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. |
(d) Exhibits. | |||
99.1 | Press release announcing fourth quarter and year ended financial results issued on February 5, 2014, by Tesoro Corporation. |
TESORO CORPORATION | ||||
By: | /s/ G. SCOTT SPENDLOVE | |||
G. Scott Spendlove | ||||
Senior Vice President and Chief Financial Officer | ||||
Index to Exhibits | |||
Exhibit Number | Description | ||
99.1 | Press release announcing fourth quarter and year ended financial results issued on February 5, 2014, by Tesoro Corporation. |
• | Full year net income from continuing operations of $386 million, or $2.81 per diluted share excluding special items |
• | Fourth quarter net income of $5 million, or $0.04 per diluted share excluding special items |
• | Fourth quarter repayment of $800 million of $1.2 billion interim borrowings to purchase Southern California refining, marketing and logistics business |
• | Repurchased $100 million of shares during fourth quarter |
• | Declared regular quarterly dividend of $0.25 per share |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues | $ | 10,116 | $ | 7,525 | $ | 37,601 | $ | 29,809 | |||||||
Costs and Expenses: | |||||||||||||||
Cost of sales | 9,258 | 6,626 | 34,085 | 26,045 | |||||||||||
Operating expenses | 560 | 372 | 1,911 | 1,405 | |||||||||||
Selling, general and administrative expenses (a) | 108 | 70 | 337 | 297 | |||||||||||
Depreciation and amortization expense | 133 | 111 | 489 | 418 | |||||||||||
Loss on asset disposals and impairments | 5 | 8 | 24 | 23 | |||||||||||
Operating Income | 52 | 338 | 755 | 1,621 | |||||||||||
Interest and financing costs, net (b) | (41 | ) | (30 | ) | (151 | ) | (167 | ) | |||||||
Interest income | 1 | — | 2 | 2 | |||||||||||
Equity in earnings (loss) of equity method investments | (1 | ) | — | 11 | — | ||||||||||
Other income (expense), net (c) | (2 | ) | (5 | ) | 63 | (26 | ) | ||||||||
Earnings Before Income Taxes | 9 | 303 | 680 | 1,430 | |||||||||||
Income tax expense | 3 | 111 | 246 | 527 | |||||||||||
Net Earnings From Continuing Operations | 6 | 192 | 434 | 903 | |||||||||||
Net earnings (loss) from discontinued operations, net of tax (d) | (3 | ) | (157 | ) | 20 | (133 | ) | ||||||||
Net Earnings | 3 | 35 | 454 | 770 | |||||||||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 10 | 8 | 42 | 27 | |||||||||||
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION | $ | (7 | ) | $ | 27 | $ | 412 | $ | 743 | ||||||
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION | |||||||||||||||
Continuing operations | $ | (4 | ) | $ | 184 | $ | 392 | $ | 876 | ||||||
Discontinued operations | (3 | ) | (157 | ) | 20 | (133 | ) | ||||||||
Total | $ | (7 | ) | $ | 27 | $ | 412 | $ | 743 | ||||||
NET EARNINGS (LOSS) PER SHARE - BASIC: | |||||||||||||||
Continuing operations | $ | (0.03 | ) | $ | 1.32 | $ | 2.90 | $ | 6.28 | ||||||
Discontinued operations | (0.02 | ) | (1.13 | ) | 0.15 | (0.95 | ) | ||||||||
Total | $ | (0.05 | ) | $ | 0.19 | $ | 3.05 | $ | 5.33 | ||||||
Weighted average common shares outstanding - Basic | 132.5 | 139.1 | 135.0 | 139.4 | |||||||||||
NET EARNINGS (LOSS) PER SHARE - DILUTED: | |||||||||||||||
Continuing operations | $ | (0.03 | ) | $ | 1.32 | $ | 2.85 | $ | 6.20 | ||||||
Discontinued operations | (0.02 | ) | (1.13 | ) | 0.15 | (0.95 | ) | ||||||||
Total | $ | (0.05 | ) | $ | 0.19 | $ | 3.00 | $ | 5.25 | ||||||
Weighted average common shares outstanding - Diluted | 134.9 | 141.6 | 137.3 | 141.5 |
