Document and Company Informatio
Document and Company Information (USD $) | |||
In Billions, except Share data | 9 Months Ended
Sep. 30, 2009 | Oct. 30, 2009
| Jun. 30, 2008
|
Document and Company Information [Abstract] | |||
Entity Registrant Name | VALERO ENERGY CORP/TX | ||
Entity Central Index Key | 0001035002 | ||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-30 | ||
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) | 564,349,512 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and temporary cash investments | $1,605 | $940 |
Restricted cash | 144 | 131 |
Receivables, net | 3,923 | 2,897 |
Inventories | 4,576 | 4,637 |
Income taxes receivable | 81 | 197 |
Deferred income taxes | 150 | 98 |
Prepaid expenses and other | 386 | 550 |
Total current assets | 10,865 | 9,450 |
Property, plant and equipment, at cost | 29,863 | 28,103 |
Accumulated depreciation | (5,632) | (4,890) |
Property, plant and equipment, net | 24,231 | 23,213 |
Intangible assets, net | 229 | 224 |
Deferred charges and other assets, net | 1,480 | 1,530 |
Total assets | 36,805 | 34,417 |
Current liabilities: | ||
Current portion of debt and capital lease obligations | 213 | 312 |
Accounts payable | 5,756 | 4,446 |
Accrued expenses | 633 | 374 |
Taxes other than income taxes | 667 | 592 |
Income taxes payable | 64 | 0 |
Deferred income taxes | 424 | 485 |
Total current liabilities | 7,757 | 6,209 |
Debt and capital lease obligations, less current portion | 7,162 | 6,264 |
Deferred income taxes | 3,872 | 4,163 |
Other long-term liabilities | 2,124 | 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 | 7,975 | 7,190 |
Treasury stock, at cost; 110,454,703 and 111,290,436 common shares | (6,830) | (6,884) |
Retained earnings | 14,670 | 15,484 |
Accumulated other comprehensive income (loss) | 68 | (176) |
Total stockholders' equity | 15,890 | 15,620 |
Total liabilities and stockholders' equity | $36,805 | $34,417 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
Sep. 30, 2009
| Dec. 31, 2008
| |
Stockholders' equity: | ||
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) | 110,454,703 | 111,290,436 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Operating revenues (1) | $19,489 | $35,960 | $51,238 | $100,545 |
Costs and expenses: | ||||
Cost of sales | 18,104 | 32,506 | 46,275 | 91,848 |
Operating expenses | 923 | 1,136 | 2,778 | 3,383 |
Retail selling expenses | 182 | 201 | 522 | 579 |
General and administrative expenses | 167 | 169 | 435 | 421 |
Depreciation and amortization expense | 389 | 370 | 1,156 | 1,106 |
Asset impairment loss | 417 | 43 | 575 | 43 |
Gain on sale of Krotz Springs Refinery | 0 | (305) | 0 | (305) |
Total costs and expenses | 20,182 | 34,120 | 51,741 | 97,075 |
Operating income (loss) | (693) | 1,840 | (503) | 3,470 |
Other income (expense), net | 9 | 36 | (16) | 71 |
Interest and debt expense: | ||||
Incurred | (149) | (112) | (386) | (335) |
Capitalized | 19 | 31 | 95 | 74 |
Income (loss) before income tax expense (benefit) | (814) | 1,795 | (810) | 3,280 |
Income tax expense (benefit) | (185) | 643 | (236) | 1,133 |
Net income (loss) | (629) | 1,152 | (574) | 2,147 |
Earnings (loss) per common share | -1.12 | 2.2 | -1.08 | 4.07 |
Weighted-average common shares outstanding (in millions) | 561 | 522 | 534 | 526 |
Earnings (loss) per common share - assuming dilution | -1.12 | 2.18 | -1.08 | 4.02 |
Weighted-average common shares outstanding - assuming dilution (in millions) | 561 | 529 | 534 | 535 |
Dividends per common share | 0.15 | 0.15 | 0.45 | 0.42 |
Supplemental information: | ||||
(1) Includes excise taxes on sales by our U.S. retail system | $226 | $207 | $659 | $605 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash flows from operating activities: | ||
Net income (loss) | ($574) | $2,147 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization expense | 1,156 | 1,106 |
Asset impairment loss | 575 | 43 |
Gain on sale of Krotz Springs Refinery | 0 | (305) |
Stock-based compensation expense | 35 | 36 |
Deferred income tax expense (benefit) | (302) | 260 |
Changes in current assets and current liabilities | 1,154 | 381 |
Changes in deferred charges and credits and other operating activities, net | (104) | (148) |
Net cash provided by operating activities | 1,940 | 3,520 |
Cash flows from investing activities: | ||
Capital expenditures | (1,820) | (1,894) |
Deferred turnaround and catalyst costs | (301) | (279) |
Purchase of certain VeraSun Energy Corporation facilities | (556) | 0 |
Return of investment in Cameron Highway Oil Pipeline Company | 18 | 11 |
Proceeds from the sale of Krotz Springs Refinery | 0 | 463 |
Contingent payment in connection with acquisition | 0 | (25) |
Minor acquisitions | (29) | (144) |
