and the initial recognition of the fair value of asset retirement obligations and restructuring costs. The implementation of Statement No.157 for these assets and liabilities effective January1, 2009 did not affect our financial position or results of operations but did result in additional disclosures, which are provided in Note 9. FASB Statement No.141 (revised 2007) In December2007, the FASB issued Statement No.141 (revised 2007), Business Combinations (Statement No.141(R)). This statement improves the financial reporting of business combinations and clarifies the accounting for these transactions. The provisions of Statement No.141(R) are to be applied prospectively to business combinations with acquisition dates on or after the beginning of an entitys fiscal year that begins on or after December15, 2008, with early adoption prohibited. Due to the adoption of Statement No.141(R) effective January1, 2009, the provisions of this statement were applied to the acquisition of certain ethanol plants from VeraSun Energy Corporation (VeraSun) in the second quarter of 2009, which is discussed in Note 3. FASB Statement No.160 In December2007, the FASB issued Statement No.160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No.51. Statement No.160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December15, 2008. This statement provides guidance for the accounting and reporting of noncontrolling interests, changes in controlling interests, and the deconsolidation of subsidiaries. In addition, Statement No.160 amends FASB Statement No.128, Earnings per Share, to specify the computation, presentation, and disclosure requirements for earnings per share if an entity has one or more noncontrolling interests. The adoption of Statement No.160 effective January1, 2009 has not affected our financial position or results of operations. FASB Statement No.161 In March2008, the FASB issued Statement No.161, Disclosures about Derivative Instruments and Hedging Activities. Statement No.161 establishes, among other things, the disclosure requirements for derivative instruments and for hedging activities. This statement requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about contingent features related to credit risk in derivative agreements. Statement No |
Acquisition
Acquisition | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Acquisition [Abstract] | |
ACQUISITION | 3. ACQUISITION In the second quarter of 2009, we acquired seven ethanol plants and a site under development from VeraSun. Because VeraSun was subject to bankruptcy proceedings and different lenders were involved with various plants, three separate closings were required to consummate the acquisition of these ethanol plants. On April1, 2009, we closed on the acquisition of ethanol plants located in Charles City, Fort Dodge, and Hartley, Iowa; Aurora, South Dakota; and Welcome, Minnesota, and a site under development located in Reynolds, Indiana for consideration of $350million. Through subsequent closings on April9, 2009 and May8, 2009, we acquired VeraSuns ethanol plant in Albert City, Iowa, for consideration of $72million and VeraSuns ethanol plant in Albion, Nebraska, for consideration of $55million, respectively. In conjunction with the acquisition of the seven ethanol plants, we also paid $79million primarily for inventory and certain other working capital. We have elected to use the LIFO method of accounting for the commodity inventories related to the acquired ethanol business. The acquisition of these ethanol plants is referred to as the VeraSun Acquisition. We incurred approximately $10million of acquisition-related costs that were recognized as expense in general and administrative expenses in the consolidated statements of income for the three and six months ended June30, 2009. The acquired ethanol business involves the production and marketing of ethanol and its co-products, including distillers grains. The ethanol operations are being reported as a new operating segment in Note 11, the operations of which will complement our existing clean motor fuels business. The acquisition cost was funded with part of the proceeds from a $1billion issuance of notes in March 2009, which is discussed in Note 5. An independent appraisal of the assets acquired in the VeraSun Acquisition has been substantially completed, and the assets acquired and the liabilities assumed have been recognized at their acquisition-date fair values as determined by the appraisal and other evaluations as follows (in millions): Current assets, primarily inventory $ 77 Property, plant and equipment 491 Identifiable intangible assets 1 Current liabilities (10 ) Other long-term liabilities (3 ) Total consideration $ 556 Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the VeraSun Acquisition, and no significant contingent assets or liabilities were acquired or assumed in the acquisition. The consolidated statements of income include the results of operations of the various ethanol plants commencing on their respective closing dates. The operating revenues and net income associated with the acquired ethanol plants included in our consolidated statements of income for the three and six months ended June30, 2009, and the consolidated pro forma operating revenues, net income (loss), and earnings (loss)per common share assuming dilution of the combined entity had the VeraSun Acquisition occurred on January 1, 2009 and 2008, are shown in the |