(a) | Includes stock-based compensation expense of $46 million and $11 million for the three months ended December 31, 2013 and 2012, respectively, and $79 million and $99 million for the years ended December 31, 2013 and 2012, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro's stock price during the periods as compared to the prior periods. Also includes integration costs related to the Los Angeles Acquisition and TLLP’s acquisition of Chevron’s Northwest Products System of $15 million ($9 million after-tax) for the three months ended December 31, 2013 and transaction and integration costs of $62 million ($38 million after-tax) for the year ended December 31, 2013 and $9 million ($6 million after-tax) and $10 million ($6 million after-tax) for the three months and year ended December 31, 2012, respectively. |
(b) | Includes a charge of $28 million ($17 million after-tax) for premiums and unamortized debt issuance costs associated with the redemption of our 6.625% and 6.500% Senior Notes for the year ended December 31, 2012. |
(c) | Includes a $16 million ($10 million after-tax) benefit related to the release of a legal reserve as a result of a favorable litigation settlement and $54 million ($34 million after-tax) in refunds from the settlement of a rate proceeding from the California Public Utilities Commission for the year ended December 31, 2013. Includes expenses related to certain legal matters of $4 million ($3 million after-tax) and $26 million ($16 million after-tax) for the three months and year ended December 31, 2012, respectively. |
(d) | Net earnings (loss) from discontinued operations include an $81 million ($49 million after-tax) gain related to the sale of the Hawaii Business, which included a $17 million curtailment gain related to the remeasurement of our pension and other postretirement benefit obligations during the year ended December 31, 2013. |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Operating Income | |||||||||||||||
Refining | $ | 106 | $ | 344 | $ | 866 | $ | 1,707 | |||||||
TLLP | 22 | 21 | 81 | 64 | |||||||||||
Retail | 24 | 41 | 120 | 126 | |||||||||||
Total Segment Operating Income | 152 | 406 | 1,067 | 1,897 | |||||||||||
Corporate and unallocated costs | (100 | ) | (68 | ) | (312 | ) | (276 | ) | |||||||
Operating Income | 52 | 338 | 755 | 1,621 | |||||||||||
Interest and financing costs, net (b) | (41 | ) | (30 | ) | (151 | ) | (167 | ) | |||||||
Interest income | 1 | — | 2 | 2 | |||||||||||
Equity in earnings (loss) of equity method investments | (1 | ) | — | 11 | — | ||||||||||
Other income (expense), net (c) | (2 | ) | (5 | ) | 63 | (26 | ) | ||||||||
Earnings Before Income Taxes | $ | 9 | $ | 303 | $ | 680 | $ | 1,430 | |||||||
Depreciation and Amortization Expense | |||||||||||||||
Refining | $ | 101 | $ | 88 | $ | 388 | $ | 342 | |||||||
TLLP | 16 | 4 | 43 | 13 | |||||||||||
Retail | 11 | 9 | 37 | 36 | |||||||||||
Corporate | 5 | 10 | 21 | 27 | |||||||||||
Depreciation and Amortization Expense | $ | 133 | $ | 111 | $ | 489 | $ | 418 | |||||||
Capital Expenditures | |||||||||||||||
Refining | $ | 96 | $ | 126 | $ | 417 | $ | 365 | |||||||
TLLP | 24 | 16 | 79 | 91 | |||||||||||
Retail | 14 | 28 | 40 | 73 | |||||||||||
Corporate | 12 | 4 | 22 | 13 | |||||||||||
Capital Expenditures | $ | 146 | $ | 174 | $ | 558 | $ | 542 |
December 31, 2013 | December 31, 2012 | |||||||
Cash and cash equivalents | $ | 1,238 | $ | 1,639 | ||||
