UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

[  ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-13175

VALERO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		74-1828067
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

One Valero Way
San Antonio, Texas
(Address of principal executive offices)
78249
(Zip Code)

(210) 345-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one).

Large accelerated filer X		Accelerated filer __		Non-accelerated filer __

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes __ No X

The number of shares of the registrant’s only class of common stock, $0.01 par value, outstanding as of July 31, 2007 was 553,823,222.

 

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			3
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2007 and 2006			4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006			5
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2007 and 2006			6
Condensed Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			50
Item 4. Controls and Procedures			54
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			54
Item 1A. Risk Factors			55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			55
Item 4. Submission of Matters to a Vote of Security Holders			56
Item 6. Exhibits			57
SIGNATURE			58

PART I — FINANCIAL INFORMATION

VALERO ENERGY CORPORATION AND SUBSIDIARIES

		June 30,				December 31,
		2007				2006
		(Unaudited)
ASSETS
Current assets:
Cash and temporary cash investments		$	2,336			$	1,590
Restricted cash			31				31
Receivables, net			4,693				4,384
Inventories			4,578				3,979
Income taxes receivable			-				32
Deferred income taxes			183				143
Prepaid expenses and other			133				145
Assets held for sale			1,613				1,527
Total current assets			13,567				11,831
Property, plant and equipment, at cost			24,452				23,421
Accumulated depreciation			(3,667	)			(3,241	)
Property, plant and equipment, net			20,785				20,180
Intangible assets, net			293				303
Goodwill			4,092				4,103
Deferred charges and other assets, net			1,613				1,336
Total assets		$	40,350			$	37,753
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	66			$	475
Accounts payable			7,348				6,841
Accrued expenses			536				507
Taxes other than income taxes			603				584
Income taxes payable			522				23
Deferred income taxes			337				363
Liabilities related to assets held for sale			53				67
Total current liabilities			9,465				8,860
Long-term debt and capital lease obligations, less current portion			6,855				4,619
Deferred income taxes			4,146				4,047
Other long-term liabilities			1,769				1,622
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.01 par value; 1,200,000,000 shares authorized; 627,501,593 and 627,501,593 shares issued			6				6
Additional paid-in capital			7,446				7,779
Treasury stock, at cost; 74,188,725 and 23,738,162 common shares			(4,876	)			(1,396	)
Retained earnings			15,204				11,951
Accumulated other comprehensive income			335				265
Total stockholders’ equity			18,115				18,605
Total liabilities and stockholders’ equity		$	40,350			$	37,753

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION AND SUBSIDIARIES

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Operating revenues (1)		$	24,202			$	25,592			$	42,957			$	45,567
Costs and expenses:
Cost of sales			19,310				21,311				34,820				38,525
Refining operating expenses			985				911				1,919				1,795
Retail selling expenses			200				182				371				354
General and administrative expenses			177				171				322				322
Depreciation and amortization expense			337				279				659				534
Total costs and expenses			21,009				22,854				38,091				41,530
Operating income			3,193				2,738				4,866				4,037
Equity in earnings of NuStar Energy L.P.			—				10				—				22
Other income (expense), net			7				(5	)			12				(5	)
Interest and debt expense:
Incurred			(110	)			(93	)			(199	)			(189	)
Capitalized			27				45				58				81
Income from continuing operations before income tax expense			3,117				2,695				4,737				3,946
Income tax expense			1,055				876				1,587				1,299
Income from continuing operations			2,062				1,819				3,150				2,647
Income from discontinued operations, net of income tax expense			187				78				243				99
Net income			2,249				1,897				3,393				2,746
Preferred stock dividends			—				1				—				2
Net income applicable to common stock		$	2,249			$	1,896			$	3,393			$	2,744
Earnings per common share:
Continuing operations		$	3.66			$	2.97			$	5.42			$	4.30
Discontinued operations			0.33				0.13				0.42				0.16
Total		$	3.99			$	3.10			$	5.84			$	4.46
Weighted-average common shares outstanding (in millions)			563				611				581				615
Earnings per common share – assuming dilution:
Continuing operations		$	3.57			$	2.86			$	5.28			$	4.13
Discontinued operations			0.32				0.12				0.40				0.16
Total		$	3.89			$	2.98			$	5.68			$	4.29
Weighted-average common equivalent shares outstanding (in millions)			578				636				597				640
Dividends per common share		$	0.12			$	0.08			$	0.24			$	0.14
Supplemental information:
(1) Includes excise taxes on sales by our U.S. retail system		$	203			$	196			$	399			$	390