Inventories
Inventories | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Inventories [Abstract] | |
INVENTORIES | 4. INVENTORIES Inventories consisted of the following (in millions): June 30, December 31, 2009 2008 Refinery feedstocks $ 2,065 $ 2,140 Refined products and blendstocks 2,105 2,224 Ethanol feedstocks and products 100 Convenience store merchandise 93 90 Materials and supplies 198 183 Inventories $ 4,561 $ 4,637 As of June30, 2009 and December31, 2008, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by approximately $3.0billion and $686million, respectively. |
Debt
Debt | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Debt [Abstract] | |
DEBT | 5. DEBT Non-Bank Debt On April1, 2009, we made scheduled debt repayments of $200million related to our 3.5% notes and $9million related to our 5.125% Series1997D industrial revenue bonds. In March2009, we issued $750million of 9.375% notes due March15, 2019 and $250million of 10.5% notes due March15, 2039. Proceeds from the issuance of these notes totaled approximately $998million, before deducting underwriting discounts and other issuance costs of $8million. On February1, 2008, we redeemed our 9.50% senior notes for $367million, or 104.75% of stated value. These notes had a carrying amount of $381million on the date of redemption, resulting in a gain of $14million that was included in other income (expense), net in the consolidated statement of income. In addition, in March2008, we made a scheduled debt repayment of $7million related to certain of our other debt. Under the indenture related to our $100million of 6.75% senior notes with a maturity date of October15, 2037, on July31, 2009, we notified the holders of such notes of our obligation to purchase any of those notes for which a written notice of purchase (purchase notice) is received from the holders prior to September15, 2009. Any notes for which a purchase notice is received will be purchased at 100% of their principal amount plus accrued and unpaid interest to October15, 2009, the date of payment of the purchase price. Bank Credit Facilities During the six months ended June30, 2009, we had no borrowings or repayments under our revolving bank credit facilities. As of June30, 2009, we had no borrowings outstanding under our revolving bank credit facilities. As of June30, 2009, we had $247million of letters of credit outstanding under our uncommitted short-term bank credit facilities and $249million of letters of credit outstanding under our U.S. committed revolving credit facilities. Under our Canadian committed revolving credit facility, we had Cdn. $19million of letters of credit outstanding as of June30, 2009. In June2008, we entered into a one-year committed revolving letter of credit facility under which we could obtain letters of credit of up to $300million to support certain of our crude oil purchases. In June2009, we amended this agreement to extend the maturity date to June2010. We are being charged letter of credit issuance fees in connection with the letter of credit facility. During the six months ended June30, 2008, we borrowed and repaid $296million under our revolving bank credit facility. In July2008, we entered into a one-year committed revolving letter of credit facility under which we could obtain letters of credit of up to $275million. This credit facility expired in July 2009. Accounts Receivable Sales Facility We have an accounts receivable sales facility with a group of third-party entities and financial institutions to sell on a revolving basis up to $1billion of eligible trade receivables. We amended our agreement in June2009 to extend the maturity date to June2010. As of December31, 2008, the amount of eligible receivables sold to the third-party entities and financial institutions was $100million, which was repaid in |
Stockholders Equity
Stockholders Equity | |
1/1/2009 - 6/30/2009