Inventories (e) | $ | 2,565 | $ | 1,338 | ||||
Current maturities of debt | $ | 6 | $ | 3 | ||||
Long-Term Debt | $ | 2,823 | $ | 1,585 | ||||
Total Equity | $ | 5,485 | $ | 4,737 | ||||
Total Debt to Capitalization Ratio, excluding capital leases related to discontinued operations | 34 | % | 25 | % | ||||
Total Debt to Capitalization Ratio excluding TLLP debt and capital leases related to discontinued operations (f) | 28 | % | 22 | % | ||||
Working Capital | $ | 1,918 | $ | 1,755 |
(e) | The total carrying value of our crude oil and refined product inventories was less than replacement cost by approximately $1.7 billion at December 31, 2013. |
(f) | Excludes TLLP’s total debt, including capital leases, of $1.2 billion and $354 million and noncontrolling interest of $1.2 billion and $486 million at December 31, 2013 and 2012, respectively. $1.2 billion and $350 million of TLLP’s total debt is comprised of TLLP Senior Notes at December 31, 2013 and 2012, respectively, which are non-recourse to Tesoro, except for Tesoro Logistics GP, LLC. |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
REFINING SEGMENT | 2013 | 2012 | 2013 | 2012 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) (g) | |||||||||||||||
Heavy crude (h) | 158 | 144 | 185 | 155 | |||||||||||
Light crude | 562 | 344 | 459 | 325 | |||||||||||
Other feedstocks | 66 | 44 | 53 | 37 | |||||||||||
Total Throughput | 786 | 532 | 697 | 517 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 407 | 293 | 350 | 270 | |||||||||||
Jet fuel | 121 | 63 | 100 | 64 | |||||||||||
Diesel fuel | 174 | 131 | 158 | 119 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 132 | 77 | 132 | 93 | |||||||||||
Total Yield | 834 | 564 | 740 | 546 | |||||||||||
Gross refining margin ($/throughput bbl) (i) | $ | 9.45 | $ | 15.11 | $ | 11.19 | $ | 17.11 | |||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (i) | $ | 5.39 | $ | 4.88 | $ | 5.14 | $ | 4.89 | |||||||
Segment Operating Income ($ millions) | |||||||||||||||
Gross refining margin (j) | $ | 683 | $ | 739 | $ | 2,848 | $ | 3,233 | |||||||
Expenses | |||||||||||||||
Manufacturing costs | 392 | 239 | 1,308 | 923 | |||||||||||
Other operating expenses | 76 | 59 | 257 | 228 | |||||||||||
Selling, general and administrative expenses | 4 | 5 | 13 | 20 | |||||||||||
Depreciation and amortization expense | 101 | 88 | 388 | 342 | |||||||||||
Loss on asset disposal and impairments | 4 | 4 | 16 | 13 | |||||||||||
Segment Operating Income | $ | 106 | $ | 344 | $ | 866 | $ | 1,707 | |||||||
Refined Product Sales (Mbpd) (k) | |||||||||||||||
Gasoline and gasoline blendstocks | 492 | 340 | 429 | 343 | |||||||||||
Jet fuel | 143 | 75 | 117 | 76 | |||||||||||
Diesel fuel | 181 | 147 | 176 | 141 | |||||||||||
Heavy fuel oils, residual products and other | 89 | 69 | 86 | 67 | |||||||||||
Total Refined Product Sales | 905 | 631 | 808 | 627 | |||||||||||
Refined Product Sales Margin ($/bbl) (i) (k) | |||||||||||||||
Average sales price | $ | 112.95 | $ | 119.04 | $ | 118.40 | $ | 123.64 | |||||||
Average costs of sales | 105.22 | 108.28 | 109.64 | 110.94 | |||||||||||
Refined Product Sales Margin | $ | 7.73 | $ | 10.76 | $ | 8.76 | $ | 12.70 |
