Analysis of Income Taxes
- Income Tax Expense (Benefit)
- Effective Income Tax Rate (EITR)
- Components of Deferred Tax Assets and Liabilities
- Deferred Tax Assets and Liabilities, Classification
- Adjustments to Financial Statements: Removal of Deferred Taxes
- Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
- Adjusted Net Profit Margin
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Income Tax Expense (Benefit)
Valero Energy Corp., income tax expense (benefit), continuing operations
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The income tax profile exhibits significant volatility over the five-year period, characterized by a sharp transition from a substantial tax benefit in 2020 to elevated tax expenses in 2022 and 2023.
- Total Income Tax Expense (Benefit)
- Total tax obligations fluctuated dramatically, shifting from an expense of 702 million USD in 2019 to a benefit of 903 million USD in 2020. This was followed by a recovery to an expense of 255 million USD in 2021, reaching a peak of 3,428 million USD in 2022, before moderating to 2,619 million USD in 2023.
- Current Tax Component
- Current taxes acted as the primary driver of the overall trend. The current tax position mirrored the total expense volatility, moving from a deficit of 1,061 million USD in 2020 to a peak expense of 3,378 million USD in 2022, signaling a significant increase in taxable income during that period.
- Deferred Tax Component
- Deferred tax expenses remained relatively low in magnitude compared to current taxes. After maintaining positive balances in 2019 and 2020, a deferred tax benefit of 126 million USD was recorded in 2021. The component returned to an expense position in 2022 and 2023, ending the period at 103 million USD.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Effective Income Tax Rate (EITR)
Valero Energy Corp., effective income tax rate (EITR) reconciliation
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Statutory income tax rate | 21.00% | 21.00% | 21.00% | 21.00% | 21.00% | |
| Effective income tax rate | 22.30% | 22.40% | 16.50% | 44.90% | 20.10% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The analysis of the income tax profile reveals a significant divergence between the constant statutory tax rate and the volatile effective income tax rate over the five-year period ending December 31, 2023.
- Statutory Rate Consistency
- The statutory income tax rate remained unchanged at 21.00% throughout the entire period, establishing a fixed baseline for tax obligations.
- Effective Rate Volatility and Anomalies
- The effective income tax rate experienced extreme fluctuations between 2019 and 2021. A substantial increase is observed in 2020, where the rate surged to 44.90%, more than double the statutory rate. This was followed by a sharp correction in 2021, with the rate descending to 16.50%, falling well below the statutory benchmark.
- Normalization Trend
- A pattern of stabilization emerged in the latter part of the period. In 2022 and 2023, the effective income tax rate converged near the statutory rate, recording 22.40% and 22.30%, respectively. This suggests a return to a more predictable tax environment after the volatility seen in the middle of the analyzed timeframe.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Components of Deferred Tax Assets and Liabilities
Valero Energy Corp., components of deferred tax assets and liabilities
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The net deferred tax position remained consistently in a liability state from 2019 through 2023, with the net deferred tax liability increasing from 5,103 million USD to 5,349 million USD. While both gross deferred tax assets and gross deferred tax liabilities grew over the five-year period, the expansion of liabilities slightly outweighed the growth in assets.
- Deferred Tax Asset Trends
- Gross deferred tax assets exhibited a steady upward trajectory, rising from 1,844 million USD in 2019 to 2,810 million USD in 2023. This growth was primarily driven by an increase in tax credit carryforwards, which rose to 809 million USD by 2023, and net operating loss (NOL) carryforwards, which increased from 582 million USD to 710 million USD over the period. A notable decline was observed in compensation and employee benefit liabilities, which dropped significantly from 213 million USD in 2019 to 32 million USD in 2023.
- Deferred Tax Liability Trends
- Gross deferred tax liabilities increased from 5,747 million USD in 2019 to 6,776 million USD in 2023. The primary driver of this increase is the deferred tax liability associated with property, plant, and equipment, which grew to 5,121 million USD by 2023. Additionally, liabilities related to investments saw a substantial increase, rising from 122 million USD in 2019 to 423 million USD in 2023, while deferred turnaround costs trended upward from 331 million USD to 399 million USD.
- Impact of Lease Accounting
- A structural shift in the deferred tax balance occurred in 2022 with the introduction of lease-related items. Finance lease obligations and operating lease liabilities added approximately 821 million USD to deferred tax assets in 2022, which was largely offset by the recognition of operating lease right-of-use (ROU) assets contributing 507 million USD to deferred tax liabilities in the same year. By 2023, these balances slightly increased to 314 million USD and 519 million USD for liabilities and 546 million USD for ROU assets, respectively.