USD / shares | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | 6. STOCKHOLDERS EQUITY Common Stock Offering On June3, 2009, we sold in a public offering 46million shares of our common stock, which included 6million shares related to an overallotment option exercised by the underwriters, at a price of $18.00 per share and received proceeds, net of underwriting discounts and commissions and other issuance costs, of $799million. Treasury Stock No significant purchases of our common stock were made during the six months ended June30, 2009. During the six months ended June30, 2008, we purchased 12.6million shares of our common stock at a cost of $700million in connection with the administration of our employee benefit plans and common stock purchase programs authorized by our board of directors. During the six months ended June30, 2009 and 2008, we issued 0.5million shares and 0.9million shares, respectively, from treasury for our employee benefit plans. Common Stock Dividends On July30, 2009, our board of directors declared a regular quarterly cash dividend of $0.15 per common share payable on September16, 2009 to holders of record at the close of business on August12, 2009. |
Earnings
Earnings (Loss) Per Common Share | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Earnings (Loss) Per Common Share [Abstract] | |
EARNINGS (LOSS) PER COMMON SHARE | 7. EARNINGS (LOSS)PER COMMON SHARE Earnings (loss)per common share amounts were computed as follows (dollars and shares in millions, except per share amounts): Three Months Ended June 30, 2009 2008 Restricted Common Restricted Common Stock Stock Stock Stock Earnings (loss)per common share: Net income (loss) $ (254 ) $ 734 Less dividends paid: Common stock 77 79 Nonvested restricted stock 1 Undistributed earnings (loss) $ (332 ) $ 655 Weighted-average common shares outstanding 2 525 1 526 Earnings (loss)per common share: Distributed earnings $ 0.15 $ 0.15 $ 0.15 $ 0.15 Undistributed earnings (loss) (0.63 ) 1.24 1.24 Total earnings (loss)per common share (1) $ 0.15 $ (0.48 ) $ 1.39 $ 1.39 Earnings (loss)per common share assuming dilution: Net income (loss) $ (254 ) $ 734 Weighted-average common shares outstanding 525 526 Common equivalent shares (2): Stock options 8 Performance awards and other benefit plans Weighted-average common shares outstanding assuming dilution 525 534 Earnings (loss)per common share assuming dilution $ (0.48 ) $ 1.37 (1) The basic earnings per common share amount originally reported for the three months ended June30, 2008 changed from $1.40 as a result of the adoption of FSP No.EITF 03-6-1 effective January1, 2009, as discussed in Note 2. (2) Common equivalent shares were excluded from the computation of diluted earnings per share for the three months ended June30, 2009 because the effect of including such shares would be anti-dilutive. Six Months Ended June 30, 2009 2008 Restricted Common Restricted Common Stock Stock Stock Stock Earnings per common share: Net income $ 55 $ 995 Less dividends paid: Common stock 154 143 Nonvested restricted stock 1 Undistributed earnings (loss) $ (100 ) $ 852 Weighted-average common shares outstanding 2 520 1 529 Earnings per common share: Distributed earnings $ 0.30 |
Statements of Cash Flows
Statements of Cash Flows | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Statements of Cash Flows [Abstract] | |
STATEMENTS OF CASH FLOWS | 8. STATEMENTS OF CASH FLOWS In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions): Six Months Ended June 30, 2009 2008 Decrease (increase)in current assets: Restricted cash $ (10 ) $ (69 ) Receivables, net (1,286 ) (54 ) Inventories 172 (865 ) Income taxes receivable 181 Prepaid expenses and other 11 4 Increase (decrease)in current liabilities: Accounts payable 1,592 1,466 Accrued expenses (97 ) (144 ) Taxes other than income taxes (41 ) (61 ) Income taxes payable 35 (88 ) Changes in current assets and current liabilities $ 557 $ 189 The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets for the respective periods for the following reasons: the amounts shown above exclude changes in cash and temporary cash investments, deferred income taxes, and current portion of debt and capital lease obligations; the amounts shown above exclude the current assets and current liabilities acquired in connection with the VeraSun Acquisition; previously accrued capital expenditures, deferred turnaround and catalyst costs, and contingent earn-out payments, as well as advance proceeds related to the sale of assets, are reflected in investing activities in the consolidated statements of cash flows; amounts accrued for common stock purchases in the open market that are not settled as of the balance sheet date are reflected in financing activities in the consolidated statements of cash flows when the purchases are settled and paid; changes in assets held for sale and liabilities