(g) | We had reduced throughput due to turnarounds at our Washington refinery during the first half of 2013, our Utah refinery during the 2013 second quarter, our Martinez refinery during the 2012 first quarter and our Alaska refinery during the 2012 second quarter. We had higher throughput at our North Dakota refinery during the first half of 2013 as a result of the refinery expansion completed in the second half of 2012 and at our Los Angeles refinery during the 2013 second, third and fourth quarters due to the acquisition of the Carson refinery. |
(h) | We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less. |
(i) | 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 the average refined product sales price per barrel. |
(j) | 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 $1 million for the three months ended December 31, 2013 and 2012, respectively, and $6 million and $3 million for the years ended December 31, 2013 and 2012, respectively. Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market and fees charged by TLLP for the transportation and terminalling of crude oil and refined products at prices which we believe are no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. |
(k) | Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales margins include margins on sales of manufactured and purchased refined products. |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
Refining By Region | 2013 | 2012 | 2013 | 2012 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) (g) | |||||||||||||||
Heavy crude (h) | 152 | 141 | 178 | 151 | |||||||||||
Light crude | 298 | 83 | 206 | 67 | |||||||||||
Other feedstocks | 44 | 25 | 38 | 24 | |||||||||||
Total Throughput | 494 | 249 | 422 | 242 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 260 | 145 | 218 | 132 | |||||||||||
Jet fuel | 75 | 18 | 57 | 21 | |||||||||||
Diesel fuel | 112 | 74 | 97 | 61 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 85 | 35 | 83 | 48 | |||||||||||
Total Yield | 532 | 272 | 455 | 262 | |||||||||||
Gross refining margin ($ in millions) | $ | 276 | $ | 244 | $ | 1,304 | $ | 966 | |||||||
Gross refining margin ($/throughput bbl) (i) | $ | 6.08 | $ | 10.61 | $ | 8.47 | $ | 10.91 | |||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (i) | $ | 6.11 | $ | 6.48 | $ | 5.86 | $ | 6.30 | |||||||
Capital expenditures ($ in millions) | $ | 39 | $ | 41 | $ | 143 | $ | 154 | |||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) (g) | |||||||||||||||
Heavy crude (h) | 6 | 3 | 7 | 4 | |||||||||||
Light crude | 143 | 142 | 138 | 142 | |||||||||||
Other feedstocks | 18 | 15 | 11 | 9 | |||||||||||
Total Throughput | 167 | 160 | 156 | 155 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 75 | 65 | 69 | |||||||||||
Jet fuel | 31 | 31 | 30 | 31 | |||||||||||
Diesel fuel | 28 | 25 | 28 | 25 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 39 | 34 | 38 | 35 | |||||||||||
Total Yield | 173 | 165 | 161 | 160 | |||||||||||
Gross refining margin ($ in millions) | $ | 168 | $ | 193 | $ | 590 | $ | 911 | |||||||
Gross refining margin ($/throughput bbl) (i) | $ | 10.94 | $ | 13.17 | $ | 10.33 | $ | 16.09 | |||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (i) | $ | 4.30 | $ | 3.72 | $ | 4.17 | $ | 3.83 | |||||||
Capital expenditures ($ in millions) | $ | 6 | $ | 23 | $ | 49 | $ | 59 |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Mid-Continent (North Dakota and Utah) | |||||||||||||||
Throughput (Mbpd) (g) | |||||||||||||||
Light crude | 121 | 119 | 115 | 116 | |||||||||||
Other feedstocks | 4 | 4 | 4 | 4 | |||||||||||
Total Throughput | 125 | 123 | 119 | 120 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 72 | 73 | 67 | 69 | |||||||||||
