<PAGE> 1
EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Balance Sheet as of March 31, 2000
Unaudited Pro Forma Combined Statement of Income for the Three Months
Ended March 31, 2000
Unaudited Pro Forma Combined Statement of Income for the Year Ended December
31, 1999
Notes to Unaudited Pro Forma Combined Financial Statements
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EXHIBITS 99.2
VALERO ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the Benicia acquisition and related interim financings as described in
Valero's Form 8-K dated May 15, 2000. The unaudited pro forma combined balance
sheet as of March 31, 2000 is presented as if the Benicia acquisition and
related interim financings had occurred on that date. The unaudited pro forma
combined statements of income for the three months ended March 31, 2000 and the
year ended December 31, 1999 assume that the Benicia acquisition and related
interim financings occurred on January 1, 1999. The Benicia acquisition is being
accounted for using the purchase method of accounting, with the purchase price
allocated to the assets acquired and liabilities assumed based on estimated fair
values, pending the completion of an independent appraisal.
The unaudited pro forma combined financial statements should be read in
conjunction with (i) the historical consolidated financial statements of Valero
included in its quarterly report on Form 10-Q for the three months ended March
31, 2000 and its annual report on Form 10-K for the year ended December 31,
1999, and (ii) the historical consolidated financial statements of the Benicia
refinery and related branded supplier relationships and service station
facilities included in this Form 8-K/A. The unaudited pro forma combined
financial statements are not necessarily indicative of the financial position
that would have been obtained or the financial results that would have occurred
if the Benicia acquisition and related interim financings had been consummated
on the dates indicated, nor are they necessarily indicative of the financial
position or financial results which may be attained in the future. The pro forma
adjustments, as described in the Notes to Pro Forma Combined Financial
Statements, are based upon available information and upon certain assumptions
that Valero's management believes are reasonable.
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VALERO ENERGY CORPORATION
PRO FORMA COMBINED BALANCE SHEET
March 31, 2000
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Valero Benicia Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash
investments .................... $ 8,509 $ 99 $ (99)(a) $ 8,509
Receivables, net ................... 403,557 44,998 (44,998)(a) 403,557
Inventories ........................ 436,197 30,345 (30,345)(a) 591,083
154,886 (b)
Current deferred income
tax assets ..................... 89,477 -- -- 89,477
Prepaid expenses and
other .......................... 22,591 3,224 (3,224)(a) 22,591
----------- ----------- ------------- -----------
960,331 78,666 76,220 1,115,217
----------- ----------- ------------- -----------
PROPERTY, PLANT AND
EQUIPMENT .......................... 2,711,907 901,641 (901,641)(a) 3,427,527
715,620 (b)
Less: Accumulated
depreciation ................... 726,723 426,191 (426,191)(a) 726,723
----------- ----------- ------------- -----------
1,985,184 475,450 240,170 2,700,804
----------- ----------- ------------- -----------
DEFERRED CHARGES AND
OTHER ASSETS ....................... 175,659 18,109 (18,109)(a) 218,467
42,808 (b)
----------- ----------- ------------- -----------
$ 3,121,174 $ 572,225 $ 341,089 $ 4,034,488
=========== =========== ============= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt .................... $ 126,500 $ -- $ -- $ 126,500
Accounts payable ................... 732,561 37,768 (37,768)(a) 732,561
Accrued expenses ................... 96,213 24,512 (24,512)(a) 97,213
1,000 (b)
----------- ----------- ------------- -----------
955,274 62,280 (61,280) 956,274
----------- ----------- ------------- -----------
LONG-TERM DEBT ......................... 645,155 -- 907,014 (b) 1,552,169
----------- ----------- ------------- -----------
DEFERRED INCOME
TAXES .............................. 296,628 88,560 (88,560)(a) 296,628
----------- ----------- ------------- -----------
DEFERRED CREDITS AND
OTHER LIABILITIES .................. 115,413 11,503 (11,503)(a) 120,713
5,300 (b)
----------- ----------- ------------- -----------
COMMON STOCKHOLDERS'
EQUITY:
Common stock ................... 563 -- -- 563
Additional paid-in
capital .................... 1,088,829 -- -- 1,088,829
Retained earnings .............. 27,408 -- -- 27,408
Treasury stock ................. (8,096) -- -- (8,096)
ExxonMobil net investment ...... -- 409,882 (409,882)(a) --
----------- ----------- ------------- -----------
1,108,704 409,882 (409,882) 1,108,704
----------- ----------- ------------- -----------
$ 3,121,174 $ 572,225 $ 341,089 $ 4,034,488
=========== =========== ============= ===========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
<PAGE> 4
VALERO ENERGY CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
For the Three Months Ended March 31, 2000
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Valero Benicia Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES............... $2,928,617 $ 623,337 $ (128,538)(c) $ 3,423,416
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales and operating
expenses................. 2,827,341 567,535 (128,538)(c) 3,266,475
612 (d)
(670)(g)
2,096 (g)
(2,000)(h)
369 (h)
(2,700)(i)
2,430 (i)
Selling and administrative
expenses................. 19,669 7,501 2,020 (d) 27,616
875 (e)
(3,000)(h)
561 (h)
(100)(i)
90 (i)
Depreciation expense......... 24,555 6,723 (6,723)(f) 31,023
6,468 (f)
---------- ---------- ----------- -----------
Total.................... 2,871,565 581,759 (128,210) 3,325,114
---------- ---------- ----------- -----------
OPERATING INCOME (LOSS).......... 57,052 41,578 (328) 98,302
OTHER INCOME (EXPENSE),
NET.......................... 2,647 (45) -- 2,602
INTEREST AND DEBT
EXPENSE:
Incurred................. (14,147) -- (18,775)(j) (32,922)
