VLI Valero Lp

Valero L.P. (NYSE:VLI) today announced income applicable to limited partners from continuing operations of $33.0 million, or $0.70 per unit, for the fourth quarter of 2006 compared to $25.1 million, or $0.54 per unit, for the fourth quarter of 2005. For the year ended December 31, 2006, income applicable to limited partners from continuing operations was $133.0 million, or $2.84 per unit, compared to $97.0 million or $2.76 per unit. Distributable cash flow available to limited partners from continuing operations for the fourth quarter of 2006 was $45.3 million, or $0.97 per unit, compared to $42.9 million, or $0.92 per unit, for the fourth quarter of 2005. For the year ended December 31, 2006, distributable cash flow available to limited partners from continuing operations was $195.7 million, or $4.18 per unit, compared to $142.6 million, or $4.09 per unit. As of December 31, 2006, the partnership�s debt-to-capitalization ratio was 41.9 percent compared to 38.1 percent as of December 31, 2005. With respect to the quarterly distribution to unitholders payable for the fourth quarter of 2006, Valero L.P. also announced that it has declared a distribution of $0.915 per unit, or $3.66 per unit on an annual basis, which will be paid on February 14, 2007, to holders of record as of February 7, 2007. This distribution represents an increase of $0.06 per unit, or 7 percent, over the distribution for the fourth quarter of 2005. In total, Valero L.P. declared cash distributions for 2006 of $3.60 per unit, up 7 percent from $3.365 per unit in distributions for 2005 and on target with its previously stated goal. Distributable cash flow available to limited partners from continuing operations covers the distribution to the limited partners by 1.06 times for the fourth quarter of 2006 and 1.16 times for the full year of 2006. �We are pleased to end the year with solid fourth quarter results as earnings came in at the top of our guidance range of $0.60 to $0.70 per unit,� said Curt Anastasio, Valero L.P.�s Chief Executive Officer. �We are also pleased with our full year results, as net income applicable to limited partners from continuing operations and distributable cash flow available to limited partners from continuing operations increased by approximately 37 percent each compared to last year. �During 2006, we had several notable achievements that will position Valero L.P. for further growth. We completed around $92 million of expansion projects, started many construction projects as part of our $300 million capital expenditure program and acquired the St. James crude oil terminal in Louisiana for $140 million. We also completed the financial separation of Valero L.P. from Valero Energy with the recent follow-on offering by Valero GP Holdings, LLC this past December, which will free each company to pursue its strategic objectives independently. �We are making significant progress on the expansion projects already started at our terminals in Amsterdam, St. Eustatius, Linden (New York Harbor), Texas City, Portland, Stockton and Savannah. We expect the majority of these projects will start contributing to the partnership�s earnings starting in mid to late 2007. Construction on our Vancouver terminal in Washington is scheduled to start in March. Additionally, at our Baltimore terminal, we have recently constructed a new dock line and completed tank repairs, which has returned to service around 230,000 barrels of storage capacity for one of our customers. �With respect to new expansion projects, I am pleased to announce that we plan to start construction on expanding our St. James crude oil terminal later this quarter. In total, we will spend around $54 million on four additional crude oil tanks with a total storage capacity of approximately 1.45 million barrels. These tanks should be in service by mid-2008. We have also identified an additional $30 million of expansion projects at our Amsterdam terminal on top of the $68 million of projects that are currently underway. These projects will contribute an additional one million barrels of storage to this