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION AND SUBSIDIARIES

		Six Months Ended June 30,
		2007				2006
Cash flows from operating activities:
Net income		$	3,393			$	2,746
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			675				553
Stock-based compensation expense			46				52
Deferred income tax expense			153				116
Changes in current assets and current liabilities			60				381
Changes in deferred charges and credits and other, net			24				(25	)
Net cash provided by operating activities			4,351				3,823
Cash flows from investing activities:
Capital expenditures			(1,042	)			(1,588	)
Deferred turnaround and catalyst costs			(230	)			(387	)
Investment in Cameron Highway Oil Pipeline Company, net			(215	)			(10	)
Advance proceeds related to sale of Lima Refinery			96				—
Contingent payments in connection with acquisitions			(75	)			(76	)
Other investing activities, net			15				28
Net cash used in investing activities			(1,451	)			(2,033	)
Cash flows from financing activities:
Long-term notes:
Borrowings			2,245				—
Repayments			(413	)			(221	)
Bank credit agreements:
Borrowings			3,000				501
Repayments			(3,000	)			(439	)
Termination of interest rate swaps			—				(54	)
Purchase of treasury stock			(4,181	)			(1,187	)
Issuance of common stock in connection with employee benefit plans			111				65
Benefit from tax deduction in excess of recognized stock-based compensation cost			215				130
Common and preferred stock dividends			(139	)			(87	)
Other financing activities			(21	)			(1	)
Net cash used in financing activities			(2,183	)			(1,293	)
Effect of foreign exchange rate changes on cash			29				4
Net increase in cash and temporary cash investments			746				501
Cash and temporary cash investments at beginning of period			1,590				436
Cash and temporary cash investments at end of period		$	2,336			$	937

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION AND SUBSIDIARIES

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Net income		$	2,249			$	1,897			$	3,393			$	2,746
Other comprehensive income (loss):
Foreign currency translation adjustment, net of income tax expense of $31, $0, $31 and $0			141				80				161				72
Pension and other postretirement benefits net loss reclassified into income, net of income tax benefit of $1, $0, $2 and $0			2				-				3				-
Net loss on derivative instruments designated and qualifying as cash flow hedges:
Net gain (loss) arising during the period, net of income tax (expense) benefit of $24, $0, $47 and $(1)			(45	)			-				(87	)			2
Net (gain) loss reclassified into income, net of income tax expense (benefit) of $(2), $0, $4 and $3			4				-				(7	)			(6	)
Net loss on cash flow hedges			(41	)			-				(94	)			(4	)
Other comprehensive income (loss)			102				80				70				68
Comprehensive income		$	2,351			$	1,977			$	3,463			$	2,814

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION AND SUBSIDIARIES

1. BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION, AND SIGNIFICANT ACCOUNTING POLICIES

As used in this report, the terms “Valero,” “we,” “us,” or “our” may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole.

These unaudited consolidated financial statements include the accounts of Valero and subsidiaries in which Valero has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation. Investments in significant non-controlled entities are accounted for using the equity method of accounting.

These unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three and six months ended June 30, 2007 and 2006 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited consolidated financial statements. Operating results for the three and six months ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The consolidated balance sheet as of December 31, 2006 has been derived from the audited financial statements as of that date. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006. As discussed in Note 3, the assets and liabilities related to the Lima Refinery as of December 31, 2006 have been reclassified as held for sale, and the results of operations of the Lima Refinery have been presented as discontinued operations in the statements of income for all periods presented.

On December 22, 2006, we sold our remaining ownership interest in NuStar GP Holdings, LLC (formerly Valero GP Holdings, LLC), which indirectly owns the general partner interest, the incentive distribution rights, and a 21.4% limited partner interest in NuStar Energy L.P. (formerly Valero L.P.). As a result, our consolidated statements of income reflect no equity in earnings of NuStar Energy L.P. subsequent to December 21, 2006.

Reclassifications
Previously reported amounts have been reclassified to present the operations of the Lima Refinery as discontinued operations as discussed above. In addition, operating revenues, cost of sales, and retail selling expenses reported in our consolidated statements of income for 2006 have been reclassified for certain credit card transactions. Commencing January 1, 2007, fees received from our distributors and dealers associated with certain credit card transactions processed on behalf of those distributors and dealers are being netted against third-party processing costs incurred on such transactions to better reflect the nature of the credit card transactions. These credit card reclassifications increased (decreased) amounts previously reported in 2006 as follows (in millions):

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Three Months				Six Months
		Ended				Ended
		June 30, 2006				June 30, 2006
Operating revenues		$	(20	)		$	(34	)
Cost of sales			2				5
Retail selling expenses			(22	)			(39	)

2. ACCOUNTING PRONOUNCEMENTS

FASB Statement No. 155
In February 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments,” which amends Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This statement improves the financial reporting of certain hybrid financial instruments and simplifies the accounting for these instruments. In particular, Statement No. 155 (i) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (ii) clarifies which interest-only and principal-only strips are not subject to the requirements of Statement No. 133, (iii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (iv) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (v) amends Statement No. 140 to eliminate the prohibition on a qualifying special-purpose entity holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The adoption of Statement No. 155 on January 1, 2007 has not affected our financial position or results of operations.

FASB Statement No. 156
In March 2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial Assets,” which amends Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Statement No. 156 requires the initial recognition at fair value of a servicing asset or servicing liability when an obligation to service a financial asset is undertaken by entering into a servicing contract. The adoption of Statement No. 156 on January 1, 2007 has not affected our financial position or results of operations.

