UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
NOVEMBER 1, 2004
VALERO L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-16417 74-2956831
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification No.)
of incorporation)
One Valero Way
San Antonio, Texas 78249
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 345-2000
------------------------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[x] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On November 1, 2004, Valero L.P., a Delaware limited partnership, issued a press
release announcing financial results for the quarter ended September 30, 2004.
A copy of the press release announcing the financial results is furnished with
this report as Exhibit 99.1, and is incorporated herein by reference.
The information in this report is being furnished, not filed, pursuant to Item
2.02 of Form 8-K. Accordingly, the information in this report, including the
press release, will not be incorporated by reference into any registration
statement filed by the Company under the Securities Act of 1933, as amended,
unless specifically identified therein as being incorporated therein by
reference.
NON-GAAP FINANCIAL MEASURES
The press release announcing the earnings discloses certain financial measures,
EBITDA and distributable cash flow, that are non-GAAP financial measures as
defined under SEC rules. The press release furnishes a reconciliation of these
non-GAAP financial measures to their nearest GAAP financial measures. Management
uses these financial measures because they are widely accepted financial
indicators used by investors to compare partnership performance. In addition,
management believes that these measures provide investors an enhanced
perspective of the operating performance of the partnership's assets and the
cash that the business is generating. Neither EBITDA nor distributable cash flow
are intended to represent cash flows for the period, nor are they presented as
an alternative to net income or cash flow from operations. They should not be
considered in isolation or as substitutes for a measure of performance prepared
in accordance with United States generally accepted accounting principles.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Press Release dated November 1, 2004.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALERO L.P.
By: Riverwalk Logistics, L.P.
Valero L.P.'s general partner
By: Valero GP, LLC
Riverwalk Logistics, L.P.'s
general partner
Date: November 1, 2004 By:/s/Bradley C. Barron
-----------------------------
Name: Bradley C. Barron
Title: Corporate Secretary
VALERO L.P. REPORTS THIRD QUARTER EARNINGS
AND ANNOUNCES QUARTERLY DISTRIBUTION
SAN ANTONIO, November 1, 2004 -- Valero L.P. (NYSE: VLI) today announced net
income applicable to limited partners of $17.9 million, or $0.78 per unit, for
the third quarter of 2004, compared to $18.5 million, or $0.82 per unit, for the
third quarter of 2003. For the nine months ended September 30, 2004, net income
applicable to limited partners was $54.6 million, or $2.37 per unit, compared to
$47.4 million, or $2.23 per unit, for the nine months ended September 30, 2003.
Distributable cash flow available to limited partners for the third quarter was
$22.7 million, compared to $21.3 million for the third quarter of 2003.
With respect to the quarterly distribution to unitholders payable for the third
quarter of 2004, Valero L.P. also announced that it has declared a distribution
of $0.80 per unit payable November 12, 2004 to holders of record as of November
8, 2004.
"Although we had a solid quarter operationally, our financial results were
impacted by a 16-day outage on the primary gasoline producing unit at Valero
Energy's McKee refinery," said Curt Anastasio, Valero L.P.'s Chief Executive
Officer. "Given that our logistics system supporting the McKee refinery
typically contributes approximately 40 percent of our operating income, the
outage affected this quarter's earnings by approximately five cents per unit.
Even with this outage, our distribution coverage to limited partners remains
strong at 1.23 times our current quarterly distribution rate of 80 cents per
unit.
"Looking at the fourth quarter, Valero Energy's Benicia refinery is currently
down for a planned 35-day plant-wide turnaround that is nearing completion.
Since we own the crude storage facilities at that plant, we expect this to
affect our fourth quarter earnings by about five cents per unit, so we expect
fourth quarter earnings to be about the same as we achieved in the third
quarter," said Anastasio.
Valero L.P. also announced this morning a proposed merger with Kaneb Pipe Line
Partners, L.P. and the acquisition of its general partner, Kaneb Services, LLC.
"We are excited about the tremendous opportunities created by this proposed
merger. This is a significant milestone for the partnership that will greatly
expand our geographic and product diversification making us the largest terminal
operator and second largest petroleum liquids pipeline operator in the United
States. In addition, we believe that the transaction will be significantly
accretive to cash flow. Upon completion of the merger, we intend to increase our
distribution to $3.42 per unit annually, which is a nearly 7 percent increase
from our current rate of $3.20 per unit annually. We anticipate closing in the
first quarter of 2005 and expect to quickly integrate these assets into our
system," said Anastasio.
-More-
A conference call with management is scheduled for 10:00 a.m. ET (9:00 a.m. CT)
today, November 1, 2004, to discuss the proposed merger with Kaneb Pipe Line
Partners, L.P. and the proposed purchase of Kaneb Services, LLC and respond to
questions regarding the financial and operational results for the third quarter
of 2004. Anyone interested in listening to the presentation may call
800/901-5218, passcode VALERO, or visit the partnership's web site at
www.valerolp.com.
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.