facility and are expected to be complete in early to mid-2008. Last, we have identified an additional $21 million of expansion projects at our Texas City terminal on top of the $8.5 million of projects that are currently underway, which should add another 430 thousand barrels of storage capacity and will be in service by mid-2008. We continue to identify and evaluate other major expansion projects and look forward to the strong growth opportunities this will provide the partnership. �Looking ahead to the first quarter of 2007, we believe results will be in the range of $0.45 to $0.55 per unit, as we previously disclosed. Despite lower expectations for Valero L.P.�s first quarter of 2007, we believe earnings before interest, taxes, depreciation and amortization (�EBITDA�) will be higher in 2007 compared to 2006 driven primarily by the Burgos pipeline project completed in July 2006, the acquisition of our St. James crude oil terminal in December 2006 and the ramp-up of terminal expansion projects. Additionally, we are targeting a 7 percent increase in our distribution from the $3.60 per unit in distributions declared for 2006,� said Anastasio. A conference call with management is scheduled for 2:30 p.m. ET (1:30 p.m. CT) today to discuss the financial and operational results for the fourth quarter of 2006. Investors interested in listening to the presentation may call 800-622-7620, passcode 5994994. International callers may access the presentation by dialing 706-645-0327, passcode 5994994. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 5994994. A live broadcast of the conference call will also be available on the partnership�s website at www.valerolp.com. Valero L.P. is a publicly traded, limited partnership based in San Antonio, with 9,303 miles of pipeline, 87 terminal facilities and four crude oil storage facilities. One of the largest independent terminal and petroleum liquids pipeline operators in the nation, the partnership has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership�s combined system has approximately 80 million barrels of storage capacity, and includes crude oil and refined product pipelines, refined product terminals, a petroleum and specialty liquids storage and terminaling business, as well as crude oil storage tank facilities. For more information, visit Valero L.P.'s website at www.valerolp.com. 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 2005 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Valero L.P. Consolidated Financial Information December 31, 2006 and 2005 (unaudited, thousands of dollars, except unit data and per unit data) � Three Months Ended Year Ended December 31, December 31, 2006� 2005� 2006� 2005� Statement of Income Data (Note 1): (Note 2) (Note 2) Revenues: Services revenues $ 162,790� $ 144,043� $ 624,701� $ 407,194� Product sales 127,889� 142,188� 510,973� 252,363� Total revenues 290,679� 286,231� 1,135,674� 659,557� � Costs and expenses: Cost of product sales 116,016� 128,589� 466,276� 229,806� Operating expenses 79,877� 75,592� 312,604� 185,351� General and administrative expenses 14,893� 9,489� 45,216� 26,553� Depreciation and amortization 26,244� 24,640� 100,266� 64,895� Total costs and expenses 237,030� 238,310� 924,362� 506,605� Operating income 53,649� 47,921� 211,312� 152,952� Equity earnings from joint ventures 1,368� (21) 5,882� 2,319� Interest and other expenses, net (13,797) (16,539) (61,427) (42,883) Income from continuing operations before income tax expense 41,220� 31,361� 155,767� 112,388� Income tax expense 3,864� 2,663� 5,861� 4,713� Income from continuing operations 37,356� 28,698� 149,906� 107,675� Income (loss) from discontinued operations 1� (908) (376) 3,398� Net income applicable to general partner and limited partners' interest 37,357� 27,790� 149,530� 111,073� Net income applicable to general partner (Note 3) (4,360) (3,543) (16,910) (10,758) Net income applicable to limited partners $ 32,997� $ 24,247� $ 132,620� $ 100,315� � � Income per unit applicable to limited partners (Note 3): � Continuing operations $ 0.70� $ 0.54� $ 2.84� $ 2.76� Discontinued