Valero 2015 Annual Report Download - page 79

Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
assets. As a result, we recognized an asset retirement obligation of $59 million, which was charged to expense during the second
quarter of 2014 and is reflected in discontinued operations. We had not recognized an asset retirement obligation previously due to our
belief that we would not be required to dismantle the assets as long as we intended to operate them. During the second quarter of 2014,
we also recognized liabilities of $4 million relating to obligations under certain contracts, including a liability for the remaining lease
payments for the land on which the refining assets reside. The Aruba Refinery had no operating revenues and a $64 million loss before
income taxes for the year ended December 31, 2014. There was no tax benefit recognized for the loss from discontinued operations for
the year ended December 31, 2014 as we do not expect to realize this tax benefit. For the year ended December 31, 2013, the refinery
had no operating revenues and $6 million of income before income tax expense.
3. SEPARATION OF RETAIL BUSINESS
On May 1, 2013, we completed the separation of our retail business by creating an independent public company named CST Brands,
Inc. (CST) and distributing 80 percent of the outstanding shares of CST common stock to our stockholders. Each Valero stockholder
received one share of CST common stock for every nine shares of Valero common stock held at the close of business on the record
date of April 19, 2013.
In connection with the separation, we received an aggregate of $1.05 billion in cash, consisting of $550 million from the issuance of
short-term debt to a third-party financial institution on April 16, 2013 and $500 million distributed to us by CST on May 1, 2013. The
cash distributed to us by CST was borrowed by CST on May 1, 2013 under its senior secured credit facility. See Note 10 under “Bank
Debt” for further discussion of that credit facility. Also on May 1, 2013, CST issued $550 million of its senior unsecured bonds to us,
and we exchanged those bonds with the third-party financial institution in satisfaction of our short-term debt. Immediately prior to
May 1, 2013, subsidiaries of CST held $315 million of cash, and CST retained that cash following the distribution on May 1, 2013. We
also incurred $30 million in costs during the three months ended June 30, 2013 to effect the separation, which were included in general
and administrative expenses.
We also entered into long-term motor fuel supply agreements with CST in the U.S. and Canada. The nature and significance of our
agreements to supply motor fuel to CST through 2028 represents a continuation of activities with CST for accounting purposes. As
such, the historical results of operations of our retail business have not been reported as discontinued operations in our statements of
income.
On November 14, 2013, we disposed of our 20 percent retained interest in CST by transferring all remaining shares of CST common
stock owned by us to a third-party financial institution in exchange for $467 million of our short-term debt and recognized a
$325 million nontaxable gain, as further described in Note 10 under “Bank Debt”.
Selected historical results of operations of our retail business prior to the separation are disclosed in Note 17. Subsequent to May 1,
2013 and through November 14, 2013, our share of CST’s results of operations was reflected in “other income, net.” Our share of
income taxes incurred directly by CST during this period was reported in the equity in earnings from CST, and as such was not included
in income taxes in our statements of income.
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