Other investing activities, net | 5 | 16 |
Net cash used in investing activities | (2,683) | (1,852) |
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 | (774) |
Issuance of common stock in connection with employee benefit plans | 7 | 14 |
Effect of tax deduction in excess of (less than) recognized stock-based compensation cost | (2) | 15 |
Common stock dividends | (239) | (221) |
Debt issuance costs | (8) | 0 |
Other financing activities | (3) | (2) |
Net cash provided by (used in) financing activities | 1,343 | (1,342) |
Effect of foreign exchange rate changes on cash | 65 | (23) |
Net increase in cash and temporary cash investments | 665 | 303 |
Cash and temporary cash investments at beginning of period | 940 | 2,464 |
Cash and temporary cash investments at end of period | $1,605 | $2,767 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Net income (loss) | ($629) | $1,152 | ($574) | $2,147 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 214 | (105) | 324 | (167) |
Pension and other postretirement benefits net (gain) loss reclassified into income, net of income tax expense of $1, $0, $1, and $1 | (1) | 0 | (1) | (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 $(12), $(34), $(46), and $20 | 24 | 62 | 87 | (38) |
Net (gain) loss reclassified into income, net of income tax expense (benefit) of $29, $(9), $89, and $(18) | (54) | 16 | (166) | 33 |
Net gain (loss) on cash flow hedges | (30) | 78 | (79) | (5) |
Other comprehensive income (loss) | 183 | (27) | 244 | (173) |
Comprehensive income (loss) | ($446) | $1,125 | ($330) | $1,974 |
1_Consolidated Statements of Co
Consolidated Statements of Comprehensive Income (Parenthetical) (Unaudited) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Other comprehensive income (loss): | ||||
Tax expense (benefit) on pension and other postretirement benefits net (gain) loss reclassified into income | $1 | $0 | $1 | $1 |
Net gain (loss) on derivative instruments designated and qualifying as cash flow hedges: | ||||
Tax (expense) benefit on net gain (loss) arising during the period | (12) | (34) | (46) | 20 |
Tax expense (benefit) on net (gain) loss reclassified into income | $29 | ($9) | $89 | ($18) |
Basis of Presentation, Principl
Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies | |
9 Months Ended
Sep. 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 nine months ended September30, 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 nine months ended September30, 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 December31, 2008. See Note 3 for a discussion of the presentation in the statements of income of the results of operations of the Krotz Springs Refinery, which was sold effective July1, 2008. We have evaluated subsequent events that occurred after September30, 2009 through the filing of this Form 10-Q on November5, 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 in 2008 and 2009 have been reclassified to conform to the current 2009 presentation. The primary reclassification relates to the presentation of asset impairment losses (discussed in Note 4) on a separate line in the consolidated statements of income due to the materiality of the amount in the third quarter of 2009. For comparability |
Accounting Pronouncements
Accounting Pronouncements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Accounting Pronouncements [Abstract] | |
ACCOUNTING PRONOUNCEMENTS | 2. ACCOUNTING PRONOUNCEMENTS Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification or ASC) The Codification is the single source of authoritative GAAP recognized by the FASB, to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC)under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification became effective for interim and annual periods ending after September15, 2009 and superseded all previously existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification is nonauthoritative. Commencing with the quarter ended September30, 2009, all of our references to GAAP now use the specific Codification Topic or Section rather than prior accounting and reporting standards. The Codification did not change existing GAAP and, therefore, did not affect our financial position or results of operations. Fair Value Measurements and Disclosures In February2008, ASC Topic 820, Fair Value Measurements and Disclosures, was modified to delay the effective date for applying fair value measurement disclosures for nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November15, 2008. The implementation of this provision of Topic 820 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 10. In August2009, the FASB modified Topic 820 to address the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available. In