Capitalized.............. 1,387 -- -- 1,387
---------- ---------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES................. 46,939 41,533 (19,103) 69,369
INCOME TAX EXPENSE
(BENEFIT).................... 16,200 16,923 (8,323)(k) 24,800
---------- ---------- ----------- -----------
NET INCOME (LOSS)................ $ 30,739 $ 24,610 $ (10,780) $ 44,569
========== ========== =========== ===========
EARNINGS PER SHARE
OF COMMON STOCK.............. $ .55 $ .80
Weighted average common shares
outstanding (in thousands) 55,874 55,874
EARNINGS PER SHARE OF
COMMON STOCK -
ASSUMING DILUTION............. $ .54 $ .78
Weighted average common shares
outstanding (in thousands) 57,234 57,234
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
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VALERO ENERGY CORPORATION
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Valero Benicia Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES............... $7,961,168 $1,826,081 $ (474,506)(c) $ 9,312,743
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales and operating
expenses....................... 7,731,151 1,661,750 (474,506)(c) 8,873,531
2,448 (d)
(45,100)(g)
6,481 (g)
(12,000)(h)
1,474 (h)
(8,476)(i)
10,309 (i)
Selling and administrative
expenses................. 68,463 25,478 8,080 (d) 98,875
3,500 (e)
(9,000)(h)
2,244 (h)
(510)(i)
620 (i)
Depreciation expense......... 92,413 26,474 (26,474)(f) 118,283
25,870 (f)
---------- ---------- ----------- -----------
Total.................... 7,892,027 1,713,702 (515,040) 9,090,689
---------- ---------- ----------- -----------
OPERATING INCOME................. 69,141 112,379 40,534 222,054
OTHER INCOME (EXPENSE),
NET.......................... 6,475 (825) -- 5,650
INTEREST AND DEBT
EXPENSE:
Incurred................. (61,182) -- (75,098)(j) (136,280)
Capitalized.............. 5,753 -- -- 5,753
---------- ---------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES................. 20,187 111,554 (34,564) 97,177
INCOME TAX EXPENSE
(BENEFIT).................... 5,900 46,023 (18,123)(k) 33,800
---------- ---------- ----------- -----------
NET INCOME (LOSS)................ $ 14,287 $ 65,531 $ (16,441) $ 63,377
========== ========== =========== ===========
EARNINGS PER SHARE
OF COMMON STOCK................. $ .25 $ 1.13
Weighted average common shares
outstanding (in thousands).... 56,086 56,086
EARNINGS PER SHARE
OF COMMON STOCK -
ASSUMING DILUTION.............. $ .25 $ 1.12
Weighted average common shares
outstanding (in thousands)... 56,758 56,758
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
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VALERO ENERGY CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) To reverse the historical cost of the assets acquired and liabilities
assumed.
(b) To reflect the allocation of the purchase price, including transaction
costs incurred in the acquisition, to the assets acquired and
liabilities assumed based on their estimated fair values as follows (in
thousands):
<TABLE>
<S> <C>
Inventories......................................................... $ 154,886
Property, plant and equipment....................................... 715,620
Deferred charges and other assets................................... 42,808
Accrued expenses.................................................... (1,000)
Deferred credits and other liabilities.............................. (5,300)
---------
$ 907,014
=========
</TABLE>
The above also reflects borrowings of $600 million under the Bridge
Facility and $307 million under the Credit Facility, including related
debt issuance costs of $7.8 million, required to fund the Benicia
acquisition.
(c) To exclude excise taxes collected on behalf of governmental agencies
associated with the operations acquired in the Benicia acquisition from
Operating Revenues and Cost of Sales to conform to Valero's accounting
policies.
(d) To reflect rent expense related to a structured lease financing
arrangement used to finance the acquisition of the Benicia refinery's
dock facility, which is included in Operating Expenses, and the Service
Station Assets, which is included in Selling and Administrative
Expenses.
(e) To reflect amortization expense on $35 million of value assigned to
Valero's receipt of the exclusive right to offer the Exxon brand
throughout California (except for the San Francisco Bay area) for a
ten-year period in connection with Valero's acquisition of the
Distribution Assets.
(f) To reverse historical depreciation expense and record depreciation
expense over an estimated life of 25 years based on the portion of the
acquisition cost allocated to property, plant and equipment.
(g) To conform the accounting for turnaround costs at the Benicia refinery
from the "expense as incurred" method followed by ExxonMobil to the
"defer and amortize" method followed by Valero.
(h) To reverse historical charges for various corporate and divisional
administrative expenses allocated to the acquired assets by ExxonMobil
from both Operating Expenses and Selling and Administrative Expenses
and record incremental corporate administrative expenses that would
have been incurred by Valero.
(i) To reverse historical expense related to various employee benefit
programs from both Operating Expenses and Selling and Administrative
Expenses and record expense that would have been incurred by Valero
under its employee benefit programs.
(j) To reflect interest expense on borrowings under the Bridge Facility of
$12.2 million and $48.6 million for the three months ended March 31,
2000 and the year ended December 31, 1999, respectively, and interest
expense on borrowings under the Credit Facility of $5.9 million and
$23.7 million for the three months ended March 31, 2000 and the year
ended December 31, 1999, respectively, required to fund the Benicia
acquisition, as well as the amortization of deferred debt issuance
costs.
(k) To reflect the tax effect of the pro forma pre-tax income adjustments
related to the Benicia acquisition and adjust the effective tax rate to
the rate that would have been incurred by Valero with respect to the
assets acquired.
