01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
Valero Energy Corporation (VLO) reported strong performance in its 2017 10-K filing, driven by a significant income tax benefit stemming from the Tax Cuts and Jobs Act of 2017, which provided a $1.9 billiona boost to net income.
Excluding this one-time benefit, adjusted net income attributable to stockholders was $2.2 billionb, an increase from $1.7 billion in the prior year. The company's refining segment was the primary driver of this improvement, with adjusted operating income rising by $942 million due to higher refining margins and increased throughput volumes. The company's operations are diversified across refining, ethanol production, and logistics through its majority-owned master limited partnership, Valero Energy Partners LP (VLP).
The refining segment processed an average of 2.9 million barrels per day in 2017, leveraging a diverse feedstock mix. The ethanol segment experienced a decline in adjusted operating income due to lower product prices. VLP saw an increase in adjusted operating income, primarily driven by new terminals and pipeline systems acquired during the year.
Valero demonstrated robust cash flow generation, with operations providing $5.5 billionc in cash. This strong liquidity supported capital investments of $2.3 billion, share repurchases totaling $1.4 billion, and dividend payments of $1.2 billion. The company also maintained a solid financial position with significant liquidity available under its credit facilities.
02—Key points
Key Highlights
- Net income attributable to Valero stockholders was $4.1 billion in 2017, boosted by a $1.9 billion income tax benefit from Tax Reform.
- Adjusted net income attributable to Valero stockholders increased to $2.2 billion in 2017 from $1.7 billion in 2016, driven by improved refining segment performance.
- The refining segment's adjusted operating income increased by $942 million, primarily due to higher refining margins and increased throughput volumes.
- Valero generated $5.5 billion in cash flow from operations in 2017, supporting significant capital investments ($2.3 billion), share repurchases ($1.4 billion), and dividends ($1.2 billion).
- The company's refining system processed an average of 2.9 million barrels per day, with strong performance across its diverse refinery locations in the U.S., Canada, and the U.K.
- Valero Energy Partners LP (VLP) reported an increase in adjusted operating income, attributed to acquisitions of new terminals and pipeline systems.
- The company maintained investment-grade credit ratings, indicating a stable financial position and access to capital markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Valero Energy kept $0.04.
- Revenue$93.98B100.0%
- Cost of revenue−$89.47B95.2%
- Gross profit$4.50B4.8%
- Operating costs−$942.0M1.0%
- Operating income$3.56B3.8%
- Interest, other & tax$502.0M0.5%
- Net income$4.07B4.3%
Where FY2017 revenue went
$93.98B- Cost of revenue: $89.47B, 95% of revenue
- Operating income: $3.56B, 3.8% of revenue
- Operating costs: $942.0M, 1.0% of revenue
Kept 3.8% as operating incomeOperating income $3.56B · 3.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $93.98B$75.66B | +24.2% |
| Cost of Revenue | $89.47B$71.31B | +25.5% |
| Gross Profit | $4.50B$4.35B | +3.6% |
| Operating Income | $3.56B$3.53B | +0.8% |
| Interest Expense | $468.00M$446.00M | +4.9% |
| Net Income | $4.07B$2.29B | +77.6% |
| EPS (Basic) | $9.17$4.94 | +85.6% |
| EPS (Diluted) | $9.16$4.94 | +85.4% |
| Shares Outstanding (Basic) | 442.00M461.00M | −4.1% |
| Shares Outstanding (Diluted) | 444.00M464.00M | −4.3% |
05—Questions
Frequently Asked Questions
What was the main driver of Valero's increased net income in 2017?
The primary driver of Valero's increased net income in 2017 was a $1.9 billion income tax benefit resulting from the enactment of the Tax Cuts and Jobs Act of 2017. Excluding this one-time tax benefit, the company's adjusted net income attributable to stockholders also saw a significant increase.
How did the different business segments perform in 2017?
The Refining segment was the strongest performer, with its adjusted operating income increasing by $942 million due to higher margins and throughput volumes. The Ethanol segment's adjusted operating income decreased by $118 million due to lower product prices. Valero Energy Partners LP (VLP) saw its adjusted operating income increase by $74 million, largely driven by new asset acquisitions.
What is Valero's outlook regarding refining and ethanol margins?
Looking ahead to the first quarter of 2018, Valero expected refining and ethanol margins to remain near their then-current levels. The company also anticipated that medium and heavy sour crude oil discounts would remain weaker than their five-year averages, while sweet crude discounts would stay near current levels.
How does Valero manage its exposure to commodity price volatility?
Valero utilizes commodity derivative instruments, such as swaps, futures, and options, to manage the impact of price volatility on its results of operations and cash flows. These instruments are used to hedge inventories, firm commitments, and forecasted purchases and sales.
06—Continue