Delaware | 1-3473 | 95-0862768 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
19100 Ridgewood Pkwy San Antonio, Texas | 78259-1828 | |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
99.1 | Press release announcing first quarter financial results issued on May 1, 3013, by Tesoro Corporation. |
TESORO CORPORATION | ||||
By: | /s/ G. SCOTT SPENDLOVE | |||
G. Scott Spendlove | ||||
Senior Vice President and Chief Financial Officer | ||||
Exhibit Number | Description | |
99.1 | Press release announcing first quarter financial results issued on May 1, 2013, by Tesoro Corporation. |
• | Net income of $0.67 per diluted share, or $0.73 per diluted share, excluding special items |
• | Announced unit train unloading and marine loading terminal at the Port of Vancouver, WA |
• | Began process to cease refining operations at the Hawaii refinery |
• | Purchased $245 million in Tesoro shares to-date, nearly 50% of authorized buyback program |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Revenues | $ | 8,156 | $ | 7,820 | |||
Costs and Expenses: | |||||||
Cost of sales | 7,335 | 7,168 | |||||
Operating expenses | 400 | 347 | |||||
Selling, general and administrative expenses (a) | 115 | 62 | |||||
Depreciation and amortization expense | 106 | 103 | |||||
Loss on asset disposals and impairments | 8 | 6 | |||||
Operating Income | 192 | 134 | |||||
Interest and financing costs, net | (30 | ) | (36 | ) | |||
Interest income | 1 | 1 | |||||
Other expense, net | (1 | ) | — | ||||
Earnings Before Income Taxes | 162 | 99 | |||||
Income tax expense | 58 | 37 | |||||
Net Earnings | 104 | 62 | |||||
Less: Net earnings attributable to noncontrolling interest | 11 | 6 | |||||
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION | $ | 93 | $ | 56 | |||
Net Earnings Per Share: | |||||||
Basic | $ | 0.68 | $ | 0.40 | |||
Diluted | $ | 0.67 | $ | 0.39 | |||
Weighted Average Common Shares: | |||||||
Basic | 137.0 | 139.5 | |||||
Diluted | 139.6 | 141.8 |
(a) | Includes stock-based compensation expense related to Tesoro stock awards of $52 million and $20 million for the three months ended March 31, 2013 and 2012, respectively. The increase is primarily a result of changes in Tesoro's stock price during the three months ended March 31, 2013 as compared to the three months ended March 31, 2012. |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Operating Income (Loss) | |||||||
Refining | $ | 283 | $ | 191 | |||
Retail | 17 | (4 | ) | ||||
Total Segment Operating Income | 300 | 187 | |||||
Corporate and unallocated costs (a) | (108 | ) | (53 | ) | |||
Operating Income | 192 | 134 | |||||
Interest and financing costs, net | (30 | ) | (36 | ) | |||
Interest income | 1 | 1 | |||||
Other expense, net | (1 | ) | — | ||||
Earnings Before Income Taxes | $ | 162 | $ | 99 | |||
Depreciation and Amortization Expense | |||||||
Refining | $ | 92 | $ | 91 | |||
Retail | 9 | 10 | |||||
Corporate | 5 | 2 | |||||
Depreciation and Amortization Expense | $ | 106 | $ | 103 | |||
Capital Expenditures | |||||||
Refining | $ | 109 | $ | 91 | |||
Retail | 7 | 8 | |||||
Corporate | 3 | 3 | |||||
Capital Expenditures | $ | 119 | $ | 102 |
March 31, 2013 | December 31, 2012 | ||||||
Cash and cash equivalents | $ | 1,972 | $ | 1,639 | |||
Inventories (b) | 1,560 | 1,578 | |||||
Total Assets | 11,390 | 10,702 | |||||
Current maturities of debt | 3 | 3 | |||||
Long-Term Debt | 1,590 | 1,587 | |||||
Total Equity | 5,104 | 4,737 | |||||
Total Debt to Capitalization Ratio | 24 | % | 25 | % | |||
Total Debt to Capitalization Ratio excluding TLLP (c) | 23 | % | 23 | % |
Three Months Ended March 31, | |||||||
REFINING SEGMENT | 2013 | 2012 | |||||
Total Refining Segment | |||||||
Throughput (thousand barrels per day (“Mbpd”)) | |||||||
Heavy crude (d) | 204 | 142 | |||||
