VALERO L.P. AND VALERO LOGISTICS OPERATIONS, L.P.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)
These consolidated and combined financial statements should be read along with
the audited consolidated and combined financial statements and notes thereto
included in Valero L.P.'s Form 10-K/A filed on April 3, 2002 and Valero L.P.'s
Form 8-K/A dated February 1, 2002 and filed on April 16, 2002.
Acquisition of the Wichita Falls Business
On February 1, 2002, the Partnership acquired the Wichita Falls Crude Oil
Pipeline and Storage Business (the Wichita Falls Business) from Valero Energy
for a total cost of $64,000,000. The purchase price was funded with borrowings
under the Partnership's revolving credit facility.
The Wichita Falls Business consists of the following assets:
o A 271.7 mile pipeline originating in Wichita Falls, Texas and ending at
Valero Energy's McKee refinery in Dumas, Texas. The pipeline has the
capacity to transport 110,000 barrels per day of crude oil gathered or
acquired by Valero Energy at Wichita Falls. The Wichita Falls crude oil
pipeline connects to third party pipelines that originate along the Texas
o Four storage tanks located in Wichita Falls, Texas with a total capacity of
In the fourth quarter of 2001, UDS completed an expansion project to increase
the capacity of the crude oil pipeline from 85,000 barrels per day to 110,000
barrels per day and to increase the capacity of the storage facility from
360,000 barrels to 660,000 barrels.
Since the acquisition of the Wichita Falls Business represents the transfer of a
business under the common control of Valero Energy, the balance sheet as of
December 31, 2001 and the statements of income and cash flows for the month
ended January 31, 2002 (preceding the acquisition date) have been restated to
include the Wichita Falls Business. The assumed transfer to the Partnership as
of December 31, 2001 (the earliest date on which common control existed) and the
restatement of the January 2002 statements of income and cash flows have been
recorded based on Valero Energy's historical cost, which was based on Valero
Energy's allocation of the purchase price paid for UDS. The balance sheet of the
Wichita Falls Business as of December 31, 2001, which is included in the
combined balance sheet as of December 31, 2001, includes the following amounts
in the respective captions.
December 31, 2001
Balance Sheet Caption
Property, plant and equipment................... $ 64,160
Accrued liabilities............................. 131
Taxes other than income taxes................... 251
Deferred income tax liabilities................. 13,147
Net parent investment........................... 50,631