Valero Energy Partners LP Reports Second Quarter 2015 Results

-- Second quarter 2015 EBITDA of $42.7 million and distributable cash flow of $40.1 million

-- Cash distribution for second quarter 2015 increased to $0.2925 per unit

Aug 05, 2015, 07:34 ET from Valero Energy Partners LP

SAN ANTONIO, Aug. 5, 2015 /PRNewswire/ -- Valero Energy Partners LP (NYSE: VLP, the Partnership), today reported second quarter 2015 net income attributable to partners of $33.7 million, or $0.54 per common limited partner unit.  The Partnership generated earnings before interest, income taxes, depreciation, and amortization (EBITDA) of $42.7 million and distributable cash flow of $40.1 million.  VLP's coverage ratio for the second quarter of 2015 was 2.17x.

"We're pleased with our growth trajectory," said Joe Gorder, Chairman and Chief Executive Officer of VLP's general partner.  "We're advancing our plans for the next acquisition and remain on course to reach Valero's target for $1 billion of drop downs in 2015."   

On July 24, 2015, the board of directors of VLP's general partner declared a second quarter 2015 cash distribution of $0.2925 per unit.  This distribution represents a 5.4 percent increase from the first quarter of 2015 and an increase of 31.5 percent from the second quarter of 2014. 

Financial Results Second quarter 2015 revenues were $60.2 million, an increase of $28.4 million versus second quarter 2014 revenues.  Primary contributors to the increase were revenues generated from the newly acquired Houston and St. Charles terminals and higher throughput volumes in the Memphis logistics system. 

Operating expenses in the second quarter of 2015 were $14.4 million, general and administrative expenses were $3.2 million, and depreciation expense was $7.7 million

Liquidity and Financial Position As of June 30, 2015, the Partnership had $152 million of total liquidity consisting of $52 million in cash and cash equivalents and $100 million available on its revolving credit facility.  Capital expenditures attributable to the Partnership in the second quarter of 2015 were $1.1 million, including $0.9 million for maintenance and $0.2 million for expansion.  For 2015, capital expenditures attributable to the Partnership are expected to total $11.6 million, of which $6.1 million is for maintenance. 

Conference Call The Partnership's senior management will host a conference call at 3 p.m. ET today to discuss this earnings release.  A live broadcast of the conference call will be available on the Partnership's website at www.valeroenergypartners.com.

About Valero Energy Partners LP Valero Energy Partners LP is a fee-based master limited partnership formed by Valero Energy Corporation to own, operate, develop and acquire crude oil and refined products pipelines, terminals, and other transportation and logistics assets. With headquarters in San Antonio, the Partnership's assets include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the United States that are integral to the operations of seven of Valero's refineries. Please visit www.valeroenergypartners.com for more information.

Contacts Investors:  John Locke, Vice President – Investor Relations, 210-345-3077 Karen Ngo, Manager – Investor Relations, 210-345-4574

Media: Bill Day, Vice President – Communications, 210-345-2928

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Safe-Harbor Statement This release contains forward-looking statements within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. You can identify forward-looking statements by words such as "anticipate," "believe," "estimate," "expect," "forecast," "project," "could," "may," "should," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Partnership's control and are difficult to predict. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of the Partnership. Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.  When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in the Partnership's filings with the U.S. Securities and Exchange Commission, including the Partnership's annual reports on Form 10-K and quarterly reports on Form 10-Q, available on the Partnership's website at www.valeroenergypartners.com. These risks could cause the Partnership's actual results to differ materially from those contained in any forward-looking statement.

Use of Non-GAAP Financial Information This earnings release includes the terms "EBITDA," "distributable cash flow," and "coverage ratio."  These terms are supplemental financial measures that are not defined under U.S. generally accepted accounting principles (GAAP). We reconcile these non-GAAP measures to the most directly comparable GAAP measures in the tables that accompany this release.  In note (k) to the tables that accompany this release, we disclose the reasons why we believe our use of the non-GAAP financial measures in this release provides useful information.