Light crude | 340 | 358 | |||||
Other feedstocks | 35 | 29 | |||||
Total Throughput (e) | 579 | 529 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 274 | 253 | |||||
Jet fuel | 86 | 83 | |||||
Diesel fuel | 131 | 105 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 122 | 114 | |||||
Total Yield | 613 | 555 | |||||
Gross refining margin ($/throughput bbl) (f) | $ | 13.68 | $ | 12.15 | |||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (f) | $ | 4.86 | $ | 4.97 | |||
Segment Operating Income ($ millions) | |||||||
Gross refining margin (g) | $ | 713 | $ | 585 | |||
Expenses | |||||||
Manufacturing costs | 253 | 239 | |||||
Other operating expenses | 71 | 52 | |||||
Selling, general and administrative expenses | 10 | 9 | |||||
Depreciation and amortization expense | 92 | 91 | |||||
Loss on asset disposal and impairments | 4 | 3 | |||||
Segment Operating Income | $ | 283 | $ | 191 | |||
Refined Product Sales (Mbpd) (h) | |||||||
Gasoline and gasoline blendstocks | 337 | 342 | |||||
Jet fuel | 100 | 94 | |||||
Diesel fuel | 146 | 131 | |||||
Heavy fuel oils, residual products and other | 96 | 90 | |||||
Total Refined Product Sales | 679 | 657 | |||||
Refined Product Sales Margin ($/bbl) (f) (h) | |||||||
Average sales price | $ | 121.92 | $ | 127.11 | |||
Average costs of sales | 111.29 | 117.75 | |||||
Refined Product Sales Margin | $ | 10.63 | $ | 9.36 |
(d) | We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less. |
(e) | We had reduced throughput due to scheduled turnarounds at our Washington refinery during the 2013 first quarter and at our Martinez refinery during the 2012 first quarter. We had higher throughput at our North Dakota refinery during the 2013 first quarter as a result of the refinery expansion completed in 2012. |
(f) | Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per barrel and refined product sales margin per barrel. |
• | Management uses gross refining margin per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate gross refining margin per barrel; different companies may calculate it in different ways. We calculate gross refining margin per barrel by dividing gross refining margin (revenues less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. |
• | Management uses Manufacturing Costs per barrel to evaluate the efficiency of refining operations. There are a variety of ways to calculate Manufacturing Costs per barrel; different companies may calculate it in different ways. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput. |
• | Management uses refined product sales margin per barrel to evaluate the profitability of manufactured and purchased refined product sales. There are a variety of ways to calculate refined product sales margin per barrel; different companies may calculate it in different ways. We calculate refined product sales margin per barrel by calculating an average refined product sales price per barrel and an average refined product cost of sales per barrel, which are calculated by dividing refined product sales or refined product cost of sales by total refining throughput. The average refined product cost of sales per barrel is subtracted from refined product sales price per barrel. |
(g) | Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Other amounts resulted in an increase of $2 million and a decrease of $1 million for the three months ended March 31, 2013 and 2012, respectively. Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. |
(h) | Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales margins include margins on sales of manufactured and purchased refined products. |
Three Months Ended March 31, | |||||||
Refining By Region | 2013 | 2012 | |||||
California (Martinez and Wilmington) | |||||||
Throughput (Mbpd) (e) | |||||||
Heavy crude (d) | 183 | 136 | |||||