such circumstances, a reporting entity is required to measure fair value using one or more of the following techniques: (i)a valuation technique that uses the quoted price of the identical liability when traded as an asset, or the quoted prices for similar liabilities or similar liabilities when traded as assets; or (ii)another valuation technique that is consistent with Topic 820. The FASB also clarified that when estimating the fair value of the liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. This modification also clarified that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. This guidance is effective for the first reporting period (including interim periods) beginning after issuance, the adoption of which in the fourth quarter of 2009 is not expected to materially affect our financial position or results of operations. Business Combinations In December2007, ASC Topic 805, Business Combinations, was iss |
Acquisition And Disposition
Acquisition And Disposition | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Acquisition And Disposition [Abstract] | |
Acquisition And Disposition | 3. ACQUISITION AND DISPOSITION Acquisition of VeraSun 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. We incurred approximately $10million of acquisition-related costs that were recognized in general and administrative expenses in the consolidated statement of income for the nine months ended September30, 2009. The acquired ethanol business involves the production and marketing of ethanol and its co-products, including distillers grains. The ethanol operations are reflected as a reportable segment in Note 12, 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 6. An independent appraisal of the assets acquired in the VeraSun Acquisition has been 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. As a result, pro forma information for the three months ended September30, 2009 presented below represents actual results of operations. The operating revenues and net income associated with the acquired ethanol plants included in our consolidated statements of income for the three and nine months ended September30, 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 Acqui |
Asset Impairments
Asset Impairments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Asset Impairments [Abstract] | |
Asset Impairments | 4. ASSET IMPAIRMENTS Impairment of Long-Lived Assets Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized in an amount by which its carrying amount exceeds its fair value. In order to test long-lived assets for recoverability, management must make estimates of projected cash flows related to the asset being evaluated, which include, but are not limited to, assumptions about the use or disposition of the asset, its estimated remaining life, and future expenditures necessary to maintain its existing service potential. In order to determine fair value, management must make certain estimates and assumptions including, among other things, an assessment of market conditions, projected cash flows, investment rates, interest/equity rates, and growth rates, that could significantly impact the fair value of the asset being tested for impairment. During the second half of 2008, there were severe disruptions in the capital and commodities markets that contributed to a significant decline in our common stock price, thus causing our market capitalization to decline to a level substantially below our net book value. Due to these adverse changes in market conditions during 2008, we evaluated our significant operating assets for potential impairment as of December31, 2008, and we determined that the carrying amount of each of these assets was recoverable. The economic slowdown that began in 2008 continued throughout the first nine months of 2009, thereby impacting demand for refined products and putting significant pressure on refined product margins. Due to these economic conditions, in June2009, we announced our plan to temporarily shut down the Aruba Refinery, which had a net book value of approximately $1.0billion as of September30, 2009, as narrow heavy sour crude oil differentials made the refinery uneconomical to operate. The Aruba Refinery was shut down in July2009 and is expected to continue to be shut down until market conditions improve. We are continuing to evaluate potential alternatives for this refinery, which may include the sale of the refinery. In June2009, the coker unit at the Corpus Christi East Refinery was also temporarily shut down and remains shut down. In September2009, we announced the shutdown of our coker and gasification units at our Delaware City Refinery also due to economic reasons. The coker unit is expected to remain shut down until economics improve and the gasification unit has been permanently shut down. As a result of these factors, we readdressed the potential impairment of all of our facilities (excluding the Delaware City gasification unit) as of September30, 2009 based on an assumption that we would operate these facilities in the future, incorporating updated 2009 price assumptions into our estimated cash flows. Based on this analysis, we determi |