FASB Interpretation No. 48
In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. If a tax position is more likely than not to be sustained upon examination, then an enterprise is required to recognize in its financial statements the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The adoption of FIN 48 on January 1, 2007 did not materially affect our financial position or results of operations.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have elected to classify any interest expense related to the underpayment of income taxes in “income tax expense” in our consolidated statements of income. Any penalties related to the underpayment of income taxes are recorded in the corresponding expense category in our consolidated statements of income.

EITF Issue No. 06-3
In June 2006, the FASB ratified its consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF No. 06-3). The scope of EITF No. 06-3 includes any tax assessed by a governmental authority that is imposed concurrent with or subsequent to a revenue-producing transaction between a seller and a customer. For taxes within the scope of this issue that are significant in amount, the consensus requires the following disclosures: (i) the accounting policy elected for these taxes and (ii) the amount of the taxes reflected gross in the income statement on an interim and annual basis for all periods presented. The disclosure of those taxes can be provided on an aggregate basis. We adopted the consensus on January 1, 2007. We present excise taxes on sales by our U.S. retail system on a gross basis with supplemental information regarding the amount of such taxes included in revenues provided in a footnote on the face of the income statement. All other excise taxes are presented on a net basis in the income statement.

FASB Statement No. 157
In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements.” Statement No. 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measures. Statement No. 157 is effective for fiscal years beginning after November 15, 2007, with early adoption encouraged. The provisions of Statement No. 157 are to be applied on a prospective basis, with the exception of certain financial instruments for which retrospective application is required. The adoption of Statement No. 157 is not expected to materially affect our financial position or results of operations.

FASB Statement No. 159
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” Statement No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Statement No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided the entity also elects to apply the provisions of Statement No. 157. We do not expect the adoption of Statement No. 159 to have any impact on our financial position or results of operations.

3. DISPOSITION OF LIMA REFINERY

On May 2, 2007, we entered into an agreement to sell our refinery in Lima, Ohio to Husky Refining Company (Husky), a wholly owned subsidiary of Husky Energy Inc. As a result, the assets and liabilities related to the Lima Refinery as of June 30, 2007 and December 31, 2006 have been presented in the consolidated balance sheets as “assets held for sale” and “liabilities related to assets held for sale,” respectively. In addition, the consolidated statements of income reflect the operations related to the Lima Refinery in “income from discontinued operations, net of income tax expense” for all periods presented.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On July 3, 2007, we consummated the sale of our Lima Refinery to Husky with an effective date of July 1, 2007. Proceeds from the sale were $1.9 billion, plus $540 million representing a preliminary working capital settlement. The working capital settlement is expected to be finalized within 90 days after the effective date of the sale. In connection with the sale, we entered into a transition services agreement with Husky under which we agreed to provide certain accounting and administrative services to Husky beginning July 3, 2007, with the services terminating by July 31, 2008.

Financial information related to the assets and liabilities sold is summarized as follows (in millions):

		June 30,				December 31,
		2007				2006
Current assets (primarily inventory)		$	533			$	456
Property, plant and equipment, net			929				918
Goodwill			108				108
Deferred charges and other assets, net			43				45
Assets held for sale		$	1,613			$	1,527
Current liabilities, including current portion of capital lease obligation		$	15			$	29
Capital lease obligation, excluding current portion			38				38
Liabilities related to assets held for sale		$	53			$	67

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Operating revenues		$	1,288			$	1,169			$	2,231			$	2,121
Income before income tax expense			300				128				391				163

4. INVENTORIES

Inventories consisted of the following (in millions):

		June 30,				December 31,
		2007				2006
Refinery feedstocks		$	2,318			$	1,680
Refined products and blendstocks			2,007				2,056
Convenience store merchandise			88				85
Materials and supplies			165				158
Inventories		$	4,578			$	3,979

As of June 30, 2007 and December 31, 2006, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by approximately $4.7 billion and $2.9 billion, respectively.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. INVESTMENT IN AND TRANSACTIONS WITH NUSTAR ENERGY L.P.

Our ownership interest in NuStar Energy L.P. as of June 30, 2006 was 23.4%, which was composed of a 2% general partner interest, incentive distribution rights, and a 21.4% limited partner interest. The limited partner interest was represented by 10,222,630 common units of NuStar Energy L.P., of which 9,599,322 were previously subordinated units that converted to common units on May 8, 2006 upon the termination of the subordination period in accordance with the terms of NuStar Energy L.P.’s partnership agreement.

Through the date of termination of the subordination period, NuStar Energy L.P. had issued common units to the public on three separate occasions, which had diluted our ownership percentage. These three issuances resulted in increases (or credits, known as SAB 51 credits due to the Securities and Exchange Commission Staff Accounting Bulletin that provides accounting guidance for such credits) in our proportionate share of NuStar Energy L.P.’s capital because, in each case, the issuance price per unit exceeded our carrying amount per unit at the time of issuance. We had not recognized any SAB 51 credits in our consolidated financial statements through March 31, 2006 and were not permitted to do so until the subordinated units converted to common units. In conjunction with the conversion of the subordinated units held by us to common units in the second quarter of 2006, we recognized the entire balance of $158 million in SAB 51 credits as an increase in our investment in NuStar Energy L.P. and $101 million after tax as an increase to “additional paid-in capital” in our consolidated balance sheet.