related to assets held for sale pertaining to the operations of the Krotz Springs Refinery prior to its sale to Alon Refining Krotz Springs, Inc. (Alon), a subsidiary of Alon USA Energy, Inc., in July2008 are reflected in the line items to which the changes relate in the table above; and certain differences between consolidated balance sheet changes and consolidated statement of cash flow changes reflected above result from translating foreign currency denominated amounts at different exchange rates. There were no significant noncash investing or financing activities for the six months ended June30, 2009 and 2008. Cash flows related to interest and income taxes were as follows (in millions): Six Months Ended June 30, 2009 2008 Interest paid in excess of amount capitalized $ 152 $ 199 Income taxes paid (net of tax refunds received) (144 ) 659 |
Fair Value Measurements
Fair Value Measurements | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | 9. FAIR VALUE MEASUREMENTS Statement No.157 establishes a fair value hierarchy (Level 1, Level 2, or Level 3) based on the quality of inputs used to measure fair value. Pursuant to the provisions of Statement No.157, fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs are based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. We use appropriate valuation techniques based on the available inputs to measure the fair values of our applicable assets and liabilities. When available, we measure fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. The table below presents information (dollars in millions) about our financial assets and liabilities measured and recorded at fair value on a recurring basis and indicates the fair value hierarchy of the inputs utilized by us to determine the fair values as of June30, 2009 and December31, 2008. Fair Value Measurements Using Quoted Significant Prices Other Significant in Active Observable Unobservable Markets Inputs Inputs Total as of (Level 1) (Level 2) (Level 3) June 30, 2009 Assets: Commodity derivative contracts $ 12 $ 537 $ $ 549 Nonqualified benefit plans 99 99 Alon earn-out agreement 38 38 Liabilities: Commodity derivative contracts 19 7 26 Certain nonqualified benefit plans 29 29 Fair Value Measurements Using Quoted Significant Prices Other Significant in Active Observable Unobservable Total as of Markets Inputs Inputs December 31, (Level 1) (Level 2) (Level 3) 2008 Assets: Commodity derivative contracts $ 40 $ 610 $ $ 650 Nonqualified benefit plans 98 98 Alon earn-out agreement 13 13 Liabilities: Commodity derivative contracts 7 7 Certain nonqualified benefit plans 26 26 The valuation methods used to measure our financial instruments at fair value are as follows: Commodity derivative contracts, consisting primarily of exchange-traded futures and swaps, are measured at fair value using the market approach pursuant to the provisions of Statement No.157. Exchange-traded futures are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Swaps are priced using third-party broker quotes, industry pricing services, and exchange-traded curves, with appropriate considerat |
Price Risk Management Activitie
Price Risk Management Activities | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Price Risk Management Activities [Abstract] | |
PRICE RISK MANAGEMENT ACTIVITIES | 10. PRICE RISK MANAGEMENT ACTIVITIES We enter into derivative instruments to manage our exposure to commodity price risk, interest rate risk, and foreign currency risk, and to hedge price risk on other contractual derivatives that we have entered into. In addition, we use derivative instruments for trading purposes based on our fundamental and technical analysis of market conditions. All derivative instruments are recorded on our balance sheet as either assets or liabilities measured at their fair values. When we enter into a derivative instrument, it is designated as a fair value hedge, a cash flow hedge, an economic hedge, or a trading activity. The gain or loss on a derivative instrument designated and qualifying as a fair value hedge, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized currently in income in the same period. The effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedge is initially reported as a component of other comprehensive income and is then recorded in income in the period or periods during which the hedged forecasted transaction affects income. The ineffective portion of the gain or loss on the cash flow derivative instrument, if any, is recognized in income as incurred. For our economic hedging relationships (hedges not designated as fair value or cash flow hedges) and for derivative instruments entered into by us for trading purposes, the derivative instrument is recorded at fair value