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)) |
(d) | Exhibits. | |||
99.1 | Press release announcing first quarter financial results issued on May 4, 2016, by Tesoro Corporation. |
TESORO CORPORATION | ||||
By: | /s/ STEVEN M. STERIN | |||
Steven M. Sterin | ||||
Executive Vice President and Chief Financial Officer | ||||
Exhibit Number | Description | |
99.1 | Press release announcing first quarter financial results issued on May 4, 2016, by Tesoro Corporation. |
• | Net earnings from continuing operations of $58 million, or $0.48 per diluted share |
• | Adjusted earnings, excluding special items, were $144 million, or $1.19 per diluted share |
• | Strong consumer demand drives 71% year-over-year growth in Marketing operating income |
• | Total Refining throughput increased 86 thousand barrels per day versus first quarter 2015 |
• | Narrow crude oil differentials negatively impacted Refining results |
• | Continued growth in Logistics earnings |
• | Closed the acquisition of Great Northern Midstream LLC |
Three Months Ended March 31, | |||||||
($ in millions, except per share data) | 2016 | 2015 | |||||
Operating Income (Loss) | |||||||
Refining | $ | (100 | ) | $ | 187 | ||
TLLP | 126 | 104 | |||||
Marketing | 227 | 133 | |||||
Total Segment Operating Income | $ | 253 | $ | 424 | |||
Net Earnings From Continuing Operations Attributable to Tesoro | $ | 58 | $ | 145 | |||
Diluted EPS - Continuing Operations | $ | 0.48 | $ | 1.15 | |||
Diluted EPS - Discontinued Operations | 0.09 | — | |||||
Total Diluted EPS | $ | 0.57 | $ | 1.15 | |||
Adjusted Diluted EPS - Continuing Operations | $ | 1.19 | $ | 0.98 |
Throughput (Mbpd) | |
California | 500 - 525 |
Pacific Northwest | 165 - 175 |
Mid-Continent | 130 - 140 |
Consolidated | 795 - 840 |
Manufacturing Cost ($/throughput barrel) | |
California | $5.50 - 5.75 |
Pacific Northwest | $3.85 - 4.10 |
Mid-Continent | $4.15 - 4.40 |
Consolidated | $4.95 - 5.20 |
Corporate/System ($ millions) | |
Refining depreciation | $150 |
TLLP depreciation | $45 |
Corporate expense (before depreciation) | $80 - 90 |
Interest expense (before interest income) | $58 |
Noncontrolling Interest | $40 - 45 |
March 31, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents (TLLP: $4 and $16, respectively) | $ | 439 | $ | 942 | |||
Receivables, net of allowance for doubtful accounts | 954 | 792 | |||||
Inventories (a) | 1,875 | 2,302 | |||||
Prepayments and other current assets | 235 | 271 | |||||
Total Current Assets | 3,503 | 4,307 | |||||
Net Property, Plant and Equipment (TLLP: $3,086 and $3,450, respectively) | 9,494 | 9,541 | |||||
Other Noncurrent Assets (TLLP: $1,455 and $1,190, respectively) | 3,014 | 2,484 | |||||
Total Assets | $ | 16,011 | $ | 16,332 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 1,492 | $ | 1,568 | |||
Other current liabilities | 776 | 962 | |||||
Total Current Liabilities | 2,268 | 2,530 | |||||
Deferred Income Taxes | 1,228 | 1,222 | |||||
Other Noncurrent Liabilities | 809 | 773 | |||||
Debt, Net of Unamortized Issuance Costs (TLLP: $2,821 and $2,844, respectively) | 4,046 | 4,067 | |||||
Equity | 7,660 | 7,740 | |||||
Total Liabilities and Equity | $ | 16,011 | $ | 16,332 |
(a) | We recorded a lower of cost or market (“LCM”) adjustment to cost of sales of $506 million at March 31, 2016 for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost. At December 31, 2015, we recorded a $359 million LCM adjustment for the same inventories, which was reversed in the first quarter of 2016 as the inventories associated with the adjustment at the end of 2015 were sold or used during the first quarter of 2016. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Revenues | $ | 5,101 | $ | 6,463 | |||
Costs and Expenses: | |||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 3,861 | 5,307 | |||||
Lower of cost or market inventory valuation adjustment (a) | 147 | (42 | ) | ||||