VALERO ENERGY PARTNERS LP

EARNINGS RELEASE

(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Statement of income data (a):

Operating revenues – related party (b)

$

60,245

$

31,843

$

102,131

$

61,332

Costs and expenses:

Operating expenses (c)

14,374

16,315

32,238

32,552

General and administrative expenses (d)

3,160

3,361

6,725

6,458

Depreciation expense (e)

7,715

6,132

15,203

12,048

Total costs and expenses

25,249

25,808

54,166

51,058

Operating income

34,996

6,035

47,965

10,274

Other income, net (f)

26

493

137

1,159

Interest and debt expense, net of capitalized interest (g)

(1,411)

(221)

(2,012)

(449)

Income before income taxes

33,611

6,307

46,090

10,984

Income tax expense (benefit) (h)

(51)

150

(177)

307

Net income

33,662

6,157

46,267

10,677

Less:  Net loss attributable to Predecessor

(6,043)

(9,516)

(12,005)

Net income attributable to partners

33,662

12,200

55,783

22,682

Less:  General partner's interest in net income

1,357

244

2,209

454

Limited partners' interest in net income

$

32,305

$

11,956

$

53,574

$

22,228

Net income per limited partner unit (basic and diluted):

Common units

$

0.54

$

0.21

$

0.91

$

0.39

Subordinated units

$

0.54

$

0.21

$

0.90

$

0.39

Weighted-average limited partner units outstanding (basic and diluted):

Common units – public

17,250

17,250

17,250

17,250

Common units – Valero

13,448

11,540

12,816

11,540

Subordinated units – Valero

28,790

28,790

28,790

28,790

See Notes to Earnings Release on Table Page 7.

 

 

VALERO ENERGY PARTNERS LP

EARNINGS RELEASE

(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Operating highlights (a):

Pipeline transportation:

Pipeline transportation revenues (b)

$

19,967

$

16,006

$

39,842

$

31,240

Pipeline transportation throughput (BPD) (i)

953,123

870,341

966,399

840,512

Average pipeline transportation revenue per barrel (j)

$

0.23

$

0.20

$

0.23

$

0.21

Terminaling:

Terminaling revenues (b)

$

40,143

$

15,549

$

62,019

$

29,516

Terminaling throughput (BPD)

1,379,757

632,614

1,095,173

600,911

Average terminaling revenue per barrel (j)

$

0.32

$

0.27

$

0.31

$

0.27

Storage revenues

$

135

$

288

$

270

$

576

Total operating revenues – related party

$

60,245

$

31,843

$

102,131

$

61,332

Capital expenditures (a):

Maintenance

$

863

$

4,570

$

4,223

$

8,348

Expansion

211

15,155

1,829

33,853

Total capital expenditures

1,074

19,725

6,052

42,201

Less: Capital expenditures attributable to Predecessor

17,365

3,693

38,977

Capital expenditures attributable to Partnership

$

1,074

$

2,360

$

2,359

$

3,224

Other financial information:

Distribution declared per unit

$

0.2925

$

0.2225

$

0.5700

$

0.4350

EBITDA attributable to Partnership (k)

$

42,737

$

15,565

$

70,547

$

29,423

Distributable cash flow (k)

$

40,051

$

15,650

$

67,503

$

29,215

Distribution declared:

Limited partner units – public

$

5,048

$

3,839

$

9,838

$

7,506

Limited partner units – Valero

12,355

8,974

24,076

17,544

General partner units – Valero

1,053

261

1,808

511

Total distribution declared

$

18,456

$

13,074

$

35,722

$

25,561

Coverage ratio (k)

2.17x

1.20x

1.89x

1.14x

June 30,

December 31,

2015

2014

Balance sheet data (a):

Cash and cash equivalents

$

52,042

$

236,579

Total assets

709,955

891,764

Current portion of debt and capital lease obligations

26,284

1,200

Debt and capital lease obligations, less current portion

335,675

1,519

Total debt and capital lease obligations

361,959

2,719

Partners' capital

340,227

880,910

Working capital

35,108

238,365

See Notes to Earnings Release on Table Page 7.

