Valero 2015 Annual Report Download - page 49

Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
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Our operations generated $5.6 billion of cash in 2015, driven primarily by net income of $4.1 billion and excluding $2.6 billion of
noncash charges to income ($1.8 billion for depreciation and amortization expense and $790 million for a lower of cost or market
inventory valuation adjustment). See “RESULTS OF OPERATIONS” for further discussion of our operations. However, the change in
working capital during the year had a negative impact to cash generated by our operations of $1.3 billion. This use of cash was
composed primarily of (i) a decrease in accounts payable, net of a decrease in receivables, of $493 million, (ii) an increase in income
taxes receivable and a decrease in income taxes payable totaling $432 million, and (iii) an increase in inventories of $222 million as
shown in Note 18 of Notes to Consolidated Financial Statements. The unfavorable effect of accounts payable, net of accounts
receivable, was mainly due to a decrease in commodity prices from December 2014 to December 2015. The unfavorable effect in
income taxes was due to tax payments associated with the settlement of several IRS audits and an overpayment of taxes in 2015. This
overpayment resulted from a change in the U.S. Federal tax laws late in the year that reinstated the bonus depreciation deduction, which
lowered our current income tax expense. The unfavorable effect in inventories was mainly due to the build in inventory volumes in
2015 as we purchased crude oil at prices we deemed favorable during the fourth quarter of 2015.
The $5.6 billion of cash generated by our operations in 2015, along with (i) $1.45 billion in proceeds from the issuance of debt and
(ii) net proceeds of $189 million from VLP’s public offering of 4,250,000 common units as discussed in Note 4 of Notes to
Consolidated Financial Statements, were used mainly to:
• fund $2.5 billion of investing activities, including $2.4 billion in capital investments. Capital investments are comprised of
capital expenditures, deferred turnaround and catalyst costs, and joint venture investments;
• make payments on debt and capital lease obligations of $513 million, of which $400 million related to our 4.5 percent senior
notes, $75 million related to our 8.75 percent debentures, $25 million related to the VLP Revolver, $10 million related to capital
lease obligations, and $3 million related to other non-bank debt;
•purchase common stock for treasury of $2.8 billion;
• pay common stock dividends of $848 million; and
• increase available cash on hand by $425 million.
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Our operations generated $4.2 billion of cash in 2014, driven primarily by net income of $3.7 billion and excluding $1.7 billion of
noncash charges to income (primarily depreciation and amortization expense). See “RESULTS OF OPERATIONS” for further
discussion of our operations. However, the change in our working capital during the year had a negative impact to cash generated by
our operations of $1.8 billion. This use of cash was composed primarily of a decrease in accounts receivable of $2.8 billion, which was
offset by a decrease in accounts payable of $3.1 billion, a decrease in income taxes payable of $319 million, and an increase in
inventories of $1.0 billion as shown in Note 18 of Notes to Consolidated Financial Statements. The favorable effect in accounts
receivable and the unfavorable effect in accounts payable were mainly due to a decrease in commodity prices from December 2013 to
December 2014. The unfavorable effect associated with income taxes payable resulted from income tax payments exceeding income
tax liabilities incurred in 2014 due to the payment of liabilities associated with prior period earnings. The unfavorable effect in
inventories was mainly due to the build in inventory volumes from 2013 to 2014 as we purchased crude oil at prices we deemed
favorable during the fourth quarter of 2014.
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