Company News

Valero's Corner Store Schedule

CST Brands to separate in second quarter; cites size, geographic diversity, growth for success

SAN ANTONIO -- Valero Energy Corp.'s plan to separate its Corner Store retail business is "progressing," vice president of investor relations Ashley Smith said during the company's fourth-quarter 2012 earnings conference call this week. Earlier this month, CST Brands Inc. formally known as Corner Store Holdings Inc., filed an amended registration statement with the U.S. Securities & Exchange Commission (SEC).

The company's plan is to distribute 80% of the shares in CST Brands to Valero shareholders, and Valero will receive approximately $1.1 billion in cash and incur a tax liability of approximately $300 million primarily in Canada. It expects to liquidate the remaining 20% of CST Brands outstanding shares within 18 months of the distribution.

Valero said it expects the retail distribution will occur in the second quarter of 2013, assuming a favorable private-letter ruling from the IRS in clearing all comments from the SEC.

"We believe the separated retail business will perform well and unlock the value for shareholders for several reasons," said Smith.

"First, CST Brands will be the second largest publicly traded independent retailer of fuel and convenience merchandise in North America with nearly 1,900 sites. Second, these sites are located in geographically diverse regions--the southwestern United States and Eastern Canada. Third, many of these 1,032 U.S. retail sites are in Texas and surrounding states, which have strong economic growth. Fourth, CST Brands has substantial ownership of the sites with approximately 60% owned and not leased. Fifth, there is a long history of strong financial performance in brand recognition. And finally, CST Brands has significant growth opportunities in merchandise, foodservice and new-build locations," he said.

Valero reported net income of $1 billion, or $1.82 per share, for fourth-quarter 2012 compared to net income of $45 million, or eight cents per share, for fourth-quarter 2011. For the year ended Dec. 31, 2012, it reported net income of $2.1 billion, or $3.75 per share.

Fourth-quarter 2012 operating income was $1.6 billion versus $167 million of operating income in fourth-quarter 2011.

"This was Valero's best fourth-quarter earnings per share since 2005," said Valero chairman and CEO Bill Klesse.

Valero's retail segment reported $95 million of operating income in fourth-quarter 2012 versus $83 million of operating income in fourth-quarter 2011. The increase in operating income was mainly due to higher fuel margins in the United States, which was somewhat offset by lower fuel margins and other factors. For the full-year 2012, the retail segment generated $348 million of operating income, and those results were second only to the 2011 record-high results of $381 million.

San Antonio-based Valero, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 16 petroleum refineries with a combined throughput capacity of approximately 3 million barrels per day, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50-megawatt wind farm. Approximately 6,800 retail and branded wholesale outlets carry the Valero, Diamond Shamrock, Shamrock and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland.

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