 

 

VALERO ENERGY PARTNERS LP

EARNINGS RELEASE

(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Reconciliation of net income to EBITDA and distributable cash flow (a)(k):

Net income

$

33,662

$

6,157

$

46,267

$

10,677

Plus:

Depreciation expense

7,715

6,132

15,203

12,048

Interest and debt expense, net of capitalized interest

1,411

221

2,012

449

Income tax expense (benefit)

(51)

150

(177)

307

EBITDA

42,737

12,660

63,305

23,481

Less:  EBITDA attributable to Predecessor

(2,905)

(7,242)

(5,942)

EBITDA attributable to Partnership

42,737

15,565

70,547

29,423

Plus:

Adjustments related to minimum throughput commitments

24

475

4

507

Projects prefunded by Valero

853

589

1,628

Other

384

Less:

Cash interest paid

1,406

229

1,578

465

Income taxes paid

441

9

441

9

Maintenance capital expenditures

863

1,005

2,002

1,869

Distributable cash flow

$

40,051

$

15,650

$

67,503

$

29,215

Reconciliation of net cash provided by operating activities to EBITDA and distributable cash flow (a)(k):

Net cash provided by operating activities

$

42,954

$

10,121

$

55,461

$

23,299

Plus:

Changes in current assets and current liabilities

(1,682)

2,191

6,073

(580)

Changes in deferred charges and credits and other operating activities, net

(41)

(19)

(459)

54

Interest and debt expense, net of capitalized interest

1,411

221

2,012

449

Current income tax expense

95

146

218

259

EBITDA

42,737

12,660

63,305

23,481

Less:  EBITDA attributable to Predecessor

(2,905)

(7,242)

(5,942)

EBITDA attributable to Partnership

42,737

15,565

70,547

29,423

Plus:

Adjustments related to minimum throughput commitments

24

475

4

507

Projects prefunded by Valero

853

589

1,628

Other

384

Less:

Cash interest paid

1,406

229

1,578

465

Income taxes paid

441

9

441

9

Maintenance capital expenditures

863

1,005

2,002

1,869

Distributable cash flow

$

40,051

$

15,650

$

67,503

$

29,215

See Notes to Earnings Release on Table Page 7.

 

VALERO ENERGY PARTNERS LP

EARNINGS RELEASE

(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)

(Unaudited)

Three Months Ended June 30,

Six Months Ended

June 30,

2015

2014

2015

2014

Comparison of ratio of net income attributable to partners divided by total distribution declared to coverage ratio (k):

Net income attributable to partners

$

33,662

$

12,200

$

55,783

$

22,682

Total distribution declared

$

18,456

$

13,074

$

35,722

$

25,561

Ratio of net income attributable to partners divided by total distribution declared

1.82x

0.93x

1.56x

0.89x

Coverage ratio: Distributable cash flow divided by total distribution declared

2.17x

1.20x

1.89x

1.14x

 

The following tables present our consolidated statements of income for the six months ended June 30, 2015 and the three and six months ended June 30, 2014, giving effect to the acquisition of the Houston and St. Charles Terminal Services Business for periods prior to March 1, 2015 and the acquisition of the Texas Crude Systems Business for periods prior to July 1, 2014. See Note (a) of Notes to Earnings Release for a discussion of the basis of this presentation.

 

Six Months Ended June 30, 2015

Valero Energy

Partners LP

Houston and St.

Charles Terminal

Services Business

(January 1, 2015 to

February 28, 2015)

Valero Energy

Partners LP

(Currently Reported)

Operating revenues – related party (b)

$

102,131

$

$

102,131

Costs and expenses:

Operating expenses

25,043

7,195

32,238

General and administrative expenses

6,678

47

6,725

Depreciation expense

12,929

2,274

15,203

Total costs and expenses

44,650

9,516

54,166

Operating income (loss)

57,481

(9,516)

47,965

Other income, net

137

137

Interest and debt expense, net of capitalized interest

(2,012)

(2,012)

Income (loss) before income taxes

55,606

(9,516)

46,090

Income tax benefit

(177)

(177)

Net income (loss)

55,783

(9,516)

46,267

Less:  Net loss attributable to Predecessor

(9,516)

(9,516)

Net income attributable to partners

$

55,783

$

$

55,783

See Notes to Earnings Release on Table Page 7.