Jet fuel | 15 | 14 | 13 | 12 | |||||||||||
Diesel fuel | 34 | 32 | 33 | 33 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 8 | 8 | 11 | 10 | |||||||||||
Total Yield | 129 | 127 | 124 | 124 | |||||||||||
Gross refining margin ($ in millions) | $ | 237 | $ | 301 | $ | 948 | $ | 1,353 | |||||||
Gross refining margin ($/throughput bbl) (i) | $ | 20.63 | $ | 26.71 | $ | 21.73 | $ | 30.90 | |||||||
Manufacturing cost before depreciation and amortization expense ($/throughput bbl) (i) | $ | 3.98 | $ | 3.11 | $ | 3.86 | $ | 3.40 | |||||||
Capital expenditures ($ in millions) | $ | 51 | $ | 62 | $ | 225 | $ | 152 |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
TLLP SEGMENT | 2013 | 2012 | 2013 | 2012 | |||||||||||
Crude Oil Gathering | |||||||||||||||
Pipeline gathering throughput (Mbpd) | 88 | 77 | 86 | 67 | |||||||||||
Average pipeline gathering revenue per barrel | $ | 1.29 | $ | 1.29 | $ | 1.27 | $ | 1.35 | |||||||
Trucking volume (Mbpd) | 43 | 47 | 44 | 38 | |||||||||||
Average trucking revenue per barrel | $ | 3.26 | $ | 2.84 | $ | 3.10 | $ | 2.87 | |||||||
Terminalling and Transportation | |||||||||||||||
Terminalling throughput (Mbpd) | 904 | 384 | 713 | 344 | |||||||||||
Average terminalling revenue per barrel | $ | 0.74 | $ | 0.69 | $ | 0.71 | $ | 0.61 | |||||||
Pipeline transportation throughput (Mbpd) | 325 | 79 | 169 | 89 | |||||||||||
Average pipeline transportation revenue per barrel | $ | 0.48 | $ | 0.25 | $ | 0.50 | $ | 0.22 | |||||||
Segment Operating Income ($ millions) | |||||||||||||||
Revenues | |||||||||||||||
Crude Oil Gathering | $ | 23 | $ | 22 | $ | 90 | $ | 73 | |||||||
Terminalling and Transportation | 76 | 26 | 215 | 84 | |||||||||||
Total Revenues (l) | 99 | 48 | 305 | 157 | |||||||||||
Expenses | |||||||||||||||
Operating expenses (m) | 51 | 18 | 150 | 63 | |||||||||||
General and administrative expenses (n) | 10 | 4 | 31 | 16 | |||||||||||
Depreciation and amortization expense | 16 | 4 | 43 | 13 | |||||||||||
Loss on asset disposals and impairments | — | 1 | — | 1 | |||||||||||
Segment Operating Income | $ | 22 | $ | 21 | $ | 81 | $ | 64 |
(l) | TLLP segment revenues from services provided to our refining segment were $84 million and $45 million for the three months ended December 31, 2013 and 2012, respectively, and $265 million and $143 million for the years ended December 31, 2013 and 2012, respectively. These amounts are eliminated upon consolidation. |
(m) | TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. These amounts totaled $9 million and $3 million for the three months ended December 31, 2013 and 2012, respectively, and $27 million and $15 million for the years ended December 31, 2013 and 2012, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products are reclassified to cost of sales upon consolidation. |
(n) | TLLP segment general and administrative expenses include amounts charged by Tesoro for general and administrative services provided to TLLP under various operational and administrative contracts. These amounts totaled $6 million and $3 million for the three months ended December 31, 2013 and 2012, respectively, and $18 million and $13 million for the years ended December 31, 2013 and 2012, respectively. These amounts are eliminated upon consolidation. |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
RETAIL SEGMENT | 2013 | 2012 | 2013 | 2012 | |||||||||||
Number of Stations (end of period) | |||||||||||||||
Company-operated | 574 | 568 | 574 | 568 | |||||||||||
