EX-99.1 2 a5138861ex991.txt TESORO CORPORATION EXHIBIT 99.1 Exhibit 99.1 Tesoro Corporation Announces First Quarter Results SAN ANTONIO--(BUSINESS WIRE)--May 4, 2006--Tesoro Corporation (NYSE:TSO) today reported net earnings of $43 million, or $0.61 per share for the first quarter of 2006 up 54% from net earnings of $28 million, or $0.40 per share for the first quarter of 2005. Results for the first quarter 2006 included after-tax charges of $4 million, or $0.06 per share, primarily relating to the previously announced sale of 13 retail sites in western Washington. "Tesoro's first quarter earnings improvement was a significant achievement considering weaker market conditions, higher energy costs, the substantial turnaround work at our Golden Eagle refinery and the slow-down at our Alaska refinery due to extreme icing in the Cook Inlet," said CEO Bruce Smith. "During January and February's low margin environment, we completed the ultra low sulfur diesel project at Golden Eagle and additional maintenance that enabled us to optimize throughput and yields in March when margins improved." The company's increase in net earnings during the 2006 first quarter compared to the prior year was primarily due to higher throughput levels, lower interest expense as a result of debt reduction and refinancing in 2005, and decreased corporate general and administrative expenses. "By focusing on operational excellence, Tesoro continues to demonstrate operational success and reliability. One example of the focus on excellence was our employees' rapid response to the mid-February incident in Alaska. This demonstrates the respect we have for the environment and our focus on safe operations," Smith said. "Reliability is a key to profitability and we are focused on maximizing our production to supply our customers during the driving season." Board Declares Quarterly Dividend Tesoro announced today that its Board of Directors has approved the regular quarterly cash dividend of $0.10 per share. The dividend is payable June 15, 2006 to shareholders of record as of June 1, 2006. Public Invited to Listen to Analyst Conference Call via Internet At 3:00 p.m., CDT, Thursday, May 4, 2006, Tesoro will broadcast, live, its conference call with analysts regarding first quarter 2006 results. Interested parties may listen to the live conference call over the Internet by logging on to Tesoro's Internet site at http://www.tsocorp.com. Tesoro Corporation, a Fortune 200 Company, is an independent refiner and marketer of petroleum products. Tesoro operates six refineries in the western United States with a combined capacity of approximately 560,000 barrels per day. Tesoro's retail-marketing system includes nearly 475 branded retail stations, of which over 200 are company owned and operated under the Tesoro(R) and Mirastar(R) brands. TESORO CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions except per share amounts) Three Months Ended March 31, ----------------- 2006 2005 ------- ------- Revenues $ 3,877 $ 3,171 Costs and Expenses: Costs of sales and operating expenses 3,689 2,997 Selling, general and administrative expenses (a) 40 54 Depreciation and amortization 60 41 Loss on asset disposals and impairments 7 1 ------- ------- Operating Income 81 78 Interest and Financing Costs (20) (32) Interest Income and Other 10 1 ------- ------- Earnings Before Income Taxes 71 47 Income Tax Provision 28 19 ------- ------- Net Earnings $ 43 $ 28 ======= ======= Net Earnings Per Share: Basic $ 0.63 $ 0.41 Diluted $ 0.61 $ 0.40 Weighted Average Common Shares: Basic 68.5 66.8 Diluted 70.6 70.1 ------------ (a) Includes stock-based and other compensation charges totaling $11 million during the 2005 first quarter, related to the termination and retirement of certain executive officers. NET EARNINGS ADJUSTED FOR SPECIAL ITEMS (Unaudited) (In millions except per share amounts) Three Months Ended March 31, ----------------- 2006 2005 ------- ------- Net Earnings - U.S. GAAP $ 43 $ 28 Special Items, After-tax: Termination and retirement costs (a) - 6 ------- ------- Net Earnings Adjusted for Special Items $ 43 $ 34 ======= ======= Net Earnings Per Share - U.S. GAAP $ 0.61 $ 0.40 Special Items Per Share, After-tax: Termination and retirement costs (a) - 0.09 ------- ------- Net