INVESTOR NOTICE
Valero L.P., Kaneb Services, LLC ("Kaneb Services") and Kaneb Pipe Line
Partners, L.P. ("Kaneb Partners") will file a proxy statement and/or a joint
proxy statement/prospectus and other documents with the Securities and Exchange
Commission. Investors and security holders are urged to read carefully these
documents when they become available because they will contain important
information regarding Valero L.P., Kaneb Services, Kaneb Partners and the
merger. A definitive proxy statement and/or joint proxy statement/prospectus
will be sent to security holders of Valero L.P., Kaneb Services, and Kaneb
Partners seeking their approval of the transactions contemplated by the merger
agreements. Investors and security holders may obtain a free copy of the proxy
statement and/or joint proxy statement/prospectus (when available) and other
documents containing information about Valero L.P., Kaneb Services, and Kaneb
Partners, without charge, at the SEC's web site at www.sec.gov. Copies of the
proxy statement and/or definitive joint proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the joint proxy
statement/prospectus may also be obtained free of charge by directing a request
to Kaneb Services or the respective partnerships.
Valero L.P., Kaneb Services, Kaneb Partners, and the officers and directors of
Kaneb Services and of the respective general partners of Valero L.P. and Kaneb
Partners may be deemed to be participants in the solicitation of proxies from
their security holders. Information about these persons can be found in Valero
L.P.'s, Kaneb Services', and Kaneb Partners' respective Annual Reports on Form
10-K filed with the SEC, and additional information about such persons may be
obtained from the proxy statement and/or joint proxy statement/prospectus when
available.
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 2003 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.
-30-
VALERO L.P.
CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED, IN THOUSANDS, EXCEPT UNIT DATA AND PER UNIT DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2004 2003 2004 2003
---- ---- ---- ----
STATEMENT OF INCOME
DATA (NOTE 1):
Revenues $ 58,075 $ 51,695 $ 166,106 $ 131,053
--------- --------- --------- --------
Costs and expenses:
Operating expenses 21,626 19,445 59,746 47,441
General and
administrative
expenses 3,588 1,588 8,233 5,102
Depreciation and
amortization 8,413 7,135 24,536 18,687
--------- --------- --------- --------
Total costs and expenses 33,627 28,168 92,515 71,230
--------- --------- --------- --------
OPERATING INCOME 24,448 23,527 73,591 59,823
Equity income from
Skelly-Belvieu
Pipeline Company 372 657 1,102 1,988
Interest and other
expense, net (5,433) (4,504) (15,630) (11,617)
--------- --------- --------- --------
NET INCOME 19,387 19,680 59,063 50,194
Net income applicable
to general partner
including incentive
distributions
(Note 2) (1,478) (1,138) (4,451) (2,828)
--------- --------- --------- --------
Net income applicable
to limited partners $ 17,909 $ 18,542 $ 54,612 $ 47,366
========= ========= ========= =========
Net income per unit
applicable to
limited partners
(Note 2) $ 0.78 $ 0.82 $ 2.37 $ 2.23
Weighted average
number of limited
partnership units
outstanding (Note 3) 23,041,394 22,477,019 23,041,394 21,256,196
Earnings before
interest, taxes
and depreciation
and amortization
(EBITDA,Note 4) $ 33,233 $ 31,319 $ 99,229 $ 80,498
Distributable cash
flow (Note 4) $ 25,684 $ 24,089 $ 76,690 $ 63,813
SEPTEMBER 30, DECEMBER 31
---------------------------
2004 2003 2003
---- ---- ----
BALANCE SHEET DATA:
Long-term debt,
including current
portion (a) $ 395,599 $ 358,095 $ 54,192
Partners' equity (b) 438,903 437,168 438,163
Debt-to-capitalization
ratio (a) / ((a)+(b)) 47.4% 45.0% 44.7%
See accompanying notes below.
VALERO L.P.