Operating expenses | 616 | 577 | |||||
Selling, general and administrative expenses (b) | 82 | 98 | |||||
Depreciation and amortization expense | 212 | 179 | |||||
Loss on asset disposals and impairments | 4 | 4 | |||||
Operating Income | 179 | 340 | |||||
Interest and financing costs, net | (60 | ) | (55 | ) | |||
Equity in earnings of equity method investments | 2 | 1 | |||||
Other income (expense), net | 7 | (2 | ) | ||||
Earnings Before Income Taxes | 128 | 284 | |||||
Income tax expense | 30 | 96 | |||||
Net Earnings From Continuing Operations | 98 | 188 | |||||
Earnings from discontinued operations, net of tax | 11 | — | |||||
Net Earnings | 109 | 188 | |||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 40 | 43 | |||||
Net Earnings Attributable to Tesoro Corporation | $ | 69 | $ | 145 | |||
Net Earnings Attributable to Tesoro Corporation | |||||||
Continuing operations | $ | 58 | $ | 145 | |||
Discontinued operations | 11 | — | |||||
Total | $ | 69 | $ | 145 | |||
Net Earnings Per Share - Basic: | |||||||
Continuing operations | $ | 0.49 | $ | 1.17 | |||
Discontinued operations | 0.09 | — | |||||
Total | $ | 0.58 | $ | 1.17 | |||
Weighted average common shares outstanding - Basic | 119.6 | 125.2 | |||||
Net Earnings Per Share - Diluted: | |||||||
Continuing operations | $ | 0.48 | $ | 1.15 | |||
Discontinued operations | 0.09 | — | |||||
Total | $ | 0.57 | $ | 1.15 | |||
Weighted average common shares outstanding - Diluted | 121.2 | 126.9 |
(b) | Includes stock-based compensation benefit of $3 million and expense of $28 million for the three months ended March 31, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro’s stock price during the three months ended March 31, 2016 as compared to the three months ended March 31, 2015. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Earnings (Loss) Before Income Taxes | |||||||
Refining (c) | $ | (100 | ) | $ | 187 | ||
TLLP (c) | 126 | 104 | |||||
Marketing | 227 | 133 | |||||
Total Segment Operating Income | 253 | 424 | |||||
Corporate and unallocated costs (b) | (74 | ) | (84 | ) | |||
Operating Income | 179 | 340 | |||||
Interest and financing costs, net | (60 | ) | (55 | ) | |||
Equity in earnings of equity method investments | 2 | 1 | |||||
Other income (expenses), net | 7 | (2 | ) | ||||
Earnings Before Income Taxes | $ | 128 | $ | 284 | |||
Depreciation and Amortization Expense | |||||||
Refining | $ | 150 | $ | 119 | |||
TLLP | 44 | 44 | |||||
Marketing | 12 | 12 | |||||
Corporate | 6 | 4 | |||||
Total Depreciation and Amortization Expense | $ | 212 | $ | 179 | |||
Special Items, Before Taxes (c) | |||||||
Refining | $ | 147 | $ | (42 | ) | ||
TLLP | (6 | ) | 13 | ||||
Total Special Items | $ | 141 | $ | (29 | ) | ||
Adjusted EBITDA | |||||||
Refining | $ | 196 | $ | 256 | |||
TLLP | 174 | 168 | |||||
Marketing | 239 | 145 | |||||
Corporate | (68 | ) | (80 | ) | |||
Total Adjusted EBITDA | $ | 541 | $ | 489 | |||
Capital Expenditures | |||||||
Refining | $ | 119 | $ | 183 | |||
TLLP | 41 | 67 | |||||
Marketing | 13 | 4 | |||||
Corporate | 15 | 6 | |||||
Total Capital Expenditures | $ | 188 | $ | 260 |
(c) | The effects of special items on net earnings before income taxes by segment include: |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
(in millions) | |||||||
Refining | |||||||
Inventory valuation adjustment (a) | $ | 147 | $ | (42 | ) | ||
TLLP | |||||||
Throughput deficiency receivables (d) | — | 13 | |||||
Legal settlements (e) | (6 | ) | — |
(d) | During the three months ended March 31, 2015, TLLP invoiced certain natural gas customer $13 million ($4 million to Tesoro, after-tax) for deficiency payments related to opening balance sheet accounts receivable for the natural gas business acquired in 2014. |
