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3. | DISPOSITIONS OF BUSINESSES |
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. Fractional shares of CST common stock were not distributed, but instead were aggregated and sold in the open market at prevailing rates with net cash proceeds then distributed pro rata to each Valero stockholder who was entitled to receive fractional shares.
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 11 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. Also in connection with the separation, we incurred a tax liability of approximately $189 million primarily related to the manner in which the transaction is treated for tax purposes in Canada; the majority of this liability was paid during 2013 and the remaining amounts will be paid in the first quarter of 2014. Therefore, the cash we received as a result of the separation, net of our tax liability, was $546 million. We also incurred $30 million in costs during the three months ended June 30, 2013 to effect the separation, which are 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 11.
Selected historical results of operations of our retail business prior to the separation are disclosed in Note 18. Subsequent to May 1, 2013 and through November 14, 2013, our share of CST’s results of operations is reflected in “other income, net.” Our share of income taxes incurred directly by CST during this period is reported in the equity in earnings from CST, and as such is not included in income taxes in our statements of income.
The following table presents the carrying values of the major categories of assets and liabilities of our retail business, immediately preceding its separation on May 1, 2013, which are excluded from our consolidated balance sheet as of December 31, 2013 (in millions):
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Assets | |
Cash and temporary cash investments | $ | 315 |
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Credit card receivables from Valero | 44 |
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Other receivables, net | 109 |
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Inventories | 170 |
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Deferred income taxes | 14 |
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Prepaid expenses and other | 13 |
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Total current assets | 665 |
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Property, plant, and equipment, at cost | 1,891 |
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Accumulated depreciation | (611 | ) |
Property, plant, and equipment, net | 1,280 |
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Intangible assets, net | 38 |
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Deferred charges and other assets, net | 191 |
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Total assets | $ | 2,174 |
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Liabilities | |
Current portion of capital lease obligations | $ | 2 |
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Trade payable to Valero | 242 |
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Other accounts payable | 96 |
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Accrued expenses | 31 |
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Taxes other than income taxes | 20 |
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Total current liabilities | 391 |
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Debt and capital lease obligations, less current portion | 1,053 |
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Deferred income taxes | 83 |
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Other long-term liabilities | 112 |
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Total liabilities | $ | 1,639 |
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We retained certain environmental and other liabilities related to our former retail business and we have indemnified CST for certain self-insurance liabilities related to its employees and property.
Sales of Refineries
In 2010, we sold our Paulsboro and our Delaware City Refineries. The results of operations of these refineries have been presented as discontinued operations for the year ended December 31, 2011.