NuStar GP Holdings, LLC completed public offerings in July and December 2006 through which we sold all of our ownership interest in NuStar GP Holdings, LLC. As a result, we no longer owned any interest in NuStar Energy L.P. as of December 31, 2006. Financial information reported by NuStar Energy L.P. for the three months and six months ended June 30, 2006 is summarized below (in millions):

		Three Months				Six Months
		Ended				Ended
		June 30, 2006				June 30, 2006
Revenues		$	280			$	554
Operating income			47				103
Net income			32				71

Related-Party Transactions
Through December 31, 2006, we provided NuStar Energy L.P. with certain corporate functions for an annual fee as prescribed by a services agreement. Effective January 1, 2007, the services agreement was amended to provide for limited services. The amended services agreement provided for a termination date of December 31, 2010, unless we terminated the agreement earlier, in which case we were required to pay a termination fee of $13 million. In April, we notified NuStar Energy L.P. of our decision to terminate the services agreement. Accordingly, the $13 million termination fee was accrued and paid during the second quarter of 2007.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the results of transactions with NuStar Energy L.P. for the three months and six months ended June 30, 2006 (in millions):

		Three Months				Six Months
		Ended				Ended
		June 30, 2006				June 30, 2006
Fees and expenses charged by us to NuStar Energy L.P.		$	31			$	57
Fees and expenses charged to us by NuStar Energy L.P.			64				125

6. DEBT

On February 1, 2007, we redeemed our 9.25% senior notes for $183 million, or 104.625% of stated value. These notes had a carrying amount of $187 million on the date of redemption, resulting in a gain of $4 million that was included in “other income (expense), net” in the consolidated statement of income.

In April 2007, we repaid in full at the scheduled maturity date $230 million related to our 6.125% notes. Also in April 2007, we borrowed $3 billion under a 364-day term credit agreement with a financial institution to fund the accelerated share repurchase program discussed in Note 7. The term loan bore interest at LIBOR plus a margin, or an alternate base rate as defined under the term credit agreement. In May 2007, we repaid $500 million of the borrowings under the term credit agreement. The remaining balance of $2.5 billion was repaid in June 2007 using available cash and proceeds from our issuance of long-term notes described below.

On June 8, 2007, we issued $750 million of 6.125% notes due June 15, 2017 and $1.5 billion of 6.625% notes due June 15, 2037. Proceeds from the issuance of these notes totaled $2.245 billion, before deducting underwriting discounts of $18 million.

During the six months ended June 30, 2007, we had no borrowings under our revolving credit facilities or our short-term uncommitted bank credit facilities.

7. STOCKHOLDERS’ EQUITY

Treasury Stock
During the six months ended June 30, 2007 and 2006, we purchased 61.9 million and 20.4 million shares of our common stock at a cost of $4.2 billion and $1.2 billion, respectively. These purchases were made in connection with the administration of our employee benefit plans and the $6 billion common stock purchase program authorized by our board of directors, including the effect of the accelerated share repurchase program discussed below. During the six months ended June 30, 2007, we issued 11.4 million shares from treasury at an average cost of $61.28 per share, and for the six months ended June 30, 2006, we issued 9.6 million shares from treasury at an average cost of $53.52 per share, for our employee benefit plans.

Accelerated Share Repurchase Program
On April 25, 2007, our board of directors approved an amendment to our $2 billion common stock purchase program to increase the authorized purchases under the program to $6 billion. In conjunction with the increase in our common stock purchase program, we entered into an agreement with a financial institution to purchase $3 billion of our shares under an accelerated share repurchase program, and in late

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

April, 42.1 million shares were purchased under this agreement. As described in Note 6 above, the purchase of these shares was initially funded with a 364-day term credit agreement, which we subsequently replaced with longer-term financing. The cost of the shares purchased under this accelerated share repurchase program was to be adjusted at the expiration of the program, with the final purchase cost based on a discount to the average trading price of our common stock, weighted by the daily volume of shares traded, during the program period. Any adjustment to the cost could be paid in cash or stock, at our option. Prior to the settlement of the accelerated share repurchase program, the number of shares of our common stock included in the calculation of “earnings per common share – assuming dilution” for the three months and six months ended June 30, 2007 included the number of shares that would have been payable under the agreement assuming we elected settlement in shares of our common stock. The weighted-average number of shares included in each respective period was based on the initial shares purchased under the program multiplied by the price adjustment as of June 30, 2007 using the final purchase price formula described above, divided by our closing price as of June 30, 2007.

The accelerated share repurchase program was completed on July 23, 2007, resulting in an additional $94.5 million payment by us for the shares purchased. At that time, we elected to pay this additional amount in cash.