(e) | Includes a gain recognized during the three months ended March 31, 2016 by TLLP on settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate. TLLP assumed the obligation for this litigation with the acquisition as part of its purchase price allocation for the natural gas business acquired in 2014 and recognized an estimated settlement amount in excess of the actual amount paid in March 2016. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Cash Flows From (Used in): | |||||||
Operating activities | $ | 184 | $ | (148 | ) | ||
Investing activities | (535 | ) | (273 | ) | |||
Financing activities | (152 | ) | (120 | ) | |||
Decrease in Cash and Cash Equivalents | $ | (503 | ) | $ | (541 | ) |
March 31, 2016 | December 31, 2015 | ||||||
Total debt, net of unamortized issuance costs, to capitalization ratio | 35 | % | 34 | % | |||
Total debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP debt (f) | 19 | % | 19 | % | |||
Working capital (current assets less current liabilities) | $ | 1,235 | $ | 1,777 | |||
Total market value of TLLP units held by Tesoro (g) | $ | 1,481 | $ | 1,633 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Cash distributions received from TLLP (h): | |||||||
For common/subordinated units held | $ | 25 | $ | 19 | |||
For general partner units held | 25 | 16 | |||||
Total Cash Distributions Received from TLLP | $ | 50 | $ | 35 |
(f) | Excludes TLLP’s total debt, net of unamortized issuance costs, and capital leases of $2.9 billion at both March 31, 2016 and December 31, 2015, which are non-recourse to Tesoro, except for Tesoro Logistics GP, LLC, and noncontrolling interest of $2.4 billion and $2.5 billion at March 31, 2016 and December 31, 2015, respectively. |
(g) | Represents market value of the 32,445,115 common units held by Tesoro at both March 31, 2016 and December 31, 2015. The market values were $45.66 and $50.32 per unit based on the closing unit price at March 31, 2016 and December 31, 2015, respectively. |
(h) | Represents distributions received from TLLP during the three months ended March 31, 2016 and 2015 on common or subordinated units and general partner units held by Tesoro. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Refined Product Sales (Mbpd) (i) | |||||||
Gasoline and gasoline blendstocks | 522 | 487 | |||||
Diesel fuel | 196 | 180 | |||||
Jet fuel | 136 | 158 | |||||
Heavy fuel oils, residual products and other | 98 | 74 | |||||
Total Refined Product Sales | 952 | 899 | |||||
Refined Product Sales Margin ($/barrel) (i) (j) | |||||||
Average sales price | $ | 54.79 | $ | 74.13 | |||
Average costs of sales | 48.93 | 65.11 | |||||
Refined Product Sales Margin | $ | 5.86 | $ | 9.02 |
(i) | 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. |
(j) | We calculate refined product sales margin per barrel by dividing refined product sales margin by total refined product sales (in barrels). Refined product sales margin represents refined product sales less refined product cost of sales. Average refined product sales price include all sales through our marketing segment as well as in bulk markets and exports through our refining segment. Average costs of sales and related sales margins include amounts recognized for the sale of refined products manufactured at our refineries along with the sale of refined products purchased from third parties to help fulfill supply commitments. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP. |
Three Months Ended March 31, | |||||||
REFINING SEGMENT | 2016 | 2015 | |||||
Total Refining Segment | |||||||
Throughput (Mbpd) | |||||||
Heavy crude (k) | 176 | 96 | |||||
Light crude | 561 | 546 | |||||
Other feedstocks | 45 | 54 | |||||
Total Throughput | 782 | 696 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 443 | 358 | |||||
Diesel fuel | 172 | 144 | |||||
Jet fuel | 116 | 119 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 102 | 117 | |||||
Total Yield | 833 | 738 | |||||
Segment Operating Income ($ millions) | |||||||
Gross refining margin (l) | $ | 540 | $ | 770 | |||