operations -� (0.02) (0.01) 0.10� Net income $ 0.70� $ 0.52� $ 2.83� $ 2.86� � Weighted average number of basic and diluted units outstanding 46,809,749� 46,809,749� 46,809,749� 35,023,250� � EBITDA from continuing operations (Note 4) $ 84,824� $ 71,298� $ 322,299� $ 218,671� � Distributable cash flow from continuing operations (Note 4) $ 50,213� $ 46,862� $ 214,203� $ 153,873� � December 31, 2006� 2005� Balance Sheet Data: Long-term debt, including current portion (a) $ 1,354,367� $ 1,170,705� Partners' equity (b) 1,875,681� 1,900,779� Debt-to-capitalization ratio (a) / ((a)+(b)) 41.9% 38.1% Valero L.P. Consolidated Financial Information - Continued December 31, 2006 and 2005 (unaudited, thousands of dollars, except barrel information) � Three Months Ended Year Ended December 31, December 31, 2006� 2005� 2006� 2005� � Operating Data: Refined product terminals (Note 2): Throughput (barrels/day) (a) 265,352� 221,798� 262,560� 245,084� Throughput revenues $ 12,563� $ 9,809� $ 49,252� $ 43,617� Storage lease revenues 64,573� 58,941� 247,524� 115,352� Product sales (bunkering) 123,213� 142,188� 505,531� 252,363� Total revenues 200,349� 210,938� 802,307� 411,332� Cost of product sales 112,367� 128,589� 462,029� 229,806� Operating expenses 48,731� 44,935� 192,357� 94,607� Depreciation and amortization 12,289� 9,353� 45,485� 25,008� Segment operating income $ 26,962� $ 28,061� $ 102,436� $ 61,911� � Refined product pipelines: Throughput (barrels/day) 712,252� 652,689� 711,476� 556,654� Throughput revenues $ 59,542� $ 51,244� $ 222,356� $ 149,853� Product sales 4,676� -� 5,442� -� Total revenues 64,218� 51,244� 227,798� 149,853� Cost of product sales 3,649� -� 4,247� -� Operating expenses 23,804� 23,309� 93,314� 64,671� Depreciation and amortization 10,788� 12,245� 42,084� 27,778� Segment operating income $ 25,977� $ 15,690� $ 88,153� $ 57,404� � Crude oil pipelines: Throughput (barrels/day) 408,424� 348,260� 421,666� 358,965� Revenues $ 14,665� $ 11,828� $ 58,654� $ 51,429� Operating expenses 4,279� 3,914� 16,825� 16,378� Depreciation and amortization 1,252� 1,155� 5,061� 4,612� Segment operating income $ 9,134� $ 6,759� $ 36,768� $ 30,439� � Crude oil storage tanks: Throughput (barrels/day) 499,483� 532,425� 502,689� 517,409� Revenues $ 11,447� $ 12,221� $ 46,915� $ 46,943� Operating expenses 3,063� 3,434� 10,108� 9,695� Depreciation and amortization 1,915� 1,887� 7,636� 7,497� Segment operating income $ 6,469� $ 6,900� $ 29,171� $ 29,751� � Consolidated Information: Revenues $ 290,679� $ 286,231� $ 1,135,674� $ 659,557� Cost of product sales 116,016� 128,589� 466,276� 229,806� Operating expenses 79,877� 75,592� 312,604� 185,351� Depreciation and amortization 26,244� 24,640� 100,266� 64,895� Segment operating income 68,542� 57,410� 256,528� 179,505� General and administrative expenses 14,893� 9,489� 45,216� 26,553� Consolidated operating income $ 53,649� $ 47,921� $ 211,312� $ 152,952� � � (a) Excludes throughputs related to the storage lease and bunkering revenues. Notes: 1. The statement of income data for the years ended December 31, 2006 and 2005 includes $96.7 million and $55.5 million, respectively, of operating income related to the Kaneb Acquisition on July 1, 2005. Of the $96.7 million and $55.5 million for the years ended December 31, 2006 and 2005, respectively, $64.8 million and $42.3 million is attributed to the refined product terminals segment, respectively, and $31.9 million and $13.2 million is attributed to the refined product pipelines segment, respectively. 2. Certain previously reported amounts in the statement of income data for 2005 have been reclassified to conform to the 2006 presentation. 