Condensed Consolidating Financial Information (Notes)

9 Months Ended

Sep. 30, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Separate condensed consolidating financial information of Tesoro Corporation (the “Parent”), subsidiary guarantors and non-guarantors is presented below. At September 30, 2014, Tesoro and certain subsidiary guarantors have fully and unconditionally guaranteed our 4.250% Senior Notes due 2017, 5.375% Senior Notes due 2022, and 2024 Notes. TLLP, in which we had a 35% ownership interest as of September 30, 2014, and other subsidiaries have not guaranteed these obligations. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information, which should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. This information is provided as an alternative to providing separate financial statements for guarantor subsidiaries. Separate financial statements of Tesoro’s subsidiary guarantors are not included because the guarantees are full and unconditional and these subsidiary guarantors are 100% owned and are jointly and severally liable for Tesoro’s outstanding senior notes. The information is presented using the equity method of accounting for investments in subsidiaries. Intercompany transactions between subsidiaries are presented gross and eliminated in the eliminations column. Additionally, the results of operations of the Hawaii Business have been reported as discontinued operations in these condensed consolidating statements of operations and comprehensive income for the three and nine months ended September 30, 2014 and 2013.

Condensed Consolidating Statement of Operations

for the Three Months Ended September 30, 2014

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	12,528		$	1,671		$	(3,048	)	$	11,151
COSTS AND EXPENSES:
Cost of sales	—			11,076			1,504			(2,986		)	9,594
Operating, selling, general and administrative expenses	2			692			78			(62		)	710
Depreciation and amortization expense	—			125			19			—			144
Loss on asset disposals and impairments	—			1			—			—			1
OPERATING INCOME (LOSS)	(2		)	634			70			—			702
Equity in earnings of subsidiaries	405			11			—			(416		)	—
Interest and financing costs, net	(10		)	(23		)	(28		)	10			(51		)
Other income, net	—			12			10			(10		)	12
EARNINGS BEFORE INCOME TAXES	393			634			52			(416		)	663
Income tax expense (benefit) (a)	(3		)	241			11			—			249
NET EARNINGS FROM CONTINUING OPERATIONS	396			393			41			(416		)	414
Loss from discontinued operations, net of tax	—			(1		)	—			—			(1		)
NET EARNINGS	396			392			41			(416		)	413
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			17			—			17
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	396		$	392		$	24		$	(416	)	$	396

COMPREHENSIVE INCOME
Total comprehensive income	$	396		$	392		$	41		$	(416	)	$	413
Less: Noncontrolling interest in comprehensive income	—			—			17			—			17
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	396		$	392		$	24		$	(416	)	$	396

_________________


(a)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations

for the Three Months Ended September 30, 2013

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	13,233		$	1,514		$	(3,506	)	$	11,241
COSTS AND EXPENSES:
Cost of sales	—			12,436			1,424			(3,505		)	10,355
Operating, selling, general and administrative expenses	1			544			52			(1		)	596
Depreciation and amortization expense	—			126			14			—			140
Loss on asset disposals and impairments	—			4			—			—			4
OPERATING INCOME (LOSS)	(1		)	123			24			—			146
Equity in earnings of subsidiaries (a)	56			10			—			(66		)	—
Interest and financing costs, net	(7		)	(34		)	(12		)	6			(47		)
Other income, net	—			22			6			(6		)	22
EARNINGS BEFORE INCOME TAXES	48			121			18			(66		)	121
Income tax expense (benefit) (b)	(2		)	50			(1		)	—			47
NET EARNINGS FROM CONTINUING OPERATIONS	50			71			19			(66		)	74
Earnings (loss) from discontinued operations, net of tax	49			(14		)	—			—			35
NET EARNINGS	99			57			19			(66		)	109
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			10			—			10
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	99		$	57		$	9		$	(66	)	$	99

COMPREHENSIVE INCOME
Total comprehensive income	$	99		$	57		$	19		$	(66	)	$	109
Less: Noncontrolling interest in comprehensive income	—			—			10			—			10
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	99		$	57		$	9		$	(66	)	$	99

_________________


(a)	Revised to conform to current period presentation of equity in earnings of subsidiaries that reflects equity in earnings of subsidiaries within the guarantor and non-guarantor columns net of intercompany amounts.