Common Stock Dividends
On July 12, 2007, our board of directors declared a regular quarterly cash dividend of $0.12 per common share payable on September 6, 2007 to holders of record at the close of business on August 8, 2007.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. EARNINGS PER COMMON SHARE

Earnings per common share amounts from continuing operations were computed as follows (dollars and shares in millions, except per share amounts):

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Earnings per common share from continuing operations:
Income from continuing operations		$	2,062			$	1,819			$	3,150			$	2,647
Preferred stock dividends			-				1				-				2
Income from continuing operations applicable to common stock		$	2,062			$	1,818			$	3,150			$	2,645
Weighted-average common shares outstanding			563				611				581				615
Earnings per common share from continuing operations		$	3.66			$	2.97			$	5.42			$	4.30
Earnings per common share from continuing operations – assuming dilution:
Income from continuing operations applicable to common equivalent shares		$	2,062			$	1,819			$	3,150			$	2,647
Weighted-average common shares outstanding			563				611				581				615
Effect of dilutive securities:
Stock options			13				19				14				19
Performance awards and other benefit plans			1				1				1				1
Contingently issuable shares related to accelerated share repurchase program			1				-				1				-
Mandatory convertible preferred stock			-				5				-				5
Weighted-average common equivalent shares outstanding			578				636				597				640
Earnings per common share from continuing operations – assuming dilution		$	3.57			$	2.86			$	5.28			$	4.13

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. STATEMENTS OF CASH FLOWS

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):

		Six Months Ended June 30,
		2007				2006
Decrease (increase) in current assets:
Receivables, net		$	(268	)		$	(648	)
Inventories			(638	)			(573	)
Income taxes receivable			32				46
Prepaid expenses and other			14				(105	)
Increase (decrease) in current liabilities:
Accounts payable			464				1,316
Accrued expenses			(71	)			(148	)
Taxes other than income taxes			3				(1	)
Income taxes payable			524				494
Changes in current assets and current liabilities		$	60			$	381

The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets for the respective periods for the following reasons:

	•		the amounts shown above exclude changes in cash and temporary cash investments, deferred income taxes, and current portion of long-term debt and capital lease obligations, as well as the effect of certain noncash investing and financing activities discussed below;
	•		previously accrued capital expenditures, deferred turnaround and catalyst costs, and contingent earn-out payments, as well as advance proceeds related to the sale of the Lima Refinery, are reflected in investing activities in the consolidated statements of cash flows;
	•		changes in assets held for sale and liabilities related to assets held for sale in the consolidated balance sheets are reflected in the line item to which the changes relate in the table above and in the consolidated statements of cash flows; and
	•		certain differences between consolidated balance sheet changes and consolidated statement of cash flow changes reflected above result from translating foreign currency denominated amounts at different exchange rates.

There were no significant noncash investing or financing activities for the six months ended June 30, 2007.

Noncash investing activities for the six months ended June 30, 2006 included the pre-tax recognition of $158 million of SAB 51 credits related to our investment in NuStar Energy L.P. as discussed in Note 5. Noncash investing activities also included adjustments to property, plant and equipment, goodwill and certain current and noncurrent assets and liabilities resulting from adjustments to the purchase price allocation related to the acquisitions of Premcor and UDS. Noncash financing activities for the six months ended June 30, 2006 included the conversion of 747,260 shares of preferred stock into 1,481,066 shares of our common stock.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash flows related to the discontinued operations of the Lima Refinery have been combined with the cash flows from continuing operations within each category in the consolidated statement of cash flows for each period presented. Cash provided by operating activities related to our discontinued results of operations was $260 million and $113 million for the six months ended June 30, 2007 and 2006, respectively. Cash used in investing activities related to the Lima Refinery were $14 million and $70 million for the six months ended June 30, 2007 and 2006, respectively.

Cash flows related to interest and income taxes were as follows (in millions):

		Six Months Ended June 30,
		2007				2006
Interest paid (net of amount capitalized)		$	139			$	164
Income taxes paid (net of tax refunds received)			811				569

10. PRICE RISK MANAGEMENT ACTIVITIES

The net gain (loss) recognized in income representing the amount of hedge ineffectiveness was as follows (in millions):

		Three Months Ended June 30,								Six Months Ended June 30,
		2007				2006				2007				2006
Fair value hedges		$	(1	)		$	(3	)		$	(2	)		$	(6	)
Cash flow hedges			(7	)			5				(6	)			5

The above amounts were included in “cost of sales” in the consolidated statements of income. No component of the derivative instruments’ gains or losses was excluded from the assessment of hedge effectiveness. No amounts were recognized in income for hedged firm commitments that no longer qualify as fair value hedges.

For cash flow hedges, gains and losses reported in “accumulated other comprehensive income” in the consolidated balance sheets are reclassified into “cost of sales” when the forecasted transactions affect income. During the six months ended June 30, 2007, we recognized in “accumulated other comprehensive income” unrealized after-tax losses of $87 million on certain cash flow hedges, primarily related to forward sales of distillates and associated forward purchases of crude oil, with $48 million of cumulative after-tax losses on cash flow hedges remaining in “accumulated other comprehensive income” as of June 30, 2007. We expect that the deferred losses as of June 30, 2007 will be reclassified into “cost of sales” over the next nine months as a result of hedged transactions that are forecasted to occur. The amount ultimately realized in income, however, will differ as commodity prices change. For the six months ended June 30, 2007 and 2006, there were no amounts reclassified from “accumulated other comprehensive income” into income as a result of the discontinuance of cash flow hedge accounting.