Expenses | |||||||
Manufacturing costs | 395 | 397 | |||||
Other operating expenses | 93 | 63 | |||||
Selling, general and administrative expenses | 2 | 1 | |||||
Depreciation and amortization expense | 150 | 119 | |||||
Loss on asset disposal and impairments | — | 3 | |||||
Segment Operating Income (Loss) | $ | (100 | ) | $ | 187 | ||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 9.66 | $ | 11.62 | |||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.55 | $ | 6.33 |
(k) | We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less. |
(l) | Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. There was $1 million loss related to other amounts for the three months ended March 31, 2015. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects a $506 million LCM reserve related to our inventory as of March 31, 2016 resulting in an incremental expense of $147 million for the three months ended March 31, 2016 when compared to the $359 million LCM reserve recognized as of December 31, 2015. The three months ended March 31, 2015 included a benefit of $42 million for the reversal of a LCM reserve recognized in 2014. No LCM reserve was required at March 31, 2015. |
(m) | Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per barrel and refined product sales margin per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP. |
(n) | Gross refining margin per throughput barrel on a consolidated and regional basis does not include the incremental expense or benefit associated with the LCM adjustments for all periods presented. |
Three Months Ended March 31, | |||||||
Refining By Region | 2016 | 2015 | |||||
California (Martinez and Los Angeles) | |||||||
Throughput (Mbpd) | |||||||
Heavy crude (k) | 172 | 90 | |||||
Light crude | 264 | 295 | |||||
Other feedstocks | 25 | 37 | |||||
Total Throughput | 461 | 422 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 280 | 223 | |||||
Diesel fuel | 97 | 83 | |||||
Jet fuel | 66 | 73 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 60 | 75 | |||||
Total Yield | 503 | 454 | |||||
Gross Refining Margin ($ millions) (o) | $ | 398 | $ | 436 | |||
Gross Refining Margin ($/throughput barrel) (n) (o) | $ | 11.64 | $ | 10.69 | |||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 6.74 | $ | 7.53 | |||
Capital Expenditures ($ millions) | $ | 76 | $ | 54 | |||
Pacific Northwest (Alaska & Washington) | |||||||
Throughput (Mbpd) | |||||||
Heavy crude (k) | 4 | 6 | |||||
Light crude | 167 | 139 | |||||
Other feedstocks | 15 | 13 | |||||
Total Throughput | 186 | 158 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 85 | 69 | |||||
Diesel fuel | 35 | 26 | |||||
Jet fuel | 38 | 33 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 34 | 35 | |||||
Total Yield | 192 | 163 | |||||
Gross Refining Margin ($ millions) (o) | $ | 68 | $ | 164 | |||
Gross Refining Margin ($/throughput barrel) (n) (o) | $ | 5.98 | $ | 10.96 | |||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.81 | $ | 4.43 | |||
Capital Expenditures ($ millions) | $ | 30 | $ | 26 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Mid-Continent (North Dakota and Utah) | |||||||
Throughput (Mbpd) | |||||||
Light crude | 130 | 112 | |||||
Other feedstocks | 5 | 4 | |||||
Total Throughput | 135 | 116 | |||||
Yield (Mbpd) | |||||||
Gasoline and gasoline blendstocks | 78 | 66 | |||||
Diesel fuel | 40 | 35 | |||||
Jet fuel | 12 | 13 | |||||
Heavy fuel oils, residual products, internally produced fuel and other | 8 | 7 | |||||
Total Yield | 138 | 121 | |||||
Gross Refining Margin ($ millions) (o) | $ | 74 | $ | 169 | |||
Gross Refining Margin ($/throughput barrel) (n) (o) | $ | 7.88 | $ | 15.82 | |||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.85 | $ | 4.56 | |||
Capital Expenditures ($ millions) | $ | 13 | $ | 103 |
(o) | Regional gross refining margin included the following allocation of the LCM adjustments to our inventories: |