Earnings Per Share Adjusted for Special Items $ 0.61 $ 0.49 ======= ======= ------------ Note: The special items present information that the Company believes is useful to investors. The Company believes that the special items described above are not indicative of its core operations. TESORO CORPORATION SELECTED OPERATING SEGMENT DATA (Unaudited) (In millions) Three Months Ended March 31, ----------------- 2006 2005 ------- ------ Operating Income (Loss) Refining $ 125 $ 132 Retail (12) (11) ------- ------ Total Segment Operating Income 113 121 Corporate and Unallocated Costs (a) (32) (43) ------- ------ Operating Income 81 78 Interest and Financing Costs (20) (32) Interest Income and Other 10 1 ------- ------ Earnings Before Income Taxes $ 71 $ 47 ======= ====== Depreciation and Amortization Refining $ 54 $ 35 Retail 4 4 Corporate 2 2 ------- ------ Depreciation and Amortization $ 60 $ 41 ======= ====== Capital Expenditures Refining $ 55 $ 37 Retail 1 - Corporate 2 27 ------- ------ Capital Expenditures $ 58 $ 64 ======= ====== BALANCE SHEET DATA (Unaudited) (Dollars in millions) March 31, December 31, 2006 2005 ------------ ------------- Cash and Cash Equivalents $ 306 $ 440 Total Assets $ 5,080 $ 5,097 Total Debt $ 1,049 $ 1,047 Total Stockholders' Equity $ 1,869 $ 1,887 Total Debt to Capitalization Ratio 36% 36% TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended March 31, ------------------- 2006 2005 -------- -------- REFINING SEGMENT Total Refining Segment Throughput (thousand barrels per day) Heavy crude 244 263 Light crude 238 188 Other feedstocks 15 26 -------- -------- Total Throughput 497 477 ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 234 223 Jet fuel 69 65 Diesel fuel 100 91 Heavy oils, residual products, internally produced fuel and other 114 116 -------- -------- Total Yield 517 495 ======== ======== Refining Margin ($/throughput bbl) (b) Gross $ 8.52 $ 8.37 Manufacturing cost before depreciation and amortization (b) $ 3.77 $ 3.55 Segment Operating Income ($ millions) Gross refining margin (after inventory changes) (c) $ 395 $ 367 Expenses Manufacturing costs 169 153 Other operating expenses 39 39 Selling, general and administrative 5 7 Depreciation and amortization (d) 54 35 Loss on asset disposals and impairments 3 1 -------- -------- Segment Operating Income $ 125 $ 132 ======== ======== Product Sales (thousand barrels per day) (e) Gasoline and gasoline blendstocks 271 267 Jet fuel 91 96 Diesel fuel 125 123 Heavy oils, residual products and other 82 69 -------- -------- Total Product Sales 569 555 ======== ======== Product Sales Margin ($/barrel) (e) Average sales price $ 73.36 $ 59.09 Average costs of sales 65.78 51.36 -------- -------- Product Sales Margin $ 7.58 $ 7.73 ======== ======== ------------ (b) Management uses gross refining margin per barrel to evaluate performance, allocate resources and compare profitability to other companies in the industry. Gross refining margin per barrel is calculated by dividing gross refining margin before inventory changes by total refining throughput and may not be calculated similarly by other companies. Management uses manufacturing costs per barrel to evaluate the efficiency of refinery operations and allocate resources. Manufacturing costs per barrel may not be comparable to similarly titled measures used by other companies. 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 alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. (c) Gross refining margin is revenues less costs of refining feedstocks, purchased products, transportation and distribution. Gross refining margin approximates total refining segment throughput times gross refining margin per barrel, adjusted for changes in refined product inventory due to selling a volume and mix of product that is different than actual volumes manufactured. Also includes the effect of intersegment sales to the retail segment at prices which approximate market. (d) Includes manufacturing depreciation and amortization per throughput barrel of approximately $1.11 and $0.73 for the three months ended March 31, 2006 and 2005, respectively. (e) Sources of total product sales include products manufactured at the refineries, products drawn from inventory balances and products purchased from third parties. Total product sales margin includes margins on sales of manufactured and purchased products and the effects of inventory changes. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended March 31, ------------------ 2006 2005 -------- ------- Refining By Region California (f) Throughput (thousand barrels per day) Heavy crude 139 144 Light crude 5 - Other feedstocks 8 5 -------- ------- Total Throughput 152 149 ======== ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 91 82 Diesel fuel 37 40 Heavy oils, residual products, internally produced fuel and other 34 34 -------- ------- Total Yield 162 156 ======== ======= Refining Margin ($/throughput bbl) Gross $ 13.26 $ 16.58 Manufacturing cost before depreciation and amortization $ 6.06 $ 5.54 Pacific Northwest (Alaska & Washington) (f) Throughput (thousand barrels per day) Heavy crude 84 81 Light crude 66 42 Other feedstocks 4 17 -------- ------- Total Throughput 154 140 ======== ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 65 62 Jet fuel 29 28 Diesel fuel 20 12 Heavy oils, residual products, internally produced fuel and other 45 44 -------- ------- Total Yield 159 146 ======== ======= Refining Margin ($/throughput bbl) Gross $ 7.20 $ 4.57 Manufacturing cost before depreciation and amortization $ 3.18 $ 3.20 Mid-Pacific (Hawaii) Throughput (thousand barrels per day) Heavy crude 21 38 Light crude 65 46 -------- ------- Total Throughput 86 84 ======== ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 22 20 Jet fuel 29 26 Diesel fuel 13 12 Heavy oils, residual products, internally produced fuel and other 24 27 -------- ------- Total Yield 88 85 ======== ======= Refining Margin ($/throughput bbl) Gross $ 3.23 $ 4.04 Manufacturing cost before depreciation and amortization $ 1.56 $ 1.67 ------------ (f) The Company experienced reduced throughput and yields during scheduled maintenance turnarounds for the California refinery during the 2006 and 2005 first quarters and the Washington refinery during the 2005 first quarter. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended March 31, ----------------- 2006 2005 ------- ------- Mid-Continent (North Dakota & Utah) Throughput (thousand barrels per day) Light crude 102 100 Other feedstocks 3 4 ------- ------- Total Throughput 105 104 ======= ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 56 59 Jet fuel 11 11 Diesel fuel 30 27 Heavy oils, residual products, internally produced fuel and other 11 11 ------- ------- Total Yield 108 108 ======= ======= Refining Margin ($/throughput bbl) Gross $ 8.17 $ 5.08 Manufacturing cost before depreciation and amortization $ 3.18 $ 2.69 TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended March 31, ----------------- 2006 2005 ------- ------- RETAIL SEGMENT Number of Stations (end of period) Company-operated 210 215 Branded jobber/dealer 260 289 ------- ------- Total Stations 470 504 ======= ======= Average Stations (during period) Company-operated 210 215 Branded jobber/dealer 263 291 ------- ------- Total Average Retail Stations 473 506 ======= ======= Fuel Sales (millions of gallons) Company-operated 59 65 Branded jobber/dealer 40 46 ------- ------- Total Fuel Sales 99 111 ======= ======= Fuel Margin ($/gallon) (g) $ 0.15 $ 0.12 Merchandise Sales ($ millions) $ 32 $ 30 Merchandise Margin ($ millions) $ 8 $ 8 Merchandise Margin % 25% 25% Segment Operating Loss ($ millions) Gross Margins Fuel (h) $ 15 $ 13 Merchandise and other non-fuel margin 9 8 ------- ------- Total Gross Margins 24 21 Expenses Operating expenses 22 22 Selling, general and administrative 6 6 Depreciation and amortization 4 4 Loss on asset disposals and impairments 4 - ------- ------- Segment Operating Loss $ (12) $ (11) ======= ======= ------------ (g) Management uses fuel margin per gallon to compare profitability to other companies in the industry. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. Fuel margin per gallon is calculated by dividing fuel gross margin by fuel sales volumes. Fuel margin per gallon may not be calculated similarly by other companies. (h) Includes the effect of intersegment purchases from the refining segment at prices which approximate market. CONTACT: Tesoro Corporation, San Antonio Investors: Scott Phipps, 210-283-2882 or Media: Sarah Simpson, 210-283-2374