Exhibit 99.1
VALERO L.P. REPORTS
THIRD QUARTER EARNINGS AND
ANNOUNCES QUARTERLY DISTRIBUTION
SAN ANTONIO, October 29, 2003 -- Valero L.P. (NYSE: VLI) today announced net
income applicable to limited partners of $18.5 million, or $0.82 per unit, for
the third quarter of 2003, compared to $13.9 million, or $0.72 per unit, for the
third quarter of 2002. For the nine months ended September 30, 2003, net income
applicable to limited partners was $47.4 million, or $2.23 per unit, compared to
$38.1 million, or $1.98 per unit, for the nine months ended September 30, 2002.
Distributable cash flow before the general partner's interest for the third
quarter was $24.1 million, compared to $18.0 million for the third quarter of
2002. As of September 30, 2003, the partnership's debt-to-capitalization ratio
was 45 percent, which was down from 48.6 percent at the end of the second
quarter.
With respect to the quarterly distribution to unitholders for the third quarter
of 2003, Valero L.P. today announced that it has declared a distribution of
$0.75 per unit payable November 14, 2003 to holders of record as of November 6,
2003.
The increase in net income was primarily attributable to the operations of the
South Texas pipeline system and crude oil storage tank assets acquired from
Valero Energy in March 2003 and the Southlake refined products pipeline acquired
from Valero Energy effective August 1, 2003.
"Including these transactions, we have completed over $400 million in
acquisitions this year and are pleased with the incremental earnings and cash
flow generated from these assets," said Curt Anastasio, Chief Executive Officer
of Valero L.P. "Going forward, we remain focused on integrating these recently
acquired assets while continuing to pursue further opportunities to deliver
strong distribution growth to our unitholders."
A conference call with management is scheduled for 11:00 a.m. EST (10:00 a.m.
CST) today, October 29, to discuss the financial and operational results for the
quarter. Anyone interested in listening to the presentation can call
800/901-5217, ID 63963091, or visit the partnership's web site at
www.valerolp.com.
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Valero L.P. owns and operates crude oil and refined product pipelines, refined
product terminals and refinery feedstock storage assets primarily in Texas, New
Mexico, Colorado, Oklahoma and California. The partnership transports refined
products from Valero Energy's refineries to established and growing markets in
the Mid-Continent, Southwest and the Texas-Mexico border region of the United
States. In addition, its pipelines, terminals and storage facilities primarily
support eight of Valero Energy's key refineries with crude oil and other
feedstocks as well as provide access to domestic and foreign crude oil sources.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of the
Securities Litigation Reform Act of 1995 regarding future events and the future
financial performance of Valero L.P. All forward-looking statements are based on
the partnership's beliefs as well as assumptions made by and information
currently available to the partnership. These statements reflect the
partnership's current views with respect to future events and are subject to
various risks, uncertainties and assumptions. These risks, uncertainties and
assumptions are discussed in Valero L.P.'s 2002 annual report on Form 10-K and
subsequent filings with the Securities and Exchange Commission.
For more information, visit Valero L.P.'s web site at www.valerolp.com..
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Valero L.P.
Consolidated Financial Information
September 30, 2003 and 2002
(unaudited, in thousands, except unit data, per unit data
and barrel information)
<caption>
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Statement of Income Data (Note 1):
Revenues $ 51,695 $ 32,161 $ 131,053 $ 88,215
-------- --------- --------- ---------
Costs and expenses:
Operating expenses 19,445 10,376 47,441 29,125
General and administrative expenses 1,588 1,783 5,102 5,270
Depreciation and amortization 7,135 4,157 18,687 12,388
-------- --------- --------- ---------
Total costs and expenses 28,168 16,316 71,230 46,783
-------- --------- ------- ------
Operating income 23,527 15,845 59,823 41,432
Equity income from Skelly-Belvieu
Pipeline Company 657 843 1,988 2,365
Interest expense, net (Note 2) (4,504) (1,738) (11,617) (3,090)
------- ------- -------- -------
Income before income tax expense 19,680 14,950 50,194 40,707
Income tax expense (Note 3) - - - (395)
---- ---- ---- -----
Net income 19,680 14,950 50,194 40,312
Net income applicable to general partner
including incentive distributions (Note 3) (1,138) (1,064) (2,828) (2,208)
Net income applicable to limited partners $ 18,542 $ 13,886 $ 47,366 $ 38,104
Net income per unit applicable to limited
partners (Note 4) $ 0.82 $ 0.72 $ 2.23 $ 1.98
Weighted average number of limited
partnership units outstanding (Note 5) 22,477,019 19,253,894 21,256,196 19,249,921
Earnings before interest, taxes and
depreciation and amortization (EBITDA, Note 6) $ 31,319 $ 20,845 $ 80,498 $ 56,185
Distributable cash flow (Note 6) 24,089 18,003 63,813 50,561
Operating Data (barrels/day):
Crude oil pipeline throughput 385,181 368,988 355,636 347,518
Refined product pipeline throughput 432,885 310,604 375,945 292,551
Refined product terminal throughput 236,440 177,279 215,925 177,675
Crude oil tank throughput 433,921 - 330,192 -
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<caption>
September 30, September 30, June 30, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Balance Sheet Data:
Long-term debt, including current portion (Note $ 358,095 $ 109,769 $ 365,231 $ 109,658
2)
Partners' equity (Note 5) 437,168 292,973 385,636 293,895
Debt-to-capitalization ratio 45.0% 27.3% 48.6% 27.2%
See accompanying notes on the following page.