California | Pacific Northwest | Mid-Continent | Consolidated Total | ||||||||||||
LCM Reserve at March 31, 2016 | $ | 327 | $ | 117 | $ | 62 | $ | 506 | |||||||
LCM Reserve at December 31, 2015 | 237 | 84 | 38 | 359 | |||||||||||
Incremental expense during three months ended March 31, 2016 | $ | 90 | $ | 33 | $ | 24 | $ | 147 | |||||||
LCM Reserve at March 31, 2015 | $ | — | $ | — | $ | — | $ | — | |||||||
LCM Reserve at December 31, 2014 | 30 | 8 | 4 | 42 | |||||||||||
Incremental benefit during three months ended March 31, 2015 | $ | (30 | ) | $ | (8 | ) | $ | (4 | ) | $ | (42 | ) |
Three Months Ended March 31, | |||||||
TLLP SEGMENT | 2016 | 2015 | |||||
Gathering | |||||||
Gas gathering throughput (thousands of MMBtu/day) (p) | 903 | 1,020 | |||||
Average gas gathering revenue per MMBtu (p) (q) | $ | 0.53 | $ | 0.39 | |||
Crude oil gathering pipeline throughput (Mbpd) | 216 | 156 | |||||
Average crude oil gathering pipeline revenue per barrel (q) | $ | 1.78 | $ | 1.95 | |||
Crude oil gathering trucking volume (Mbpd) | 29 | 46 | |||||
Average crude oil gathering trucking revenue per barrel (q) | $ | 3.27 | $ | 3.23 | |||
Processing | |||||||
NGL processing throughput (Mbpd) | 8 | 7 | |||||
Average keep-whole fee per barrel of NGL (q) | $ | 35.08 | $ | 31.84 | |||
Fee-based processing throughput (thousands of MMBtu/day) | 675 | 689 | |||||
Average fee-based processing revenue per MMBtu (q) | $ | 0.43 | $ | 0.46 | |||
Terminalling and Transportation | |||||||
Terminalling throughput (Mbpd) | 907 | 918 | |||||
Average terminalling revenue per barrel (q) | $ | 1.31 | $ | 1.10 | |||
Pipeline transportation throughput (Mbpd) | 824 | 818 | |||||
Average pipeline transportation revenue per barrel (q) | $ | 0.40 | $ | 0.39 | |||
Segment Operating Income ($ millions) | |||||||
Revenues | |||||||
Gathering | $ | 91 | $ | 77 | |||
Processing | 71 | 67 | |||||
Terminalling and transportation | 138 | 119 | |||||
Total Revenues (r) | 300 | 263 | |||||
Expenses | |||||||
Operating expenses (s) | 105 | 90 | |||||
General and administrative expenses (t) | 24 | 25 | |||||
Depreciation and amortization expense | 44 | 44 | |||||
Gain on asset disposals and impairments | 1 | — | |||||
Segment Operating Income | $ | 126 | $ | 104 |
(p) | Prior to TLLP’s deconsolidation of Rendezvous Gas Services L.L.C. (“RGS”) as of January 1, 2016, fees paid by TLLP to RGS were eliminated upon consolidation and third-party transactions, including revenue and throughput volumes, were included in its results of operations. Third party volumes associated with RGS, included in gas gathering volume for the three months ended March 31, 2015, were 146 thousand MMBtu/d and reduced our average gas gathering revenue per MMBtu by $0.05. RGS had third party gas gathering volumes of 126 thousand MMBtu/d for the three months ended March 31, 2016. These volumes are no longer included in our operational data. |
(q) | Management uses average revenue per barrel and average revenue per MMBtu to evaluate performance and compare profitability to other companies in the industry. We calculate average revenue per barrel as revenue divided by total throughput or keep-whole processing volumes. We calculate average revenue per MMBtu as revenue divided by gas gathering and fee-based processing volume. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered as an alternative to segment operating income, revenues and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP. |
(r) | TLLP segment revenues from services provided to our refining segment were $169 million and $148 million for the three months ended March 31, 2016 and 2015, respectively. These amounts are eliminated upon consolidation. |