(b)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations

for the Nine Months Ended September 30, 2014

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	36,821		$	5,110		$	(9,743	)	$	32,188
COSTS AND EXPENSES:
Cost of sales	—			33,312			4,668			(9,571		)	28,409
Operating, selling, general and administrative expenses	6			1,981			207			(172		)	2,022
Depreciation and amortization expense	—			355			54			—			409
(Gain) loss on asset disposals and impairments	—			3			(5		)	—			(2		)
OPERATING INCOME (LOSS)	(6		)	1,170			186			—			1,350
Equity in earnings of subsidiaries	722			38			—			(760		)	—
Interest and financing costs, net	(27		)	(106		)	(63		)	27			(169		)
Other income, net	2			12			27			(27		)	14
EARNINGS BEFORE INCOME TAXES	691			1,114			150			(760		)	1,195
Income tax expense (benefit) (a)	(7		)	419			25			—			437
NET EARNINGS FROM CONTINUING OPERATIONS	698			695			125			(760		)	758
Loss from discontinued operations, net of tax	—			(2		)	—			—			(2		)
NET EARNINGS	698			693			125			(760		)	756
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			58			—			58
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	698		$	693		$	67		$	(760	)	$	698

COMPREHENSIVE INCOME
Total comprehensive income	$	698		$	693		$	125		$	(760	)	$	756
Less: Noncontrolling interest in comprehensive income	—			—			58			—			58
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	698		$	693		$	67		$	(760	)	$	698

_________________


(a)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Statement of Operations

for the Nine Months Ended September 30, 2013

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
REVENUES	$	—		$	32,776		$	3,417		$	(8,708	)	$	27,485
COSTS AND EXPENSES:
Cost of sales	—			30,330			3,204			(8,707		)	24,827
Operating, selling, general and administrative expenses	8			1,460			113			(1		)	1,580
Depreciation and amortization expense	—			329			27			—			356
Loss on asset disposals and impairments	—			16			3			—			19
OPERATING INCOME (LOSS)	(8		)	641			70			—			703
Equity in earnings of subsidiaries (a)	386			21			—			(407		)	—
Interest and financing costs, net	(13		)	(85		)	(24		)	12			(110		)
Other income, net	—			78			12			(12		)	78
EARNINGS BEFORE INCOME TAXES	365			655			58			(407		)	671
Income tax expense (benefit) (b)	(5		)	246			2			—			243
NET EARNINGS FROM CONTINUING OPERATIONS	370			409			56			(407		)	428
Earnings (loss) from discontinued operations, net of tax	49			(26		)	—			—			23
NET EARNINGS	419			383			56			(407		)	451
Less: Net earnings from continuing operations attributable to noncontrolling interest	—			—			32			—			32
NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION	$	419		$	383		$	24		$	(407	)	$	419

COMPREHENSIVE INCOME
Total comprehensive income	$	492		$	383		$	56		$	(407	)	$	524
Less: Noncontrolling interest in comprehensive income	—			—			32			—			32
COMPREHENSIVE INCOME ATTRIBUTABLE TO TESORO CORPORATION	$	492		$	383		$	24		$	(407	)	$	492

_________________


(a)	Revised to conform to current period presentation of equity in earnings of subsidiaries that reflects equity in earnings of subsidiaries within the guarantor and non-guarantor columns net of intercompany amounts.


(b)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

Condensed Consolidating Balance Sheet as of September 30, 2014

(In millions)



	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,438	$	92	$	—		$	1,530
Receivables, less allowance for doubtful accounts	—		1,286		292		—			1,578
Short-term receivables from affiliates	—		166		—		(166		)	—
Inventories	—		2,392		282		—			2,674
Prepayments and other current assets	42		128		13		(1		)	182
Total Current Assets	42		5,410		679		(167		)	5,964
Net Property, Plant and Equipment	—		5,531		1,557		—			7,088
Investment in Subsidiaries	5,973		404		—		(6,377		)	—
Long-Term Receivables from Affiliates	3,146		—		—		(3,146		)	—
Long-Term Intercompany Note Receivable	—		—		1,377		(1,377		)	—
Other Noncurrent Assets, Net	48		1,089		36		—			1,173
Total Assets	$	9,209	$	12,434	$	3,649	$	(11,067	)	$	14,225

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,376	$	360	$	—		$	2,737
Short-term payables to affiliates	—		—		166		(166		)	—
Other current liabilities	219		638		75		(1		)	931
Total Current Liabilities	220		3,014		601		(167		)	3,668
Long-Term Payables to Affiliates	—		3,138		8		(3,146		)	—
Deferred Income Taxes	1,167		—		—		—			1,167
Other Noncurrent Liabilities	252		293		15		—			560
Debt	1,622		40		1,276		—			2,938
Long-Term Intercompany Note Payable	1,377		—		—		(1,377		)	—
Equity-Tesoro Corporation	4,571		5,949		460		(6,377		)	4,603
Equity-Noncontrolling Interest	—		—		1,289		—			1,289
Total Liabilities and Equity	$	9,209	$	12,434	$	3,649	$	(11,067	)	$	14,225

Condensed Consolidating Balance Sheet as of December 31, 2013

(In millions)



	Parent		Guarantor Subsidiaries		Non- Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,161	$	77	$	—		$	1,238
Receivables, less allowance for doubtful accounts	12		1,182		119		—			1,313
Short-term receivables from affiliates	—		—		43		(43		)	—
Inventories	—		2,041		524		—			2,565
Prepayments and other current assets	109		89		14		(2		)	210
Total Current Assets	121		4,473		777		(45		)	5,326
Net Property, Plant and Equipment	—		5,428		1,447		—			6,875
Investment in Subsidiaries (a)	5,242		342		—		(5,584		)	—
Long-Term Receivables from Affiliates	3,080		—		—		(3,080		)	—
Long-Term Intercompany Note Receivable	—		—		1,134		(1,134		)	—
Other Noncurrent Assets, Net	58		1,092		38		—			1,188
Total Assets	$	8,501	$	11,335	$	3,396	$	(9,843	)	$	13,389