Light crude | 54 | 36 | |||||
Other feedstocks | 20 | 17 | |||||
Total Throughput | 257 | 189 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 131 | 98 | |||||
Jet fuel | 23 | 20 | |||||
Diesel fuel | 68 | 36 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 58 | 50 | |||||
Total Yield | 280 | 204 | |||||
Gross refining margin ($ millions) | $ | 271 | $ | 138 | |||
Gross refining margin ($/throughput bbl) (f) | $ | 11.73 | $ | 7.98 | |||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (f) | $ | 6.04 | $ | 7.34 | |||
Capital expenditures ($ millions) | $ | 36 | $ | 50 | |||
Pacific Northwest (Alaska & Washington) | |||||||
Throughput (Mbpd) (e) | |||||||
Heavy crude (d) | 3 | 2 | |||||
Light crude | 116 | 146 | |||||
Other feedstocks | 11 | 7 | |||||
Total Throughput | 130 | 155 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 52 | 69 | |||||
Jet fuel | 29 | 33 | |||||
Diesel fuel | 21 | 22 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 32 | 36 | |||||
Total Yield | 134 | 160 | |||||
Gross refining margin ($ millions) | $ | 155 | $ | 183 | |||
Gross refining margin ($/throughput bbl) (f) | $ | 13.33 | $ | 12.96 | |||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (f) | $ | 4.73 | $ | 3.83 | |||
Capital expenditures ($ millions) | $ | 22 | $ | 16 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Mid-Pacific (Hawaii) | |||||||
Throughput (Mbpd) | |||||||
Heavy crude (d) | 18 | 4 | |||||
Light crude | 49 | 63 | |||||
Total Throughput | 67 | 67 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 18 | 19 | |||||
Jet fuel | 19 | 18 | |||||
Diesel fuel | 10 | 13 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 22 | 19 | |||||
Total Yield | 69 | 69 | |||||
Gross refining margin ($ millions) | $ | 28 | $ | 13 | |||
Gross refining margin ($/throughput bbl) (f) | $ | 4.60 | $ | 2.07 | |||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (f) | $ | 3.02 | $ | 3.51 | |||
Capital expenditures ($ millions) | $ | — | $ | 3 | |||
Mid-Continent (North Dakota and Utah) | |||||||
Throughput (Mbpd) (e) | |||||||
Light crude | 121 | 113 | |||||
Other feedstocks | 4 | 5 | |||||
Total Throughput | 125 | 118 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 73 | 67 | |||||
Jet fuel | 15 | 12 | |||||
Diesel fuel | 32 | 34 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 10 | 9 | |||||
Total Yield | 130 | 122 | |||||
Gross refining margin ($ millions) | $ | 257 | $ | 252 | |||
Gross refining margin ($/throughput bbl) (f) | $ | 22.73 | $ | 23.51 | |||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (f) | $ | 3.54 | $ | 3.47 | |||
Capital expenditures ($ millions) | $ | 51 | $ | 22 |
Three Months Ended March 31, | |||||||
Retail Segment | 2013 | 2012 | |||||
Number of Stations (end of period) | |||||||
Company-operated (i) | 595 | 425 | |||||
Branded jobber/dealer | 810 | 790 | |||||
Total Stations | 1,405 | 1,215 | |||||
Average Stations (during period) | |||||||
Company-operated (i) | 595 | 413 | |||||
Branded jobber/dealer | 811 | 794 | |||||
Total Average Retail Stations | 1,406 | 1,207 | |||||
Fuel Sales (millions of gallons) | |||||||
Company-operated (i) | 266 | 195 | |||||
Branded jobber/dealer | 183 | 184 | |||||
Total Fuel Sales | 449 | 379 | |||||
Fuel margin ($/gallon) (j) | $ | 0.20 | $ | 0.12 | |||
Merchandise Sales ($ millions) | $ | 50 | $ | 48 | |||
Merchandise Margin ($ millions) | $ | 13 | $ | 12 | |||
Merchandise Margin % | 26 | % | 25 | % | |||
Segment Operating Income (Loss) ($ millions) | |||||||
Gross Margins | |||||||
Fuel (i) (j) | $ | 89 | $ | 47 | |||
Merchandise and other non-fuel margin | 19 | 19 | |||||
Total Gross Margins | 108 | 66 | |||||
Expenses | |||||||
Operating expenses | 76 | 54 | |||||
Selling, general and administrative expenses | 5 | 4 | |||||
Depreciation and amortization expense | 9 | 10 | |||||