and changes in the fair value of the derivative instrument are recognized currently in income. Commodity Price Risk We are exposed to market risks related to the volatility of crude oil and refined product prices, as well as volatility in the price of natural gas used in our refining operations. To reduce the impact of this price volatility on our results of operations and cash flows, we use derivative commodity instruments, including swaps, futures, and options, to manage our exposure to commodity price risks. For such risk management purposes, we use fair value hedges, cash flow hedges, and economic hedges. In addition to the use of derivative instruments to manage commodity price risk, we also enter into certain derivative commodity instruments for trading purposes. Our objectives for entering into each of these types of derivative instruments and the level of activity of each as of June30, 2009 are described below. Fair Value Hedges Fair value hedges are used to hedge certain refining inventories and firm commitments to purchase inventories. The level of activity for our fair value hedges is based on the level of our operating inventories, and normally represents the amount by which our inventories differ from our previous year-end LIFO inventory levels. As of June30, 2009, we had the following outstanding derivative commodity instruments that were entered into to hedge crude oil and refined product inventories. The information presents the volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels). Derivative Instrument / Maturity |
Segment Information
Segment Information | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | 11. SEGMENT INFORMATION Prior to the second quarter of 2009, we had two reportable segments, which were refining and retail. As a result of our acquisition of seven ethanol plants from VeraSun during the second quarter of 2009 (as discussed in Note 3), ethanol is now being presented as a third reportable segment. Segment information for our three reportable segments was as follows (in millions): Refining Retail Ethanol Corporate Total Three months ended June30, 2009: Operating revenues from external customers $ 15,693 $ 1,969 $ 263 $ $ 17,925 Intersegment revenues 1,281 29 1,310 Operating income (loss) (268 ) 65 22 (136 ) (317 ) Three months ended June30, 2008: Operating revenues from external customers 33,625 3,015 36,640 Intersegment revenues 2,367 2,367 Operating income (loss) 1,235 49 (126 ) 1,158 Six months ended June30, 2009: Operating revenues from external customers 27,885 3,601 263 31,749 Intersegment revenues 2,288 29 2,317 Operating income (loss) 339 121 22 (292 ) 190 Six months ended June30, 2008: Operating revenues from external customers 59,055 5,530 64,585 Intersegment revenues 4,267 4,267 Operating income (loss) 1,803 99 (272 ) 1,630 Total assets by reportable segment were as follows (in millions): June 30, December 31, 2009 2008 Refining $ 32,464 $ 30,801 Retail 1,843 1,818 Ethanol 597 Corporate 2,317 1,798 Total consolidated assets $ 37,221 $ 34,417 |
Employee Benefit Plans
Employee Benefit Plans | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Employee Benefit Plans [Abstract] | |
EMPLOYEE BENEFIT PLANS | 12. EMPLOYEE BENEFIT PLANS The components of net periodic benefit cost related to our defined benefit plans were as follows for the three and six months ended June30, 2009 and 2008 (in millions): Other Postretirement Pension Plans Benefit Plans 2009 2008 2009 2008 Three months ended June30: Components of net periodic benefit cost: Service cost $ 26 $ 24 $ 3 $ 4 Interest cost 20 19 7 7 Expected return on plan assets (27 ) (26 ) Amortization of: Prior service cost (credit) 1 (5 ) (3 ) Net loss 2 1 1 1 Net periodic benefit cost $ 22 $ 18 $ 6 $ 9 Six months ended June30: Components of net periodic benefit cost: Service cost $ 52 $ 47 $ 6 $ 7 Interest cost 40 38 13 14 Expected return on plan assets (54 ) (52 ) Amortization of: Prior service cost (credit) 1 1 (9 ) (5 ) Net loss 5 1 3 2 Net periodic benefit cost $ 44 $ 35 $ 13 $ 18 We expect to contribute a total of approximately $70million to our qualified pension plans during 2009. In January2009, we contributed $50million of this amount to our main qualified pension plan. There were no significant additional contributions made during the six months ended June30, 2009. |
Commitments and Contingencies