Valero L.P.
Consolidated Financial Information - Continued
September 30, 2003 and 2002
Notes:
1. Effective September 4, 2003, Valero L.P. acquired a refined product
terminal in Paulsboro, New Jersey from ExxonMobil for $14,000,000.
Effective August 1, 2003, Valero L.P. acquired from Valero Energy
Corporation (Valero Energy) the Southlake refined product pipeline,
which transports refined products from Valero Energy's McKee refinery to
the Dallas-Forth Worth area, for $30,000,000. Effective March 18, 2003,
Valero L.P. and Valero Energy entered into (i) a contribution agreement
whereby Valero Energy contributed to Valero Logistics Operations, L.P.
(Valero Logistics) certain crude oil and other feedstock storage tank
assets in exchange for an aggregate amount of $200,000,000 in cash, and
(ii) a contribution agreement whereby Valero Energy contributed to
Valero Logistics certain refined product pipelines and refined product
terminals (referred to as the South Texas Pipelines and Terminals) in
exchange for an aggregate amount of $150,000,000 in cash. Effective
January 7, 2003, Valero L.P. acquired an asphalt terminal in Pittsburg,
California from Telfer Oil Company for $15,100,000. The statement of
income for the three months ended September 30, 2003, includes $908,000
of operating income related to the Southlake refined product pipeline
and Paulsboro refined product teriminal, $7,336,000 of operating income
related to the storage tank assets and the South Texas Pipelines and
Terminals and $260,000 of operating income related to the Telfer asphalt
terminal. The statement of income for the nine months ended September
30, 2003, includes $908,000 of operating income related to the Southlake
refined product pipeline and Paulsboro refined product terminal,
$17,709,000 of operating income related to the storage tank assets and
the South Texas Pipelines and Terminals for the period from March 19,
2003 through September 30, 2003, and $1,171,000 of operating income
related to the Telfer asphalt terminal. Partially offsetting the
increase in operating income resulting from the acquisitions is an
increase in net interest expense due to additional borrowings to
partially fund the 2003 acquisitions.
2. Interest expense increased for the three months and nine months ended
September 30, 2003 as compared to the three months and nine months ended
September 30, 2002 primarily due to interest expense related to
$250,000,000 of 6.05% senior notes issued on March 18, 2003 and
$100,000,000 of 6.875% senior notes issued on July 10, 2002. The
proceeds from the 6.875% senior note offering were used to repay
borrowings under the variable-rate revolving credit facility. The
proceeds from the 6.05% senior notes and $25,000,000 of borrowings under
the revolving credit facility were used to fund a portion of the
acquisitions discussed in Note 1 and the redemption of common units
discussed in Note 5. During the nine months ended September 30, 2003,
Valero Logistics entered into various interest rate swaps, which
effectively convert $167,500,000 of fixed rate debt to variable rate
debt.
3. Net income for the nine months ended September 30, 2002 includes
$650,000 (net of income tax expense of $395,000) related to the Wichita
Falls Business for the month ended January 31, 2002. Such net income was
allocated entirely to the general partner.
4. Net income is allocated between limited partners and the general
partner's interests. Then such apportioned net income applicable to the
limited partners is divided by the weighted average number of limited
partnership units outstanding for such class. Net income per unit
applicable to limited partners for each of the quarters of 2003 was
impacted by the common unit offerings completed in 2003 discussed in
Note 5. As a result, the net income per unit applicable to limited
partners for the year-to-date period does not equal the sum of each
quarterly per unit amount.
5. On August 11, 2003, Valero L.P. closed on a public offering of 1,236,250
common units for total proceeds of $48,239,000, net of underwriter's
discount. On March 18, 2003, Valero L.P. redeemed from Valero Energy
3,809,750 common units for $134,065,000 in cash, using a portion of the
proceeds from the $250,000,000 senior notes discussed in Note 2. Also on
March 18, 2003, Valero L.P. closed on a public offering of 5,750,000
common units for total proceeds of $202,342,000, net of underwriters'
discount. On April 16, 2003, Valero L.P. closed on the exercise of a
portion of the overallotment option related to the March 2003 public
offering by selling 581,000 common units for total proceeds of
$20,445,000, net of underwriters' discount. As a result of these common
unit transactions, Valero Energy's aggregate ownership interest in
Valero L.P. was reduced to 45.8%, including Riverwalk Logistics, L.P.'s
2% general partner interest.
Valero L.P.
Consolidated Financial Information - Continued
September 30, 2003 and 2002
6. The following is a reconciliation of income before income tax expense to
EBITDA and distributable cash flow (in thousands):
<caption>
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Income before income tax expense $ 19,680 $ 14,950 $ 50,194 $ 40,707
Plus interest expense, net 4,504 1,738 11,617 3,090
Plus depreciation and amortization 7,135 4,157 18,687 12,388
-------- -------- -------- --------
EBITDA 31,319 20,845 80,498 56,185
Less equity income from Skelly-Belvieu
Pipeline Company (657) (843) (1,988) (2,365)
Less interest expense, net (4,504) (1,738) (11,617) (3,090)
Less reliability capital expenditures (2,664) (1,304) (5,302) (2,834)
Plus distributions from Skelly-Belvieu
Pipeline Company 595 1,043 2,222 2,665
-------- -------- -------- --------
Distributable cash flow $ 24,089 $ 18,003 $ 63,813 $ 50,561
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