- Valuation Allowance and Net Asset Position
- A significant valuation allowance was maintained throughout the period to offset a portion of the deferred tax assets, increasing from 1,200 million USD in 2019 to 1,383 million USD in 2023. Despite this allowance, the net deferred income tax assets grew from 644 million USD in 2019 to 1,427 million USD in 2023, reflecting a higher accumulation of deductible temporary differences and carryforwards offset by the valuation reserve.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Deferred Tax Assets and Liabilities, Classification
Valero Energy Corp., deferred tax assets and liabilities, classification
US$ in millions
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Deferred income tax liabilities | 5,349) | 5,217) | 5,210) | 5,275) | 5,103) |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The deferred income tax liabilities exhibit a state of relative stability over the five-year period ending December 31, 2023. There is a modest overall upward trajectory, with the balance increasing from 5,103 million US dollars in 2019 to 5,349 million US dollars in 2023, representing a total growth of approximately 4.8%.
- Annual Variance Analysis
- A peak in liabilities was observed in 2020 at 5,275 million US dollars, following an increase of 172 million US dollars from the previous year. This was followed by a slight contraction in 2021 to 5,210 million US dollars and a period of near-stagnation in 2022. The final year of the period saw a renewed increase of 132 million US dollars, bringing the balance to its five-year high in 2023.
- Liability Consistency
- The limited volatility in the deferred tax liability account suggests a consistent relationship between the company's accounting profit and taxable income. The narrow range of fluctuation indicates that the temporary differences creating these liabilities are being managed or generated at a steady rate, without significant structural changes to the tax position or large-scale reversals of deferred tax items.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjustments to Financial Statements: Removal of Deferred Taxes
Valero Energy Corp., Financial Data: Reported vs. Adjusted
Valero Energy Corp., adjustments to financial statements
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The removal of deferred taxes produces a consistent shift in the balance sheet structure, resulting in a reduction of total liabilities and a proportional increase in stockholders' equity. This adjustment provides a view of the financial position devoid of the accounting complexities associated with future tax obligations.
- Impact on Total Liabilities
- A consistent downward adjustment is observed in total liabilities from 2019 through 2023. Reported liabilities peaked in 2021 at 38,071 million USD, while the adjusted total for the same period was 32,861 million USD. The variance between reported and adjusted liabilities remains relatively stable, suggesting that deferred tax liabilities constitute a significant and persistent portion of the company's total obligations.
- Impact on Stockholders' Equity
- The elimination of deferred tax liabilities leads to a corresponding increase in the valuation of stockholders' equity across all observed years. Adjusted equity consistently exceeds reported equity, with the gap remaining substantial. A strong growth trend is evident from 2021 onward, where adjusted equity rose from 23,640 million USD to 31,695 million USD by the end of 2023, indicating a substantial strengthening of the net asset position.
- Net Income Analysis
- Net income exhibits high volatility over the five-year period, characterized by a loss in 2020 and a significant peak in 2022. The adjustment for deferred taxes has a marginal effect on net income compared to its impact on the balance sheet. While reported net income reached 11,528 million USD in 2022, the adjusted figure was slightly higher at 11,578 million USD, demonstrating that the removal of deferred tax accounting slightly elevates the realized earnings attributable to stockholders.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Valero Energy Corp., Financial Ratios: Reported vs. Adjusted
Valero Energy Corp., adjusted financial ratios
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The financial performance from 2019 to 2023 is characterized by significant volatility, with a notable contraction in 2020 followed by a substantial recovery and peak in 2022. The adjustment for deferred taxes reveals a consistent divergence between reported and adjusted metrics, particularly within solvency and equity return ratios.
- Net Profit Margin
- Profitability experienced a sharp decline in 2020, with both reported and adjusted margins falling into negative territory. A recovery began in 2021, culminating in a peak in 2022. The variance between reported and adjusted net profit margins remains minimal across the five-year period, suggesting that deferred tax adjustments have a negligible impact on the overall margin percentage.
- Financial Leverage
- A consistent gap is observed between reported and adjusted financial leverage, with reported ratios remaining systematically higher. Reported leverage peaked in 2021 at 3.14 before declining to 2.39 by 2023. The adjusted leverage follows a similar trajectory but remains lower, peaking at 2.45 in 2021 and returning to 1.99 in 2023. This indicates that the removal of deferred tax liabilities significantly reduces the perceived leverage of the organization.
- Return on Equity (ROE)
- ROE exhibits the highest degree of volatility among the analyzed ratios. After a negative result in 2020, ROE surged to a peak in 2022. There is a distinct difference between reported and adjusted ROE, particularly during the high-performance years of 2022 and 2023. The adjusted ROE is consistently lower than the reported ROE during these periods, implying that deferred tax considerations inflate the reported returns on equity.