Commitments and Contingencies | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 13. COMMITMENTS AND CONTINGENCIES Contingent Earn-Out Agreements In January2008, we made a previously accrued earn-out payment of $25million related to the acquisition of the St. Charles Refinery, which was the final payment under that agreement. As of June30, 2009, we have no further commitments with respect to contingent earn-out agreements. However, see Note 9 for a discussion of a contingent receivable from Alon related to a three-year earn-out agreement received in July2008 as partial consideration for the sale of our Krotz Springs Refinery. Based on our calculations under the provisions of the agreement, we determined that $28 million was earned for the first year of this three-year agreement. Alon has calculated a different amount, and we are in the process of reconciling the different amounts. The resolution of this matter is not expected to result in a material difference. Insurance Recoveries During the first quarter of 2007, our McKee Refinery was shut down due to a fire originating in its propane deasphalting unit, resulting in business interruption losses for which we submitted claims to our insurance carriers under our insurance policies. We reached a settlement with the insurance carriers on our claims, resulting in pre-tax income of approximately $100million in the first quarter of 2008 that was recorded as a reduction to cost of sales. TRN Refinery Commitment On May20, 2009, we entered into a Business Sale Agreement (Agreement) with Dow Chemical Company and certain of its affiliates (Dow) under which we agreed to purchase Dows 45% equity interest in Total Raffinaderij Nederland N.V. (TRN), which owns a refinery in the Netherlands, along with related businesses of TRN owned by Dow. The Agreement extends through December31, 2009 and provides for a purchase price of $600million plus an amount for related inventories. The closing of the transaction was conditioned upon, among other things, the expiration of a right of first refusal held by Total S.A. (Total) to purchase Dows equity interest in TRN or a waiver by Total of such right of first refusal. In June2009, Total exercised its right of first refusal. To our knowledge, Totals acquisition of Dows equity interest in TRN has not closed, and we and Dow have not executed a formal termination of the Agreement. Tax Matters We are subject to extensive tax liabilities, including federal, state, and foreign income taxes and transactional taxes such as excise, sales/use, payroll, franchise, withholding, and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Many of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties. Effective January1, 2007, the Government of Aruba (GOA)enacted a turnover tax on revenues from the sale of goods produced and services rendered in Aruba. The turnover tax, which is 3% for on-island sales and services and 1% on export sales, is be |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Condensed Consolidating Financial Information [Abstract] | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION In conjunction with the acquisition of Premcor Inc. on September1, 2005, Valero Energy Corporation has fully and unconditionally guaranteed the following debt of The Premcor Refining Group Inc. (PRG), a wholly owned subsidiary of Valero Energy Corporation, that was outstanding as of June30, 2009: 6.75% senior notes due February2011, 6.125% senior notes due May2011, 6.75% senior notes due May2014, and 7.5% senior notes due June2015. In addition, PRG has fully and unconditionally guaranteed all of the outstanding debt issued by Valero Energy Corporation. The following condensed consolidating financial information is provided for Valero and PRG as an alternative to providing separate financial statements for PRG. The accounts for all companies reflected herein are presented using the equity method of accounting for investments in subsidiaries. Condensed Consolidating Balance Sheet as of June30, 2009 (unaudited, in millions) Valero Other Non- Energy Guarantor Corporation PRG Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and temporary cash investments $ 443 $ $ 1,180 $ $ 1,623 Restricted cash 22 2 117 141 Receivables, net 60 4,157 4,217 Inventories 447 4,114 4,561 Income taxes receivable 5 27 (5 ) 27 Deferred income taxes 132 132 Prepaid expenses and other 6 466 472 Total current assets 470 515 10,193 (5 ) 11,173 Property, plant and equipment, at cost 6,129 23,559 29,688 Accumulated depreciation (575 ) (4,829 ) (5,404 ) Property, plant and equipment, net 5,554 18,730 24,284 Intangible assets, net 221 221 Investment in Valero Energy affiliates 6,194 3,052 (296 ) (8,950 ) Long-term notes receivable from affiliates 16,659 (16,659 ) Deferred income tax receivable 1,085 (1,085 ) Deferred charges and other assets, net 127 123 1,293 1,543 Total assets $ 24,535 $ 9,244 $ 30,141 $ (26,699 ) $ 37,221 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Current portion of debt and capital lease obligations $ 33 $ $ 104 $ $ 137 Accounts payable 31 190 5,619 5,840 Accrued expenses 110 |