VALERO ENERGY PARTNERS LP

EARNINGS RELEASE

(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)

(Unaudited)

Three Months Ended June 30, 2014

Valero Energy

Partners LP

(Previously

Reported)

Texas Crude

Systems Business

(April 1, 2014

to June 30, 2014)

Houston and St.

Charles Terminal

Services Business

(April 1, 2014

to June 30, 2014)

Valero Energy

Partners LP

(Currently

Reported)

Operating revenues – related party (b)

$

23,660

$

8,183

$

$

31,843

Costs and expenses:

Operating expenses

5,738

2,108

8,469

16,315

General and administrative expenses

2,848

447

66

3,361

Depreciation expense

3,024

844

2,264

6,132

Total costs and expenses

11,610

3,399

10,799

25,808

Operating income (loss)

12,050

4,784

(10,799)

6,035

Other income, net

491

2

493

Interest and debt expense, net of capitalized interest

(221)

(221)

Income (loss) before income taxes

12,320

4,786

(10,799)

6,307

Income tax expense

120

30

150

Net income (loss)

12,200

4,756

(10,799)

6,157

Less:  Net income (loss) attributable to Predecessor

4,756

(10,799)

(6,043)

Net income attributable to partners

$

12,200

$

$

$

12,200

Six Months Ended June 30, 2014

Valero Energy

Partners LP

(Previously

Reported)

Texas Crude

Systems Business

(January 1, 2014

to June 30, 2014)

Houston and St.

Charles Terminal

Services Business

(January 1, 2014

to June 30, 2014)

Valero Energy

Partners LP

(Currently

Reported)

Operating revenues – related party (b)

$

45,191

$

16,141

$

$

61,332

Costs and expenses:

Operating expenses

11,464

4,010

17,078

32,552

General and administrative expenses

5,443

884

131

6,458

Depreciation expense

6,082

1,687

4,279

12,048

Total costs and expenses

22,989

6,581

21,488

51,058

Operating income (loss)

22,202

9,560

(21,488)

10,274

Other income, net

1,139

20

1,159

Interest and debt expense, net of capitalized interest

(449)

(449)

Income (loss) before income taxes

22,892

9,580

(21,488)

10,984

Income tax expense

210

97

307

Net income (loss)

22,682

9,483

(21,488)

10,677

Less:  Net income (loss) attributable to Predecessor

9,483

(21,488)

(12,005)

Net income attributable to partners

$

22,682

$

$

$

22,682

See Notes to Earnings Release on Table Page 7.

 

VALERO ENERGY PARTNERS LP EARNINGS RELEASE (In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios) (Unaudited)

The following table presents our balance sheet data as of December 31, 2014, giving effect to the acquisition of the Houston and St. Charles Terminal Services Business. See Note (a) of Notes to Earnings Release for a discussion of the basis of this presentation.

 

December 31, 2014

Valero Energy

Partners LP

(Previously

Reported)

Houston and St.

Charles Terminal

Services Business

Valero Energy

Partners LP

(Currently

Reported)

Cash and cash equivalents

$

236,579

$

$

236,579

Total assets

596,073

295,691

891,764

Current portion of debt and capital lease obligations

1,200

1,200

Debt and capital lease obligations, less current portion

1,519

1,519

Total debt and capital lease obligations

2,719

2,719

Partners' capital

585,219

295,691

880,910

Working capital

238,365

238,365

See Notes to Earnings Release on Table Page 7.