- Return on Assets (ROA)
- ROA trends mirror the trajectory of the net profit margin and ROE, showing a significant trough in 2020 and a peak in 2022. Unlike the leverage and ROE metrics, the difference between reported and adjusted ROA is marginal, indicating that the adjustment for deferred taxes does not materially alter the assessment of asset efficiency.
In summary, the adjustment for deferred taxes primarily affects the interpretation of financial leverage and return on equity. While the core profitability trends remain consistent across both reported and adjusted views, the adjusted figures present a more conservative view of equity returns and a lower risk profile regarding financial leverage.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Net profit margin = 100 × Net income (loss) attributable to Valero Energy Corporation stockholders ÷ Revenues, includes excise taxes on sales by certain of foreign operations
= 100 × 8,835 ÷ 144,766 = 6.10%
2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Valero Energy Corporation stockholders ÷ Revenues, includes excise taxes on sales by certain of foreign operations
= 100 × 8,938 ÷ 144,766 = 6.17%
The financial performance from 2019 through 2023 is characterized by significant volatility, featuring a severe contraction in 2020 followed by a rapid expansion in profitability that peaked in 2022 before slightly moderating in 2023.
- Net Income Trajectory
- A substantial decline occurred between 2019 and 2020, with reported net income shifting from 2,422 million US$ to a loss of 1,421 million US$. A recovery phase began in 2021 with a return to profitability at 930 million US$, followed by an exponential increase in 2022 to 11,528 million US$. In 2023, a moderate reduction is observed, with reported net income settling at 8,835 million US$, though this remains significantly higher than pre-2022 levels.
- Adjusted Net Profit Margin Analysis
- The adjusted net profit margin mirrors the volatility of net income, moving from 2.45% in 2019 to a negative 1.95% in 2020. The margin remained low in 2021 at 0.71% before surging to a five-year peak of 6.56% in 2022. By the end of 2023, the adjusted net profit margin saw a slight contraction to 6.17%, indicating a stabilization of profitability at a higher baseline compared to the 2019-2021 period.
- Reported versus Adjusted Performance
- Adjusted figures generally present a more favorable view of profitability than reported figures in most periods. In 2020, the adjusted net loss was 1,263 million US$, which is lower than the reported loss of 1,421 million US$, resulting in a less severe adjusted net profit margin of -1.95% compared to -2.19%. A notable divergence is observed in 2021, where the reported net profit margin (0.82%) exceeded the adjusted net profit margin (0.71%), suggesting that certain non-recurring items or tax effects negatively impacted the adjusted result during that specific year.
Overall, the trend indicates a period of extreme instability followed by a strong structural improvement in profit margins. The close alignment between reported and adjusted margins in 2022 and 2023 suggests that current profitability is driven by core operational performance rather than one-time adjustments.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Financial Leverage
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Financial leverage = Total assets ÷ Total Valero Energy Corporation stockholders’ equity
= 63,056 ÷ 26,346 = 2.39
2 Adjusted financial leverage = Total assets ÷ Adjusted total Valero Energy Corporation stockholders’ equity
= 63,056 ÷ 31,695 = 1.99
The financial profile between 2019 and 2023 exhibits a distinct cyclical trend in both equity levels and financial leverage. A period of equity contraction and rising leverage occurred between 2019 and 2021, followed by a robust recovery and deleveraging phase from 2022 through 2023.
- Stockholders' Equity Trends
- Reported stockholders' equity experienced a decline from US$ 21,803 million in 2019 to a trough of US$ 18,430 million in 2021. This was followed by a sharp increase, reaching US$ 26,346 million by December 31, 2023. Adjusted stockholders' equity followed an identical trajectory but remained consistently higher than reported values, starting at US$ 26,906 million in 2019 and peaking at US$ 31,695 million in 2023.
- Financial Leverage Dynamics
- An inverse correlation is observed between equity levels and financial leverage. Reported leverage increased from 2.47 in 2019 to a peak of 3.14 in 2021, before declining to 2.39 by the end of 2023. Adjusted financial leverage mirrored this movement, rising from 2.00 in 2019 to a peak of 2.45 in 2021, and subsequently falling to 1.99 in 2023.
- Impact of Adjusted Metrics
- The application of adjusted equity figures consistently results in a lower leverage ratio across all analyzed years. The gap between reported and adjusted leverage was most pronounced in 2021, where the adjusted ratio was 0.69 points lower than the reported ratio. This indicates that the adjustments provide a more favorable representation of the organization's solvency and capital structure.