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	1	$	2,110	$	485	$	—		$	2,596
Short-term payables to affiliates	—		43		—		(43		)	—
Other current liabilities	112		636		66		(2		)	812
Total Current Liabilities	113		2,789		551		(45		)	3,408
Long-Term Payables to Affiliates	—		2,939		141		(3,080		)	—
Deferred Income Taxes	1,018		—		—		—			1,018
Other Noncurrent Liabilities	320		327		8		—			655
Debt	1,614		45		1,164		—			2,823
Long-Term Intercompany Note Payable	1,134		—		—		(1,134		)	—
Equity-Tesoro Corporation (a)	4,302		5,235		349		(5,584		)	4,302
Equity-Noncontrolling Interest	—		—		1,183		—			1,183
Total Liabilities and Equity	$	8,501	$	11,335	$	3,396	$	(9,843	)	$	13,389

________________


(a)	Revised to conform to current period presentation that reflects investment in subsidiary and equity amounts within the guarantor and non-guarantor columns net of intercompany amounts.

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended September 30, 2014

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$	(31	)	$	926		$	152		$	—		$	1,047
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(341		)	(136		)	—			(477		)
Acquisitions	—			(17		)	—			—			(17		)
Intercompany notes, net	261			—			—			(261		)	—
Other investing activities	—			1			10			—			11
Net cash from (used in) investing activities	261			(357		)	(126		)	(261		)	(483		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	—			—			295			—			295
Proceeds from debt offering	300			—			—			—			300
Repayments on revolving credit agreements	—			—			(52		)	—			(52		)
Repayments of debt	(300		)	(2		)	(131		)	—			(433		)
Dividend payments	(104		)	—			—			—			(104		)
Proceeds from stock options exercised	14			—			—			—			14
Net proceeds from issuance of Tesoro Logistics LP common units	—			—			156			—			156
Distributions to noncontrolling interest	—			—			(63		)	—			(63		)
Purchases of common stock	(350		)	—			—			—			(350		)
Taxes paid related to net share settlement of equity awards	(22		)	—			—			—			(22		)
Net intercompany borrowings (repayments)	—			(324		)	63			261			—
Borrowings from general partner	243			—			(243		)	—			—
Distributions to TLLP unitholders and general partner	13			15			(28		)	—			—
Other financing activities	(24		)	19			(8		)	—			(13		)
Net cash used in financing activities	(230		)	(292		)	(11		)	261			(272		)
INCREASE IN CASH AND CASH EQUIVALENTS	—			277			15			—			292
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			1,161			77			—			1,238
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	1,438		$	92		$	—		$	1,530

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended September 30, 2013

(In millions)



	Parent			Guarantor Subsidiaries			Non- Guarantors			Eliminations			Consolidated
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net cash from (used in) operating activities	$	(17	)	$	702		$	(15	)	$	—		$	670
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Capital expenditures	—			(397		)	(50		)	—			(447		)
Acquisitions	—			(1,901		)	(714		)	—			(2,615		)
Proceeds from sale of Hawaii Business	539			—			—			—			539
Intercompany notes, net	(2,117		)	—			—			2,117			—
Other investing activities	—			(2		)	2			—			—
Net cash used in investing activities	(1,578		)	(2,300		)	(762		)	2,117			(2,523		)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Borrowings under revolving credit agreements	1,524			—			544			—			2,068
Borrowings under term loan credit agreements	500			—			—			—			500
Proceeds from debt offering	—			—			550			—			550
Repayments on revolving credit agreements	(824		)	—			(544		)	—			(1,368		)
Repayments of debt	(3		)	(3		)	—			—			(6		)
Dividend payments	(88		)	—			—			—			(88		)
Proceeds from stock options exercised	69			—			—			—			69
Net proceeds from issuance of Tesoro Logistics LP common units	—			—			392			—			392
Distributions to noncontrolling interest	—			—			(43		)	—			(43		)
Purchases of common stock	(341		)	—			—			—			(341		)
Taxes paid related to net share settlement of equity awards	(5		)	—			—			—			(5		)
Net intercompany borrowings (repayments)	—			1,695			422			(2,117		)	—
Borrowings from general partner	774			—			(774		)	—			—
Distributions to TLLP unitholders and general partner	10			12			(22		)	—			—
Other financing activities	(21		)	11			(12		)	—			(22		)
Net cash from financing activities	1,595			1,715			513			(2,117		)	1,706
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			117			(264		)	—			(147		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			1,244			395			—			1,639
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	1,361		$	131		$	—		$	1,492

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

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