Inventories
Inventories | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Inventories [Abstract] | |
INVENTORIES | 5. INVENTORIES Inventories consisted of the following (in millions): September 30, December 31, 2009 2008 Refinery feedstocks $ 1,936 $ 2,140 Refined products and blendstocks 2,240 2,224 Ethanol feedstocks and products 101 Convenience store merchandise 94 90 Materials and supplies 205 183 Inventories $ 4,576 $ 4,637 As of September30, 2009 and December31, 2008, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by approximately $3.2billion and $686million, respectively. |
Debt
Debt | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Debt [Abstract] | |
DEBT | 6. DEBT Non-Bank 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) was received from the holders prior to September15, 2009. A purchase notice was received related to $76million of the outstanding notes, which resulted in a charge of $6million in the third quarter of 2009 to write off a pro rata portion of unamortized fair value adjustment. We redeemed the $76million of notes at 100% of their principal amount plus accrued and unpaid interest to October15, 2009, the date of the payment of the purchase price. 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 $998 million, 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. Bank Credit Facilities In October2009, Lehman Brothers Bank, FSB, one of the participating banks under our $2.5billion revolving credit facility, failed to fund its loan commitment related to our borrowing under this facility discussed below. Lehman Brothers aggregate commitment under the revolving credit facility was $84million. As a result, our borrowing capacity under that revolving credit facility has been reduced to $2.4billion commencing in October2009. During the nine months ended September30, 2009, we had no borrowings or repayments under our revolving bank credit facilities. As of September30, 2009, we had no borrowings outstanding under our revolving bank credit facilities. In October 2009, we borrowed and subsequently repaid approximately $40 million under our U.S. committed revolving bank credit facility. As of September30, 2009, we had $76million of letters of credit outstanding under our uncommitted short-term bank credit facilities and $113million 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 September30, 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. Duri |
Stockholders Equity
Stockholders Equity | |
1/1/2009 - 9/30/2009
USD / shares | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | 7. 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 nine months ended September30, 2009. During the nine months ended September30, 2008, we purchased 14.6million shares of our common stock at a cost of $774million in connection with the administration of our employee benefit plans and common stock purchase programs authorized by our board of directors. During the nine months ended September30, 2009 and 2008, we issued 0.9million shares and 1.3million shares, respectively, from treasury for our employee benefit plans. Common Stock Dividends On October15, 2009, our board of directors declared a regular quarterly cash dividend of $0.15 per common share payable on December9, 2009 to holders of record at the close of business on November 11, 2009. |
Earnings
Earnings (Loss) Per Common Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Earnings (Loss) Per Common Share [Abstract] | |
EARNINGS (LOSS) PER COMMON SHARE | 8. 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 September 30, 2009 2008 Restricted Common Restricted Common Stock Stock Stock Stock Earnings (loss)per common share: Net income (loss) $ (629 ) $ 1,152 Less dividends paid: Common stock 84 78 Nonvested restricted stock Undistributed earnings (loss) $ (713 ) $ 1,074 Weighted-average common shares outstanding 2 561 1 522 Earnings (loss)per common share: Distributed earnings $ 0.15 $ 0.15 $ 0.14 $ 0.15 Undistributed earnings (loss) (1.27 ) 2.05 2.05 Total earnings (loss)per common share (1) $ 0.15 $ (1.12 ) $ 2.19 $ 2.20 Earnings (loss)per common share assuming dilution: Net income (loss) $ (629 ) $ 1,152 Weighted-average common shares outstanding 561 522 Common equivalent shares (2): Stock options 6 Performance