By the end of the observed period, the company achieved its strongest equity position and lowest leverage levels since 2019, suggesting a significant improvement in financial stability and a reduction in relative indebtedness.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 ROE = 100 × Net income (loss) attributable to Valero Energy Corporation stockholders ÷ Total Valero Energy Corporation stockholders’ equity
= 100 × 8,835 ÷ 26,346 = 33.53%
2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Valero Energy Corporation stockholders ÷ Adjusted total Valero Energy Corporation stockholders’ equity
= 100 × 8,938 ÷ 31,695 = 28.20%
The financial performance between 2019 and 2023 is characterized by extreme volatility, transitioning from stable profitability to a significant loss in 2020, followed by an exponential increase in returns peaking in 2022. A consistent divergence is observed between reported and adjusted figures, particularly regarding shareholder equity and the resulting return on equity (ROE).
- Net Income Trajectory
- Profitability experienced a severe contraction in 2020, with reported net income falling to negative 1,421 million US dollars. A recovery phase began in 2021, which evolved into an exceptional surge in 2022, where reported net income reached 11,528 million US dollars. While 2023 saw a moderation in these gains, reported net income remained high at 8,835 million US dollars, significantly exceeding pre-2020 levels.
- Equity Base Evolution
- Total stockholders' equity exhibited a U-shaped trend. Reported equity declined from 21,803 million US dollars in 2019 to a low of 18,430 million US dollars in 2021, before climbing steadily to 26,346 million US dollars by 2023. Adjusted equity maintained a consistently higher valuation than reported equity across all periods, reaching 31,695 million US dollars in 2023, suggesting the presence of significant adjustments that increase the recognized capital base.
- Analysis of Return on Equity (ROE)
- The reported ROE mirrored the volatility of net income, swinging from 11.11% in 2019 to -7.56% in 2020, before spiking to a peak of 48.93% in 2022 and settling at 33.53% in 2023. Adjusted ROE followed the same directional trend but remained consistently lower than the reported ROE from 2019, 2021, 2022, and 2023. This variance is attributable to the larger denominator in the adjusted equity calculations, which effectively tempers the reported returns.
- Comparative Performance Insights
- The gap between reported and adjusted ROE widened significantly during the high-performance years of 2022 and 2023. In 2022, the difference was 8.7 percentage points (48.93% reported vs. 40.23% adjusted), and in 2023, the difference was 5.33 percentage points (33.53% reported vs. 28.20% adjusted). This indicates that while the company achieved record-breaking efficiency in generating profits from its equity, the adjusted metrics provide a more conservative view of the actual return on the modified capital base.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 ROA = 100 × Net income (loss) attributable to Valero Energy Corporation stockholders ÷ Total assets
= 100 × 8,835 ÷ 63,056 = 14.01%
2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Valero Energy Corporation stockholders ÷ Total assets
= 100 × 8,938 ÷ 63,056 = 14.17%
An analysis of the financial performance from 2019 to 2023 reveals significant volatility in both net income and asset utilization, characterized by a severe contraction in 2020 followed by an exceptional surge in profitability peaking in 2022.
- Net Income Trends
- Reported net income experienced a sharp decline from US$ 2,422 million in 2019 to a loss of US$ 1,421 million in 2020. A recovery phase began in 2021 with a return to profitability at US$ 930 million, which escalated dramatically to a peak of US$ 11,528 million in 2022. By 2023, net income moderated to US$ 8,835 million, though it remained substantially higher than 2019 levels.
- Return on Assets (ROA) Performance
- The Reported ROA mirrored the income volatility, dropping from 4.50% in 2019 to -2.74% in 2020. The metric recovered to 1.61% in 2021 before reaching a period high of 18.90% in 2022. In 2023, the Reported ROA settled at 14.01%, indicating a continued, albeit lower, level of asset efficiency compared to the previous year.
- Comparison of Reported and Adjusted Metrics
- Adjusted figures consistently track the trajectory of reported results, though they typically present a slightly more favorable view of performance. Adjusted ROA was higher than reported ROA in 2019, 2020, 2022, and 2023, suggesting that certain non-recurring items or specific tax adjustments negatively impacted the reported figures. The only exception occurred in 2021, where the Reported ROA of 1.61% slightly exceeded the Adjusted ROA of 1.39%.
The overall trend indicates a period of extreme cyclicality. The transition from negative returns in 2020 to double-digit ROA in 2022 and 2023 highlights a significant expansion in the company's ability to generate earnings from its asset base following the 2020 downturn.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?