3. Income is allocated between limited partners and the general partner's interests based on provisions in the partnership agreement. The income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the income per unit applicable to limited partners. On July 1, 2005, Valero L.P. issued 23,768,355 of common units in exchange for all of the outstanding common units of Kaneb Pipe Line Partners, L.P. During the year ended December 31, 2006 our general partner reimbursed us for certain charges we incurred related to services historically provided under our Services Agreement with Valero Energy Corporation. Generally accepted accounting principles require us to record the charges as expenses and record the reimbursement as partner's capital contribution. Valero L.P. Consolidated Financial Information - Continued December 31, 2006 and 2005 (unaudited, thousands of dollars, except unit data and per unit data) � � Notes: (continued) � The following table details the calculation of net income applicable to the general partner (in thousands): � Three Months Ended Year Ended December 31, December 31, 2006� 2005� 2006� 2005� � � Net income applicable to general partner and limited partners' interest $ 37,357� $ 27,790� $ 149,530� $ 111,073� Charges reimbursed by general partner 223� -� 575� -� Net income before charges reimbursed by general partner 37,580� 27,790� 150,105� 111,073� General partner incentive distribution 3,909� 3,049� 14,778� 8,711� Net income before charges reimbursed by general partner and after general partner incentive distribution 33,671� 24,741� 135,327� 102,362� General partner interest 2% 2% 2% 2% � � General partner allocation of net income before charges reimbursed by general partner and after general partner incentive distribution 674� 494� 2,707� 2,047� Charges reimbursed by general partner (223) -� (575) -� General partner incentive distribution 3,909� 3,049� 14,778� 8,711� Net income applicable to general partner $ 4,360� $ 3,543� $ 16,910� $ 10,758� 4. Valero L.P. utilizes two financial measures, EBITDA from continuing operations and distributable cash flow from continuing operations, 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 from continuing operations nor distributable cash flow from continuing operations are intended to represent cash flows for the period, nor are they presented as an alternative to income from continuing 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. Distributable cash flow from continuing operations per limited partner unit for the year and three months ended December 31, 2005 differs from previously reported amounts. The difference results from a change in methodology for calculating the amount of distributable cash flow applicable to the general partner, which Valero L.P. adopted in the fourth quarter of 2006. Under the new methodology, the amount of distributable cash flow applicable to the general partner equals the amount they will actually receive based upon the current distribution. The following is a reconciliation of income from continuing operations to EBITDA from continuing operations and distributable cash flow from continuing operations (in thousands): Three Months Ended Year Ended December 31, December 31, 2006� 2005� 2006� 2005� � Income from continuing operations $ 37,356� $ 28,698� $ 149,906� $ 107,675� Plus interest expense, net 17,360� 15,297� 66,266� 41,388� Plus income tax expense (benefit) 3,864� 2,663� 5,861� 4,713� Plus depreciation and amortization 26,244� 24,640� 100,266� 64,895� EBITDA from continuing operations 84,824� 71,298� 322,299� 218,671� Less equity earnings from joint ventures (1,368) 21� (5,882) (2,319) Less interest expense, net (17,360) (15,297) (66,266) (41,388) Less reliability capital expenditures (12,986) (11,338) (35,803) (23,707) Less income tax expense (3,864) (2,663) (5,861) (4,713) Plus general partner reimbursable charges 223� -� 575� -� Plus distributions from joint ventures 744� 2,169� 5,141� 4,657� Plus other non-cash items -� 2,672� -� 2,672� Distributable cash flow from continuing operations 50,213� 46,862� 214,203� 153,873� � General partner's interest in distributable cash flow from continuing operations (4,864) (3,928) (18,520) (11,300) Limited partners' interest in distributable cash flow from continuing operations $ 45,349� $ 42,934� $ 195,683� $ 142,573� � Weighted average number of basic and diluted units outstanding 46,809,749� 46,809,749� 46,809,749� 35,023,250� � Distributable cash flow from continuing operations per limited partner unit $ 0.969� $ 0.917� $ 4.181� $ 4.094