Loss on asset disposals and impairments | 1 | 2 | |||||
Segment Operating Income (Loss) | $ | 17 | $ | (4 | ) |
(i) | Reflects the transition of 174 retail stations from Thrifty Oil Co. during the second and third quarters of 2012 and acquisition of 49 retail stations from SUPERVALU, Inc. during the first quarter of 2012. |
(j) | Management uses fuel margin per gallon to compare profitability to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon; different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered an alternative to segment operating income and revenues or any other measure of financial performance presented in accordance with U.S. GAAP. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the refining segment at prices which approximate market. |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Reconciliation of Net Earnings to Adjusted EBITDA | |||||||
Net earnings attributable to Tesoro Corporation | $ | 93 | $ | 56 | |||
Net earnings attributable to noncontrolling interest | 11 | 6 | |||||
Depreciation and amortization expense | 106 | 103 | |||||
Income tax expense | 58 | 37 | |||||
Interest and financing costs, net | 30 | 36 | |||||
Interest income | (1 | ) | (1 | ) | |||
Adjusted EBITDA (k) | $ | 297 | $ | 237 | |||
Reconciliation of Cash Flows from (used in) Operating Activities to Adjusted EBITDA | |||||||
Net cash from (used in) operating activities | $ | 247 | $ | (15 | ) | ||
Deferred charges | 159 | 126 | |||||
Changes in assets and liabilities | (125 | ) | 102 | ||||
Income tax expense | 58 | 37 | |||||
Stock-based compensation expense | (52 | ) | (21 | ) | |||
Interest and financing costs, net | 30 | 36 | |||||
Deferred income taxes | (14 | ) | (24 | ) | |||
Loss on asset disposals and impairments | (8 | ) | (6 | ) | |||
Other | 2 | 2 | |||||
Adjusted EBITDA (k) | $ | 297 | $ | 237 |
Salt Lake City Conversion Project Expected EBITDA | Expected Annual EBITDA | ||
Projected net earnings | $ | 59 | |
Income tax expense | 35 | ||
Depreciation and amortization expense | 6 | ||
EBITDA (k) | $ | 100 |
(k) | Adjusted EBITDA represents consolidated earnings, including earnings attributable to noncontrolling interest, before income taxes, depreciation and amortization expense, net interest and financing costs and interest income. EBITDA represents net earnings before interest and financing costs, interest income, income taxes and depreciation and amortization expense. We present Adjusted EBITDA and EBITDA because we believe some investors and analysts use Adjusted EBITDA and EBITDA to help analyze our cash flows including our ability to satisfy principal and interest obligations with respect to our indebtedness and use cash for other purposes, including capital expenditures. Adjusted EBITDA and EBITDA are also used by some investors and analysts to analyze and compare companies on the basis of operating performance and by management. Adjusted EBITDA and EBITDA should not be considered as alternatives to net earnings, earnings before income taxes, cash flows from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted EBITDA and EBITDA may not be comparable to similarly titled measures used by other entities. |
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS | |||||||
(Unaudited) (In millions, except per share amounts) | |||||||
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net Earnings- U.S. GAAP | $ | 93 | $ | 56 | |||
Special Items, after-tax: | |||||||
Transaction costs (l) | 9 | — | |||||
Net Earnings Adjusted for Special Items (m) | $ | 102 | $ | 56 | |||
Diluted Net Earnings Per Share- U.S. GAAP | $ | 0.67 | $ | 0.39 | |||
Special Items, after-tax: | |||||||
Transaction costs (l) | 0.06 | — | |||||
Diluted Net Earnings Per Share Adjusted for Special Items (m) | $ | 0.73 | $ | 0.39 |