CONSOLIDATED FINANCIAL INFORMATION - CONTINUED
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED, IN THOUSANDS, EXCEPT BARREL INFORMATION)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2004 2003 2004 2003
---- ---- ---- ----
OPERATING DATA:
CRUDE OIL PIPELINES:
Throughput
(barrels/day) 380,395 385,181 384,643 355,636
Revenues $ 13,231 $ 14,166 $ 39,462 $ 38,707
Operating
expenses 4,225 4,173 11,825 11,827
Depreciation and
amortization 1,136 1,227 3,368 4,083
--------- --------- --------- --------
SEGMENT OPERATING INCOME $ 7,870 $ 8,766 $ 24,269 $ 22,797
========= ========= ========= =========
REFINED PRODUCT
PIPELINES:
Throughput
(barrels/day) 433,695 432,885 440,853 375,945
Revenues $ 22,324 $ 20,819 $ 63,764 $ 51,439
Operating expenses 10,493 8,885 28,360 21,163
Depreciation and
amortization 3,690 3,405 10,978 8,815
--------- --------- --------- --------
SEGMENT OPERATING INCOME $ 8,141 $ 8,529 $ 24,426 $ 21,461
--------- --------- --------- --------
REFINED PRODUCT
TERMINALS:
Throughput
(barrels/day) 260,440 236,440 256,291 215,925
Revenues $ 11,150 $ 8,438 $ 30,259 $ 22,614
Operating expenses 4,677 4,553 13,930 11,020
Depreciation and
amortization 1,720 853 4,593 2,472
--------- --------- --------- --------
SEGMENT OPERATING INCOME $ 4,753 $ 3,032 $ 11,736 $ 9,122
========= ========= ========= ========
CRUDE OIL STORAGE
TANKS:
Throughput
(barrels/day) 517,135 433,921 490,190 330,192
Revenues $ 11,370 $ 8,272 $ 32,621 $ 18,293
Operating expenses 2,231 1,834 5,631 3,431
Depreciation and
amortization 1,867 1,650 5,597 3,317
--------- --------- --------- --------
SEGMENT OPERATING INCOME $ 7,272 $ 4,788 $ 21,393 $ 11,545
========= ========= ========= =========
CONSOLIDATED
INFORMATION:
Throughput
(barrels/day) 1,591,665 1,488,427 1,571,977 1,277,698
Revenues $ 58,075 $ 51,695 $ 166,106 $ 131,053
Operating expenses 21,626 19,445 59,746 47,441
Depreciation and
amortization 8,413 7,135 24,536 18,687
--------- --------- --------- --------
SEGMENT OPERATING INCOME 28,036 25,115 81,824 64,925
General and administrative
expenses 3,588 1,588 8,233 5,102
--------- --------- --------- --------
CONSOLIDATED
OPERATING INCOME $ 24,448 $ 23,527 $ 73,591 $ 59,823
========= ========= ========= =========
See accompanying notes below.
VALERO L.P.
CONSOLIDATED FINANCIAL INFORMATION - CONTINUED
SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
NOTES:
1. The statement of income data for the nine months ended September 30,
2004 includes $32 million of operating income related to the various
acquisitions completed by Valero L.P. during 2003 and 2004. These
acquisitions consist of the Paulsboro refined product terminal
acquired on September 3, 2003, the Southlake refined product
pipeline acquisition effective August 1, 2003, the Shell pipeline
interest acquired on May 1, 2003, the crude oil storage tanks and
the South Texas pipelines and terminals acquired on March 18, 2003
and on February 20, 2004, the Royal Trading asphalt terminals. The
statement of income for the nine months ended September 30, 2003
includes $20 million of operating income related to the 2003
acquisitions mentioned above.
2. Net income is allocated between limited partners and the general
partner's interests based on provisions in the partnership
agreement. The apportioned net income applicable to limited partners
is divided by the weighted average number of limited partnership
units outstanding in computing the net income per unit applicable to
limited partners. Net income per unit applicable to the general
partner includes incentive distributions, aggregating $1.1 million
and $0.8 million for the three months ended September 30, 2004 and
2003, respectively, and $3.3 million and $1.9 million for the nine
months ended September 30, 2004 and 2003, respectively.
3. The increase in outstanding limited partnership units over
comparable periods is due to the 2003 public offerings of common
units by Valero L.P. in March, April and August, in which 7,567,250
common units were sold. Partially offsetting the increase in new
units sold was the redemption in March 2003 of 3,809,750 common
units held by UDS Logistics, LLC, an affiliate of Valero Energy
Corporation. As of September 30, 2004, Valero L.P. has 23,041,394
common and subordinated units outstanding.
4. Valero L.P. utilizes two financial measures, EBITDA and
distributable cash flow, which are not defined in United States
generally accepted accounting principles. Management uses these
financial measures because they are widely accepted financial
indicators used by investors to compare partnership performance. In
addition, management believes that these measures provide investors
an enhanced perspective of the operating performance of the
partnership's assets and the cash that the business is generating.
Neither EBITDA nor distributable cash flow are intended to represent
cash flows for the period, nor are they presented as an alternative
to net income. They should not be considered in isolation or as
substitutes for a measure of performance prepared in accordance with
United States generally accepted accounting principles.
The following is a reconciliation of net income to EBITDA and
distributable cash flow (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2004 2003 2004 2003
---- ---- ---- ----
Net income $ 19,387 $ 19,680 $ 59,063 $ 50,194
Plus interest and
other expense, net 5,433 4,504 15,630 11,617
Plus depreciation
and amortization 8,413 7,135 24,536 18,687
--------- --------- --------- --------
EBITDA 33,233 31,319 99,229 80,498
Less equity income
from Skelly-Belvieu
Pipeline Company (372) (657) (1,102) (1,988)
Less interest and
other expense, net (5,433) (4,504) (15,630) (11,617)
Less reliability
capital expenditures (1,992) (2,664) (7,030) (5,302)
Plus distributions
from Skelly-Belvieu
Pipeline Company 248 595 1,223 2,222
--------- --------- --------- --------
DISTRIBUTABLE
CASH FLOW $ 25,684 $ 24,089 $ 76,690 $ 63,813
General Partner
interest in
distributable
cash flow (2,946) (2,815) (8,748) (6,782)
--------- --------- --------- --------
Limited Partners'
interest in
distributable
cash flow $ 22,738 $ 21,274 $ 67,942 $ 57,031
========= ========= ========= =========