 

 

VALERO ENERGY PARTNERS LP

NOTES TO EARNINGS RELEASE

(a)  

References to the "Partnership," "we," "us," or "our" refer to Valero Energy Partners LP, one or more of its subsidiaries, or all of them taken as a whole for periods after December 16, 2013, the date the Partnership completed its initial public offering (IPO). For periods prior to the IPO and periods prior to the Acquisitions (defined below), those terms refer to Valero Energy Partners LP Predecessor, our Predecessor for accounting purposes. References in these notes to "Valero" may refer to Valero Energy Corporation, one or more of its subsidiaries, or all of them taken as a whole, other than Valero Energy Partners LP, any of its subsidiaries, or its general partner.

Effective March 1, 2015, we acquired the Houston and St. Charles Terminal Services Business from Valero (the Houston and St. Charles Terminal Acquisition) for total consideration of $671.2 million consisting of (i) cash of $571.2 million and (ii) the issuance of 1,908,100 common units representing limited partner interests in us and 38,941 general partner units representing general partner interests in us having an aggregate value, collectively, of $100.0 million. We funded the cash distribution to Valero with $211.2 million of our cash on hand, $200.0 million of borrowings under our revolving credit facility, and $160.0 million of proceeds from a subordinated credit agreement with Valero. We began receiving fees for services provided by this business commencing on March 1, 2015.

Effective July 1, 2014, we acquired the Texas Crude Systems Business from Valero (the Texas Crude Systems Acquisition) for total cash consideration of $154.0 million, and we began receiving fees for services provided by this business commencing on July 1, 2014.

The Texas Crude Systems Acquisition and the Houston and St. Charles Terminal Acquisition (collectively, the Acquisitions) were each accounted for as transfers of a business between entities under the common control of Valero. As entities under the common control of Valero, we recorded the Acquisitions on our balance sheet at Valero's carrying value rather than fair value. Transfers between entities under common control are accounted for as though the transfer occurred as of the beginning of the period of transfer, and prior period financial statements and financial information are retrospectively adjusted to furnish comparative information. Accordingly, the statement of income data and operating highlights and capital expenditures data have been retrospectively adjusted to include the historical results of operations of the Texas Crude Systems Business for periods presented prior to July 1, 2014 and the historical results of operations of the Houston and St. Charles Terminal Services Business for periods presented prior to March 1, 2015. In addition, the balance sheet data as of December 31, 2014 has been retrospectively adjusted to include the assets and liabilities of the Houston and St. Charles Terminal Services Business.

(b) 

Operating revenues include amounts attributable to our Predecessor. Prior to being acquired by us, the Texas Crude Systems Business generated revenues by providing fee-based transportation and terminaling services to Valero, but the Houston and St. Charles Terminal Services Business did not charge Valero for services provided and did not generate revenues. Effective with the date of each of the Acquisitions, we entered into additional schedules to our commercial agreements with Valero with respect to the services we provide to Valero using the assets of the acquired businesses. This resulted in (i) changes to pipeline and terminaling throughput fees previously charged to Valero by the Texas Crude Systems Business and (ii) the recognition of terminaling revenues by the Houston and St. Charles Terminal Services Business.

(c)   

The decrease in operating expenses for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 was due primarily to lower maintenance expense of $2.3 million at the St. Charles and Houston terminals and the Memphis logistics system. The decrease in maintenance expense was partially offset by an increase in insurance expense of $765,000 as a result of the assets of the Acquisitions being covered under our own insurance policies. Prior to the Acquisitions, our Predecessor was allocated a portion of Valero's insurance costs.

(d)   

The decrease in general and administrative expenses for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 was due primarily to transaction costs of $308,000 incurred during the three months ended June 30, 2014 related to the July 1, 2014 acquisition of the Texas Crude Systems Business.

The increase in general and administrative expenses for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 was due primarily to higher transaction costs of $238,000 during the six months ended June 30, 2015. In 2015, we incurred transaction costs of $546,000 in connection with the March 1, 2015 acquisition of the Houston and St. Charles Terminal Services Business. In 2014, we incurred $308,000 in connection with the July 1, 2014 acquisition of the Texas Crude Systems Business.