(s) | TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. Amounts billed by Tesoro totaled $37 million and $29 million for the three months ended March 31, 2016 and 2015, respectively. Operating expenses also include imbalance gains and reimbursements pursuant to the Amended Omnibus Agreement of $7 million and $8 million for the three months ended March 31, 2016 and 2015, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products related to Tesoro’s sale of those refined products during the ordinary course of business are reclassified to cost of sales in our condensed statements of consolidated operations upon consolidation. In addition, the three months ended March 31, 2015 contain $6 million in fees paid by TLLP to RGS for volumes attributable to its operations that were eliminated in consolidation. However, those fees are no longer eliminated as a result of the deconsolidation of RGS. Fees paid by us to RGS for the three months ended March 31, 2016 that were not eliminated were $7 million. |
(t) | 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 $17 million for both the three months ended March 31, 2016 and 2015 and are eliminated upon consolidation. General and administrative expenses are reclassified to cost of sales as it relates to Tesoro’s sale of refined products in our condensed statements of consolidated operations upon consolidation. |
Three Months Ended March 31, | |||||||
MARKETING SEGMENT | 2016 | 2015 | |||||
Number of Branded Stations (at the end of the period) | |||||||
MSO operated | 591 | 584 | |||||
Jobber/Dealer operated | 1,845 | 1,674 | |||||
Total Stations | 2,436 | 2,258 | |||||
Fuel Sales (millions of gallons) | 2,166 | 2,060 | |||||
Fuel Margin ($/gallon) (u) | $ | 0.14 | $ | 0.10 | |||
Segment Operating Income ($ millions) | |||||||
Gross Margins | |||||||
Fuel (u) | $ | 302 | $ | 204 | |||
Other non-fuel | 16 | 14 | |||||
Total Gross Margins | 318 | 218 | |||||
Expenses | |||||||
Operating expenses | 72 | 69 | |||||
Selling, general and administrative expenses | 5 | 3 | |||||
Depreciation and amortization expense | 12 | 12 | |||||
Loss on asset disposals and impairments | 2 | 1 | |||||
Segment Operating Income | $ | 227 | $ | 133 |
(u) | Management uses fuel margin per gallon to compare fuel results to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon and 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 may 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. |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA | |||||||
Net earnings | $ | 109 | $ | 188 | |||
Earnings from discontinued operations, net of tax | (11 | ) | — | ||||
Depreciation and amortization expense | 212 | 179 | |||||
Interest and financing costs, net | 60 | 55 | |||||
Income tax expense | 30 | 96 | |||||
EBITDA | 400 | 518 | |||||
Special items (c) | 141 | (29 | ) | ||||
Adjusted EBITDA | $ | 541 | $ | 489 | |||
Reconciliation of Cash Flows from Operating Activities to EBITDA and Adjusted EBITDA | |||||||
Net cash from operating activities | $ | 184 | $ | (148 | ) | ||
Net cash used in discontinued operations | 2 | — | |||||
Turnaround and branding charges | 133 | 83 | |||||
Changes in current assets and current liabilities | 22 | 428 | |||||
Income tax expense | 30 | 96 | |||||
Stock-based compensation benefit (expense) | 3 | (28 | ) | ||||
Interest and financing costs, net | 60 | 55 | |||||
Other | (34 | ) | 32 | ||||
EBITDA | 400 | 518 | |||||
Special items (c) | 141 | (29 | ) | ||||
Adjusted EBITDA | $ | 541 | $ | 489 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Reconciliation of Refining Operating Income (Loss) to Refining EBITDA and Adjusted EBITDA | |||||||
Operating income (loss) | $ | (100 | ) | $ | 187 | ||
Impact related to TLLP Predecessor presentation (v) | — | (4 | ) | ||||
Depreciation and amortization expense | 150 | 119 | |||||
Equity in loss of equity method investments | (2 | ) | (2 | ) | |||
Other income (expense), net | 1 | (2 | ) | ||||
EBITDA | 49 | 298 | |||||
Special items (c) | 147 | (42 | ) | ||||
Adjusted EBITDA | $ | 196 | $ | 256 | |||