awards and other benefit plans 1 Weighted-average common shares outstanding assuming dilution 561 529 Earnings (loss)per common share assuming dilution $ (1.12 ) $ 2.18 (1) The basic earnings per common share amount for the three months ended September30, 2008 changed from the $2.21 originally reported as a result of the adoption of certain modifications that require our restricted stock to be treated as a participating security in calculating basic earnings per common share effective January1, 2009, as discussed in Note 2. (2) Common equivalent shares were excluded from the computation of diluted earnings (loss) per common share for the three months ended September30, 2009 because the effect of including such shares would be antidilutive. Nine Months Ended September 30, 2009 2008 Restricted Common Restricted Common Stock Stock Stock Stock Earnings (loss)per common share: Net income (loss) $ (574 ) $ 2,147 Less dividends paid: Common stock 238 221 Nonvested restricted stock 1 Undistributed earnings (loss) $ (813 ) $ 1,926 Weighted-average common shares |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Supplemental Cash Flow Information [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | 9. SUPPLEMENTAL CASH FLOW INFORMATION In order to determine net cash provided by operating activities, net income (loss)is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions): Nine Months Ended September 30, 2009 2008 Decrease (increase)in current assets: Restricted cash $ (13 ) $ (90 ) Receivables, net (966 ) 1,120 Inventories 198 (842 ) Income taxes receivable 137 Prepaid expenses and other 119 (6 ) Increase (decrease)in current liabilities: Accounts payable 1,466 476 Accrued expenses 94 32 Taxes other than income taxes 54 (77 ) Income taxes payable 65 (232 ) Changes in current assets and current liabilities $ 1,154 $ 381 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; amounts accrued for capital expenditures, deferred turnaround and catalyst costs, and contingent earn-out payments are reflected in investing activities in the consolidated statements of cash flows when such amounts are paid; 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 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 nine months ended September30, 2009 and 2008. Cash flows related to interest and income taxes were as follows (in millions): Nine Months Ended September 30, 2009 2008 Interest paid in excess of amount capitalized $ 232 $ 187 Income taxes paid (net of tax refunds received) (134 ) 1,092 |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | 10. FAIR VALUE MEASUREMENTS A fair value hierarchy (Level 1, Level 2, or Level 3) is used to categorize fair value amounts based on the quality of inputs used to measure fair value. Accordingly, 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 tables below present information (dollars in millions) about our financial assets and liabilities measured and recorded at fair value on a recurring basis and indicate the fair value hierarchy of the inputs utilized by us to determine the fair values as of September30, 2009 and December31, 2008. Fair Value Measurements Using Quoted Significant Prices Other Significant in Active Observable Unobservable Total as of Markets Inputs Inputs September 30, (Level 1) (Level 2) (Level 3) 2009 Assets: Commodity derivative contracts $ 44 $ 490 $ $ 534 Nonqualified benefit plans 106 106 Liabilities: Commodity derivative contracts 149 11 160 Certain nonqualified benefit plans 32 32 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. 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 consideration of counterparty credit risk, but since they have contractual terms that are not identical to exchange-tra |
Price Risk Management Activitie
Price Risk Management Activities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Price Risk Management Activities [Abstract] | |
PRICE RISK MANAGEMENT ACTIVITIES | 11. 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. The cash flow effects of all of our derivative contracts are reflected in operating activities in the consolidated statements of cash flows for all periods presented. 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 commodity derivative 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 commodity derivative 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 September30, 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 September30, 2009, we had the following outstanding commodity derivative instruments that were entered into to hedge crude oil and refined product inventories. The information |
Segment Information