(e)   

The increase in depreciation expense for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was due primarily to the effect of assets placed in service during 2014, including the expansion of the St. Charles terminal, the enhancement of pipeline and terminal monitoring systems at the Memphis products system, and the interconnection with TransCanada's Cushing Marketlink pipeline at the Lucas crude system.

(f)   

The decrease in "other income, net" for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was due primarily to a decrease in interest income (net of bank fees) of $229,000 and $418,000, respectively, attributable to a reduced cash balance during the three and six months ended June 30, 2015. In addition, right-of-way fees decreased $143,000 and $141,000, respectively, and scrap metal sales decreased  $42,000 and $410,000, respectively.

(g)  

The increase in "interest and debt expense, net of capitalized interest" for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was due primarily to interest expense incurred on borrowings of $200.0 million under our revolving credit facility and $160.0 million under a subordinated credit agreement with Valero in connection with the acquisition of the Houston and St. Charles Terminal Services Business. Interest expense on this indebtedness was $1.3 million and $1.7 million for the three and six months ended June 30, 2015, respectively.

(h)   

Our income tax expense (benefit) is associated with the Texas margin tax. In June 2015, the Texas margin tax rate was reduced from 1 percent to 0.75 percent. The impact of this rate reduction resulted in a tax benefit for the three and six months ended June 30, 2015. In addition, during the six months ended June 30, 2015, we reduced our deferred income tax liabilities due to a reduction in the relative amount of revenue we generate in Texas compared to our total revenue. This reduction was a result of the acquisition of the Houston and St. Charles Terminal Services Business (which includes operations in Louisiana).

(i)   

Represents the sum of volumes transported through each separately tariffed pipeline segment.

(j)   

Management uses average revenue per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate average revenue per barrel; different companies may calculate it in different ways. We calculate average revenue per barrel as revenue divided by throughput for the period. Throughput can be derived by multiplying the throughput barrels per day (BPD) by the number of days in the period. Investors and analysts use this financial measure to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered as an alternative to revenues presented in accordance with U.S. generally accepted accounting principles (GAAP).

(k)   

We define EBITDA as net income before income tax expense, interest expense, and depreciation expense. We define distributable cash flow as EBITDA less cash payments during the period for interest, income taxes, and maintenance capital expenditures, plus adjustments related to minimum throughput commitments, capital projects prefunded by Valero, and certain other items. We define coverage ratio as the ratio of distributable cash flow to the total distribution declared.

EBITDA, distributable cash flow, and coverage ratio are supplemental financial measures that are not defined under GAAP. They may be used by management and external users of our financial statements, such as industry analysts, investors, lenders, and rating agencies, to:

 

describe our expectation of forecasted earnings;

 

assess our operating performance as compared to other publicly traded limited partnerships in the transportation and logistics industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;

assess the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders;

assess our ability to incur and service debt and fund capital expenditures; and

assess the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of EBITDA provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income or net cash provided by operating activities presented in accordance with GAAP. EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income or net cash provided by operating activities. EBITDA should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because EBITDA may be defined differently by other companies in our industry, our definition of EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

We use distributable cash flow to measure whether we have generated from our operations, or "earned," an amount of cash sufficient to support the payment of the minimum quarterly distributions. Our partnership agreement contains the concept of "operating surplus" to determine whether our operations are generating sufficient cash to support the distributions that we are paying, as opposed to returning capital to our partners. Because operating surplus is a cumulative concept (measured from the IPO date and compared to cumulative distributions from the IPO date), we use the term distributable cash flow to approximate operating surplus on a quarterly or annual, rather than a cumulative, basis. As a result, distributable cash flow is not necessarily indicative of the actual cash we have on hand to distribute or that we are required to distribute.

We use the coverage ratio to reflect the relationship between our distributable cash flow and the total distribution declared. We have also provided the ratio of net income attributable to partners, the most directly comparable GAAP measure to distributable cash flow, to the total distribution declared.

 

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SOURCE Valero Energy Partners LP



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