Reconciliation of TLLP Operating Income to TLLP EBITDA and Adjusted EBITDA | |||||||
Operating income | $ | 126 | $ | 104 | |||
Loss attributable to Predecessor (v) | — | 4 | |||||
Depreciation and amortization expense | 44 | 44 | |||||
Equity in earnings of equity method investments | 4 | 3 | |||||
Other income, net | 6 | — | |||||
EBITDA | 180 | 155 | |||||
Special items (c) | (6 | ) | 13 | ||||
Adjusted EBITDA | $ | 174 | $ | 168 | |||
Reconciliation of Marketing Operating Income to Marketing EBITDA and Adjusted EBITDA | |||||||
Operating income | $ | 227 | $ | 133 | |||
Depreciation and amortization expense | 12 | 12 | |||||
EBITDA and Adjusted EBITDA | $ | 239 | $ | 145 | |||
Reconciliation of Corporate and Other Operating Loss to Corporate and Other EBITDA and Adjusted EBITDA | |||||||
Operating loss | $ | (74 | ) | $ | (84 | ) | |
Depreciation and amortization expense | 6 | 4 | |||||
EBITDA and Adjusted EBITDA | $ | (68 | ) | $ | (80 | ) |
(v) | The TLLP financial and operational data presented include the historical results of all assets acquired from Tesoro prior to the acquisition dates. The acquisitions from Tesoro were transfers between entities under common control. Accordingly, the financial information of TLLP contained herein has been retrospectively adjusted to include the historical results of the assets acquired in the acquisitions from Tesoro prior to the effective date of each acquisition for all periods presented. The TLLP financial data is derived from the combined financial results of the TLLP predecessor (the “TLLP Predecessor”). We refer to the TLLP Predecessor and, prior to each acquisition date, the acquisitions from Tesoro collectively, as “TLLP’s Predecessors.” |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Reconciliation of Operating Income excluding Special Items | |||||||
Total Segment Operating Income | $ | 253 | $ | 424 | |||
Special items (c) | 141 | (29 | ) | ||||
Total Segment Operating Income excluding Special Items | $ | 394 | $ | 395 | |||
Total Refining Segment Operating Income (Loss) | $ | (100 | ) | $ | 187 | ||
Special items (c) | 147 | (42 | ) | ||||
Total Refining Segment Operating Income excluding Special Items | $ | 47 | $ | 145 |
Annual Expected EBITDA Contribution from Drop Down | ||
Reconciliation of Projected Net Earnings to Projected Annual EBITDA: | ||
Projected net earnings | $ 50 - 80 | |
Add: Depreciation and amortization expenses | 3 | |
Add: Interest and financing costs, net | 17 | |
Annual Expected EBITDA | $ 70 - 100 |
TLLP 2017 Projected Annual EBITDA | |||
Reconciliation of TLLP Projected Net Earnings to Projected Annual EBITDA | |||
Projected net earnings | $ | 650 | |
Depreciation and amortization expense | 175 | ||
Interest and financing costs, net | 175 | ||
Projected Annual EBITDA | $ | 1,000 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net Earnings Attributable to Tesoro Corporation from Continuing Operations - U.S. GAAP | $ | 58 | $ | 145 | |||
Special Items, After-tax: (w) | |||||||
Inventory valuation adjustment (a) | 88 | (25 | ) | ||||
Throughput deficiency receivables (d) | — | 4 | |||||
Legal settlements (e) | (2 | ) | — | ||||
Adjusted Earnings | $ | 144 | $ | 124 | |||
Diluted Net Earnings per Share from Continuing Operations Attributable to Tesoro Corporation - U.S. GAAP | $ | 0.48 | $ | 1.15 | |||
Special Items Per Share, After-tax: (w) | |||||||
Inventory valuation adjustment (a) | 0.73 | (0.20 | ) | ||||
Throughput deficiency receivables (d) | — | 0.03 | |||||
Legal settlements (e) | (0.02 | ) | — | ||||
Adjusted Diluted EPS | $ | 1.19 | $ | 0.98 |
(w) | For the purpose of reconciling net earnings, special items have been adjusted pre-tax to reflect our limited and general partner interests in TLLP including amounts attributable to our incentive distribution rights. |
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