Segment Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | 12. 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 September30, 2009: Operating revenues from external customers $ 16,932 $ 2,147 $ 410 $ $ 19,489 Intersegment revenues 1,388 47 1,435 Operating income (loss) (674 ) 111 49 (179 ) (693 ) Three months ended September30, 2008: Operating revenues from external customers 32,903 3,057 35,960 Intersegment revenues 2,296 2,296 Operating income (loss) 1,913 107 (180 ) 1,840 Nine months ended September30, 2009: Operating revenues from external customers 44,817 5,748 673 51,238 Intersegment revenues 3,676 76 3,752 Operating income (loss) (335 ) 232 71 (471 ) (503 ) Nine months ended September30, 2008: Operating revenues from external customers 91,958 8,587 100,545 Intersegment revenues 6,563 6,563 Operating income (loss) 3,716 206 (452 ) 3,470 Total assets by reportable segment were as follows (in millions): September 30, December 31, 2009 2008 Refining $ 32,056 $ 30,801 Retail 1,863 1,818 Ethanol 605 Corporate 2,281 1,798 Total consolidated assets $ 36,805 $ 34,417 |
Employee Benefit Plans
Employee Benefit Plans | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Employee Benefit Plans [Abstract] | |
EMPLOYEE BENEFIT PLANS | 13. EMPLOYEE BENEFIT PLANS The components of net periodic benefit cost related to our defined benefit plans were as follows for the three and nine months ended September30, 2009 and 2008 (in millions): Other Postretirement Pension Plans Benefit Plans 2009 2008 2009 2008 Three months ended September30: Components of net periodic benefit cost: Service cost $ 26 $ 22 $ 3 $ 3 Interest cost 19 19 6 7 Expected return on plan assets (27 ) (26 ) Amortization of: Prior service cost (credit) 1 1 (5 ) (2 ) Net loss 3 2 1 Net periodic benefit cost $ 22 $ 16 $ 6 $ 9 Nine months ended September30: Components of net periodic benefit cost: Service cost $ 78 $ 69 $ 9 $ 10 Interest cost 59 57 19 21 Expected return on plan assets (81 ) (78 ) Amortization of: Prior service cost (credit) 2 2 (14 ) (7 ) Net loss 8 1 5 3 Net periodic benefit cost $ 66 $ 51 $ 19 $ 27 During the nine months ended September30, 2009 and 2008, we contributed $72million and $110 million, respectively, to our qualified pension plans. |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 14. 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 September30, 2009, we have no further commitments with respect to contingent earn-out agreements. However, as discussed in Note 3, in July2008 we received contingent consideration from Alon in the form of a three-year earn-out agreement based on certain product margins, as partial consideration for the sale of our Krotz Springs Refinery. On August27, 2009, we settled this earn-out agreement with Alon for $35million, of which $18million was received on the settlement date and the remaining amount will be received in eight payments of $2.2million each quarter beginning in the fourth quarter of 2009. 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 extended through December31, 2009 and provided 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 and in September2009, Total completed its acquisition of Dows equity interest in TRN. Our obligations under the Agreement have since been terminated. 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 being assessed by the GOA on sales by our Aruba |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Condensed Consolidating Financial Information [Abstract] | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 15. 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 September 30, 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 September30, 2009 (unaudited, in millions) Valero Other Non- Energy Guarantor Corporation PRG Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and temporary cash investments $ 298 $ $ 1,307 $ $ 1,605 Restricted cash 23 1 120 144 Receivables, net 38 3,885 3,923 Inventories 521 4,055 4,576 Income taxes receivable 58 81 (58 ) 81 Deferred income taxes 150 150 Prepaid expenses and other 8 378 386 Total current assets 379 568 9,976 (58 ) 10,865 Property, plant and equipment, at cost 5,834 24,029 29,863 Accumulated depreciation (582 ) (5,050 ) (5,632 ) Property, plant and equipment, net 5,252 18,979 24,231 Intangible assets, net 229 229 Investment in Valero Energy affiliates 5,553 3,410 (701 ) (8,262 ) Long-term notes receivable from affiliates 16,745 (16,745 ) Deferred income tax receivable 1,351 (1,351 ) Deferred charges and other assets, net 132 134 1,214 1,480 Total assets $ 24,160 $ 9,364 $ 29,697 $ (26,416 ) $ 36,805 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Current portion of debt and capital lease obligations $ 109 $ $ 104 $ $ 213 Accounts payable 42 180 5,534 5,756 Accrued expenses 166 99 368 633 Taxes other than income taxe |