11. INCOME TAXES

As discussed in Note 2, on January 1, 2007, we adopted the provisions of FIN 48. We did not recognize a significant change in our liability for uncertain tax positions as a result of our implementation of FIN 48; however, certain amounts previously reported in “deferred income taxes” were reclassified to “other long-

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

term liabilities” in the consolidated balance sheet as of January 1, 2007. In accordance with the provisions of FIN 48, prior period amounts were not reclassified. The total amount of unrecognized tax benefits as of January 1, 2007 was $179 million of which $85 million, if recognized, would impact our effective rate. Accrued liabilities for interest and penalties related to unrecognized tax benefits were $43 million as of January 1, 2007. We anticipate that any matters resolved with tax authorities within the next 12 months will not result in a material change in our financial position or results of operations. As of June 30, 2007, we remain subject to examination in the U.S. federal and various state jurisdictions for the tax years from 1999 through 2006 and Canadian federal and various provincial jurisdictions for tax years from 2001 to 2006.

12. SEGMENT INFORMATION

Segment information for our two reportable segments, refining and retail, was as follows (in millions):

		Refining				Retail				Corporate				Total
Three months ended June 30, 2007:
Operating revenues from external customers		$	21,883			$	2,319			$	-			$	24,202
Intersegment revenues			1,654				-				-				1,654
Operating income (loss)			3,327				56				(190	)			3,193
Three months ended June 30, 2006:
Operating revenues from external customers			23,361				2,231				-				25,592
Intersegment revenues			1,601				-				-				1,601
Operating income (loss)			2,873				46				(181	)			2,738
Six months ended June 30, 2007:
Operating revenues from external customers			38,732				4,225				-				42,957
Intersegment revenues			2,963				-				-				2,963
Operating income (loss)			5,103				109				(346	)			4,866
Six months ended June 30, 2006:
Operating revenues from external customers			41,445				4,122				-				45,567
Intersegment revenues			2,912				-				-				2,912
Operating income (loss)			4,311				67				(341	)			4,037

Total assets by reportable segment were as follows (in millions):

		June 30,				December 31,
		2007				2006
Refining		$	35,583			$	34,275
Retail			1,919				1,826
Corporate			2,848				1,652
Total consolidated assets		$	40,350			$	37,753

The entire balance of goodwill as of June 30, 2007 and December 31, 2006 has been included in the total assets of the refining reportable segment. Total assets related to the Lima Refinery have been included in the refining reportable segment for both periods presented.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost related to our defined benefit plans were as follows for the three and six months ended June 30, 2007 and 2006 (in millions):

										Other Postretirement
		Pension Plans								Benefit Plans
		2007				2006				2007				2006
Three months ended June 30:
Components of net periodic benefit cost:
Service cost		$	24			$	25			$	4			$	4
Interest cost			17				16				6				6
Expected return on plan assets			(21	)			(15	)			-				-
Amortization of:
Prior service cost (credit)			-				-				(2	)			(3	)
Net loss			3				4				1				1
Net periodic benefit cost before special charges			23				30				9				8
Charge for special termination benefits			7				—				1				—
Net periodic benefit cost		$	30			$	30			$	10			$	8
Six months ended June 30:
Components of net periodic benefit cost:
Service cost		$	48			$	50			$	7			$	7
Interest cost			35				32				13				12
Expected return on plan assets			(42	)			(29	)			-				-
Amortization of:
Prior service cost (credit)			1				1				(5	)			(5	)
Net loss			5				7				3				3
Net periodic benefit cost before special charges			47				61				18				17
Charge for special termination benefits			7				—				1				—
Net periodic benefit cost		$	54			$	61			$	19			$	17

Although we have only $1 million of minimum required contributions to our qualified pension plans during 2007 under the Employee Retirement Income Security Act, we expect to contribute $36 million to our qualified plans during 2007. There were no contributions made during the six months ended June 30, 2007. For the six months ended June 30, 2006, we contributed $45 million to our qualified pension plans.

14. COMMITMENTS AND CONTINGENCIES

Accounts Receivable Sales Facility
As of June 30, 2007, we had an accounts receivable sales facility with a group of third-party financial institutions to sell on a revolving basis up to $1 billion of eligible trade receivables, which matures in August 2008. As of June 30, 2007 and December 31, 2006, the amount of eligible receivables sold to the third-party financial institutions was $1 billion.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent Earn-Out Agreements
In June 2007, we made a previously accrued payment of $25 million related to the Delaware City Refinery contingent earn-out agreement. In both January 2007 and January 2006, we made previously accrued earn-out payments of $50 million related to the acquisition of the St. Charles Refinery. In the second quarter of 2006, we made an earn-out contingency payment of $26 million to Salomon Inc in conjunction with our acquisition of Basis Petroleum, Inc.

The following table summarizes the aggregate payments we have made through June 30, 2007 and payment limitations related to the following acquisitions (in millions):

		Aggregate
		Payments				Annual
		Made Through				Maximum				Aggregate
		June 30, 2007				Limit				Limit
St. Charles Refinery		$	150			$	50			$	175
Delaware City Refinery			50				25				50

Tax Matters
We are subject to extensive tax liabilities, including federal, state, and foreign income taxes and transactional taxes such as excise, sales/use, payroll, franchise, withholding, and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future. Certain of these liabilities are subject to periodic audits by the respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits may subject us to interest and penalties.