Branded jobber/dealer (o) | 1,690 | 804 | 1,690 | 804 | |||||||||||
Total Stations | 2,264 | 1,372 | 2,264 | 1,372 | |||||||||||
Average Stations (during period) | |||||||||||||||
Company-operated | 574 | 568 | 571 | 496 | |||||||||||
Branded jobber/dealer (o) | 1,679 | 797 | 1,285 | 791 | |||||||||||
Total Average Retail Stations | 2,253 | 1,365 | 1,856 | 1,287 | |||||||||||
Fuel Sales (millions of gallons) | |||||||||||||||
Company-operated | 266 | 259 | 1,072 | 909 | |||||||||||
Branded jobber/dealer (o) | 763 | 191 | 2,096 | 782 | |||||||||||
Total Fuel Sales | 1,029 | 450 | 3,168 | 1,691 | |||||||||||
Fuel margin ($/gallon) (p) | $ | 0.09 | $ | 0.25 | $ | 0.12 | $ | 0.21 | |||||||
Merchandise Sales ($ millions) | $ | 46 | $ | 44 | $ | 188 | $ | 178 | |||||||
Merchandise Margin ($ millions) | $ | 11 | $ | 11 | $ | 48 | $ | 45 | |||||||
Merchandise Margin % | 24 | % | 25 | % | 26 | % | 25 | % | |||||||
Segment Operating Income ($ millions) | |||||||||||||||
Gross Margins | |||||||||||||||
Fuel (p) | $ | 96 | $ | 114 | $ | 390 | $ | 361 | |||||||
Merchandise and other non-fuel margin | 28 | 17 | 99 | 74 | |||||||||||
Total Gross Margins | 124 | 131 | 489 | 435 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | 87 | 74 | 318 | 252 | |||||||||||
Selling, general and administrative expenses | 1 | 3 | 9 | 13 | |||||||||||
Depreciation and amortization expense | 11 | 9 | 37 | 36 | |||||||||||
Loss on asset disposals and impairments | 1 | 4 | 5 | 8 | |||||||||||
Segment Operating Income | $ | 24 | $ | 41 | $ | 120 | $ | 126 |
(o) | Reflects the acquisition of supply rights for approximately 835 dealer-operated and branded wholesale retail stations with the Los Angeles Acquisition on June 1, 2013. |
(p) | 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 revenues, segment operating income 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 December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Reconciliation of Net Earnings (Loss) to Adjusted EBITDA | |||||||||||||||
Net earnings (loss) attributable to Tesoro Corporation | $ | (7 | ) | $ | 27 | $ | 412 | $ | 743 | ||||||
Net earnings from continuing operations attributable to noncontrolling interest | 10 | 8 | 42 | 27 | |||||||||||
Loss (earnings) from discontinued operations, net of tax (d) | 3 | 157 | (20 | ) | 133 | ||||||||||
Depreciation and amortization expense | 133 | 111 | 489 | 418 | |||||||||||
Interest and financing costs, net | 41 | 30 | 151 | 167 | |||||||||||
Income tax expense | 3 | 111 | 246 | 527 | |||||||||||
Interest income | (1 | ) | — | (2 | ) | (2 | ) | ||||||||
Adjusted EBITDA (q) | $ | 182 | $ | 444 | $ | 1,318 | $ | 2,013 | |||||||
Reconciliation of Cash Flows from (used in) Operating Activities to Adjusted EBITDA | |||||||||||||||
Net cash from operating activities | $ | 189 | $ | 410 | $ | 859 | $ | 1,585 | |||||||
Net cash used in (from) discontinued operations | 3 | (153 | ) | (71 | ) | (193 | ) | ||||||||
Loss on asset disposals and impairments | (5 | ) | (8 | ) | (24 | ) | (23 | ) | |||||||
Other changes in assets and liabilities | (175 | ) | (113 | ) | (46 | ) | (230 | ) | |||||||
Deferred income tax benefit (expense) | 56 | 113 | (166 | ) | 8 | ||||||||||
Deferred charges | 118 | 68 | 451 | 277 | |||||||||||
Interest and financing costs, net | 41 | 30 | 151 | 167 | |||||||||||
Income tax expense | 3 | 111 | 246 | 527 | |||||||||||
Stock-based compensation expense | (46 | ) | (11 | ) | (79 | ) | (99 | ) | |||||||
