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EXHIBIT 12.1
VALERO ENERGY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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Pretax income (loss) from continuing operations........... $ (83,091) $ 175,557 $ 39,083 $ 88,696 $ 28,803
Add (Deduct):
Net interest expense (1).............................. 32,479 42,455 38,534 40,935 38,710
Amortization of previously capitalized interest....... 4,900 4,865 4,801 5,497 5,419
Interest portion of rental expense (2)................ 15,926 13,193 8,913 8,059 3,004
Distributions in excess of (less than)
equity in earnings of joint ventures (1).......... 2,965 (1,851) (3,899) (4,304) (2,437)
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Earnings as defined................................... $ (26,821) $ 234,219 $ 87,432 $ 138,883 $ 73,499
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Net interest expense (1).................................. $ 32,479 $ 42,455 $ 38,534 $ 40,935 $ 38,710
Capitalized interest...................................... 5,340 1,695 2,884 4,117 1,885
Interest portion of rental expense (2).................... 15,926 13,193 8,913 8,059 3,004
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Fixed charges as defined.............................. $ 53,745 $ 57,343 $ 50,331 $ 53,111 $ 43,599
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Ratio of earnings to fixed charges (4).................... (3) 4.08x 1.74x 2.61x 1.69x
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(1) During 1994 through September 1997, the Company guaranteed its pro rata
share of the debt of Javelina Company, an equity method investee in which
the Company holds a 20% interest. The interest expense related to the
guaranteed debt is not included in the computation of the ratio as the
Company was not required to satisfy the guarantee.
(2) The interest portion of rental expense represents one-third of rents, which
is deemed representative of the interest portion of rental expense.
(3) For 1998, earnings were insufficient to cover fixed charges by $80.6
million. Such deficiency was due primarily to a $170.9 million pre-tax
charge to earnings to write down the carrying amount of the Company's
refinery inventories to market value. Excluding the effect of the inventory
write-down, the ratio of earnings to fixed charges would have been 2.68x.
(4) The Company paid no dividends on preferred stock with respect to its
continuing operations during the periods indicated; therefore, the ratio of
earnings to combined fixed charges and preferred stock dividends is the
same as the ratio of earnings to fixed charges.