Effective January 1, 2007, the Government of Aruba (GOA) enacted a turnover tax on revenues from the sale of goods produced and services rendered in Aruba. The turnover tax, which is 3% for on-island sales and services and 1% on export sales, is being assessed by the GOA on sales by our Aruba Refinery. However, due to a previous tax holiday that was granted to our Aruba Refinery by the GOA through December 31, 2010, we believe that sales by our Aruba Refinery should not be subject to this turnover tax. As a result, no amounts have been accrued with respect to this turnover tax. We have filed a request for arbitration with the Netherlands Arbitration Institute pursuant to which we will seek to enforce our rights under the tax holiday.

Litigation
MTBE Litigation
As of August 1, 2007, we were named as a defendant in 82 active cases alleging liability related to MTBE contamination in groundwater. The plaintiffs are generally water providers, governmental authorities, and private water companies alleging that refiners and marketers of MTBE and gasoline containing MTBE are liable for manufacturing or distributing a defective product. We have been named in these lawsuits together with many other refining industry companies. We are being sued primarily as a refiner and marketer of MTBE and gasoline containing MTBE. We do not own or operate gasoline station facilities in most of the geographic locations in which damage is alleged to have occurred. The lawsuits generally seek individual, unquantified compensatory and punitive damages, injunctive relief, and attorneys’ fees. Although most of the cases are pending in federal court and consolidated for pre-trial proceedings in the U.S. District Court for the Southern District of New York (Multi-District Litigation Docket No. 1358, In re: Methyl-Tertiary Butyl Ether Products Liability Litigation), a recent ruling on

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

jurisdiction from the U.S. Court of Appeals for the Second Circuit may result in a remand of many of the cases to state court. Two cases, Riverview Water District and California Water Services Company, have already been remanded to state courts in California. Valero is involved in four cases that have been selected as “focus cases” for discovery and pre-trial motions. One of these, the Suffolk County Water Authority case, is scheduled for trial in March 2008. Activity in the “non-focus” cases is generally stayed. We believe that we have strong defenses to these claims and are vigorously defending the cases. We have recorded a loss contingency liability with respect to this matter in accordance with FASB Statement No. 5. However, due to the inherent uncertainty of litigation, we believe that it is reasonably possible (as defined in FASB Statement No. 5) that we may suffer a loss with respect to one or more of the lawsuits in excess of the amount accrued. We believe that such an outcome in any one of these lawsuits would not have a material adverse effect on our results of operations or financial position. However, we believe that an adverse result in all or a substantial number of these cases could have a material effect on our results of operations and financial position. An estimate of the possible loss or range of loss from an adverse result in all or substantially all of these cases cannot reasonably be made.

Retail Fuel Temperature Litigation
Along with several other defendants in the retail petroleum marketing business, as of August 1, 2007, we were named in 17 consumer class action lawsuits relating to fuel temperature. The complaints, filed in federal courts in several states, allege that because fuel volume increases with fuel temperature, the defendants have violated state consumer protection laws by failing to adjust the volume of fuel when the fuel temperature exceeded 60 degrees Fahrenheit. The complaints seek to certify classes of retail consumers who purchased fuel in various locations. The complaints seek an order compelling the installation of temperature correction devices as well as associated monetary relief. In June 2007, the federal lawsuits were consolidated into a multidistrict litigation case in the U.S. District Court for the District of Kansas (Multi-District Litigation Docket No. 1840, In re: Motor Fuel Temperature Sales Practices Litigation). We believe that we have several strong defenses to these lawsuits and intend to contest them. We have not recorded a loss contingency liability with respect to this matter, but due to the inherent uncertainty of litigation, we believe that it is reasonably possible (as defined in FASB Statement No. 5) that we may suffer a loss with respect to one or more of the lawsuits. An estimate of the possible loss or range of loss from an adverse result in all or substantially all of these cases cannot reasonably be made.

Other Litigation
We are also a party to additional claims and legal proceedings arising in the ordinary course of business. We believe that there is only a remote likelihood that future costs related to known contingent liabilities related to these legal proceedings would have a material adverse impact on our consolidated results of operations or financial position.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In conjunction with the acquisition of Premcor Inc. (Premcor) on September 1, 2005, Valero Energy Corporation has fully and unconditionally guaranteed the following debt of The Premcor Refining Group Inc. (PRG), a wholly owned subsidiary of Valero Energy Corporation, that was outstanding as of June 30, 2007:

	•		6.75% senior notes due February 2011,
	•		6.125% senior notes due May 2011,
	•		9.5% senior notes due February 2013,
	•		6.75% senior notes due May 2014, and
	•		7.5% senior notes due June 2015.

In addition, PRG has fully and unconditionally guaranteed all of the outstanding debt issued by Valero Energy Corporation.