Other | (2 | ) | (3 | ) | (3 | ) | (6 | ) | |||||||
Adjusted EBITDA (q) | $ | 182 | $ | 444 | $ | 1,318 | $ | 2,013 |
(q) | Adjusted EBITDA represents consolidated earnings (loss), including earnings attributable to noncontrolling interest, excluding net earnings from discontinued operations, before income tax expense, depreciation and amortization expense, net interest and financing costs and interest income. We present Adjusted EBITDA because we believe some investors and analysts use Adjusted 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 is also used by some investors and analysts to analyze and compare companies on the basis of operating performance and by management. Adjusted EBITDA should not be considered as an alternative to net earnings (loss), 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 may not be comparable to similarly titled measures used by other entities. |
Three Months Ended December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net Earnings (Loss) Attributable to Tesoro Corporation from Continuing Operations - U.S. GAAP | $ | (4 | ) | $ | 184 | $ | 392 | $ | 876 | ||||||
Special Items, After-tax: | |||||||||||||||
Transaction and integration costs (a) | 9 | 6 | 38 | 6 | |||||||||||
Legal adjustments (c) | — | 3 | (44 | ) | 16 | ||||||||||
Debt redemption charges (b) | — | — | — | 17 | |||||||||||
Supplemental vacation accrual (s) | — | — | — | 5 | |||||||||||
MF Global Holding Ltd. loss (t) | — | — | — | 2 | |||||||||||
Net Earnings Adjusted for Special Items (r) | $ | 5 | $ | 193 | $ | 386 | $ | 922 | |||||||
Diluted Net Earnings (Loss) per Share from Continuing Operations Attributable to Tesoro Corporation - U.S. GAAP | $ | (0.03 | ) | $ | 1.32 | $ | 2.85 | $ | 6.20 | ||||||
Special Items Per Share, After-tax: | |||||||||||||||
Transaction and integration costs (a) | 0.07 | 0.04 | 0.28 | 0.04 | |||||||||||
Legal adjustments (c) | — | 0.02 | (0.32 | ) | 0.11 | ||||||||||
Debt redemption charges (b) | — | — | — | 0.12 | |||||||||||
Supplemental vacation accrual (s) | — | — | — | 0.04 | |||||||||||
MF Global Holding Ltd. loss (t) | — | — | — | 0.01 | |||||||||||
Net Earnings per Diluted Share Adjusted for Special Items (r) | $ | 0.04 | $ | 1.38 | $ | 2.81 | $ | 6.52 |
(r) | We present net earnings adjusted for special items (“Adjusted Earnings”) and net earnings per diluted share adjusted for special items (“Adjusted Diluted EPS”) as management believes that the impact of these items on net earnings and diluted earnings per share is important information for an investor's understanding of the operations of our business and the financial information presented. Adjusted Earnings and Adjusted Diluted EPS should not be considered as an alternative to net earnings (loss), earnings (loss) per diluted share or any other measure of financial performance presented in accordance with U.S. GAAP. Adjusted Earnings and Adjusted Diluted EPS may not be comparable to similarly titled measures used by other entities. |
(s) | Includes an expense of $5 million, after-tax, for a supplemental vacation accrual related to a change in benefits for retirement eligible employees for the year ended December 31, 2012. |
(t) | Includes a loss of $2 million, after-tax, related to the liquidation of our outstanding accounts receivable balance with MF Global Holding Ltd. for the year ended December 31, 2012. |
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