The following condensed consolidating financial information is provided for Valero and PRG as an alternative to providing separate financial statements for PRG. The accounts for all companies reflected herein are presented using the equity method of accounting for investments in subsidiaries.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Condensed Consolidating Balance Sheet as of June 30, 2007
(unaudited, in millions)

		Valero								Other Non-
		Energy								Guarantor
		Corporation				PRG				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and temporary cash investments		$	1,364			$	-			$	972			$	-			$	2,336
Restricted cash			22				2				7				-				31
Receivables, net			2				94				4,597				-				4,693
Inventories			-				441				4,137				-				4,578
Income taxes receivable			-				4				-				(4	)			-
Deferred income taxes			-				-				183				-				183
Prepaid expenses and other			-				8				125				-				133
Assets held for sale			-				935				1,613				(935	)			1,613
Total current assets			1,388				1,484				11,634				(939	)			13,567
Property, plant and equipment, at cost			-				6,530				17,922				-				24,452
Accumulated depreciation			-				(311	)			(3,356	)			-				(3,667	)
Property, plant and equipment, net			-				6,219				14,566				-				20,785
Intangible assets, net			-				2				291				-				293
Goodwill			-				1,819				2,273				-				4,092
Investment in Valero Energy affiliates			6,515				856				801				(8,172	)			-
Long-term notes receivable from affiliates			17,999				-				-				(17,999	)			-
Deferred charges and other assets, net			216				166				1,231				-				1,613
Total assets		$	26,118			$	10,546			$	30,796			$	(27,110	)		$	40,350
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	63			$	-			$	3			$	-			$	66
Accounts payable			77				269				7,002				-				7,348
Accrued expenses			80				43				413				-				536
Taxes other than income taxes			-				16				587				-				603
Income taxes payable			524				-				2				(4	)			522
Deferred income taxes			65				272				-				-				337
Liabilities related to assets held for sale			-				-				53				-				53
Total current liabilities			809				600				8,060				(4	)			9,465
Long-term debt and capital lease obligations, less current portion			5,524				1,290				41				-				6,855
Long-term notes payable to affiliates			-				7,656				10,343				(17,999	)			-
Deferred income taxes			841				7				3,298				-				4,146
Other long-term liabilities			829				192				748				-				1,769
Stockholders’ equity:
Common stock			6				-				2				(2	)			6
Additional paid-in capital			7,446				100				4,113				(4,213	)			7,446
Treasury stock			(4,876	)			-				-				-				(4,876	)
Retained earnings			15,204				700				4,249				(4,949	)			15,204
Accumulated other comprehensive income (loss)			335				1				(58	)			57				335
Total stockholders’ equity			18,115				801				8,306				(9,107	)			18,115
Total liabilities and stockholders’ equity		$	26,118			$	10,546			$	30,796			$	(27,110	)		$	40,350

VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Condensed Consolidating Balance Sheet as of December 31, 2006
(in millions)

		Valero								Other Non-
		Energy								Guarantor
		Corporation				PRG				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and temporary cash investments		$	712			$	-			$	878			$	-			$	1,590
Restricted cash			22				2				7				-				31
Receivables, net			1				76				4,307				-				4,384
Inventories			-				377				3,602				-				3,979
Income tax receivable			-				5				32				(5	)			32
Deferred income taxes			-				-				143				-				143
Prepaid expenses and other			-				12				133				-				145
Assets held for sale			-				977				550				-				1,527
Total current assets			735				1,449				9,652				(5	)			11,831
Property, plant and equipment, at cost			-				6,481				16,940				-				23,421
Accumulated depreciation			-				(231	)			(3,010	)			-				(3,241	)
Property, plant and equipment, net			-				6,250				13,930				-				20,180
Intangible assets, net			-				3				300				-				303
Goodwill			-				1,826				2,277				-				4,103
Investment in Valero Energy affiliates			2,114				705				101				(2,920	)			-
Long-term notes receivable from affiliates			20,920				-				-				(20,920	)			-
Deferred income taxes			-				111				-				(111	)			-
Deferred charges and other assets, net			196				184				956				-				1,336
Total assets		$	23,965			$	10,528			$	27,216			$	(23,956	)		$	37,753
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	285			$	187			$	3			$	-			$	475
Accounts payable			80				281				6,480				-				6,841
Accrued expenses			76				76				355				-				507
Taxes other than income taxes			-				19				565				-				584
Income taxes payable			21				-				7				(5	)			23
Deferred income taxes			91				272				-				-				363
Liabilities related to assets held for sale			-				67				-				-				67
Total current liabilities			553				902				7,410				(5	)			8,860
Long-term debt and capital lease obligations, less current portion			3,281				1,295				43				-				4,619
Long-term notes payable to affiliates			-				8,003				12,917				(20,920	)			-
Deferred income taxes			868				-				3,290				(111	)			4,047
Other long-term liabilities			658				227				737				-				1,622
Stockholders’ equity:
Common stock			6				-				2				(2	)			6
Additional paid-in capital			7,779				100				1,458				(1,558	)			7,779
Treasury stock			(1,396	)			-				-				-				(1,396	)
Retained earnings			11,951				-				1,322				(1,322	)			11,951
Accumulated other comprehensive income			265				1				37				(38	)			265
Total stockholders’ equity			18,605				101				2,819				(2,920	)			18,605
Total liabilities and stockholders’ equity		$	23,965			$	10,528			$	27,216			$	(23,956	)		$	37,753