-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wx8cbM01/AfHSFKs/u/BaemUw8K+i82z/UXBjogD+sgJKZwsRWNKelgy9ojEEneT x4gu6gP0xpRLAnUYNEnnmw== 0001157523-06-007911.txt : 20060803 0001157523-06-007911.hdr.sgml : 20060803 20060803150203 ACCESSION NUMBER: 0001157523-06-007911 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060803 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060803 DATE AS OF CHANGE: 20060803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TESORO CORP /NEW/ CENTRAL INDEX KEY: 0000050104 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 950862768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03473 FILM NUMBER: 061001584 BUSINESS ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 BUSINESS PHONE: 2108288484 MAIL ADDRESS: STREET 1: 300 CONCORD PLAZA DRIVE CITY: SAN ANTONIO STATE: TX ZIP: 78216-6999 FORMER COMPANY: FORMER CONFORMED NAME: TESORO PETROLEUM CORP /NEW/ DATE OF NAME CHANGE: 19920703 8-K 1 a5201393.txt TESORO CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 3, 2006 Tesoro Corporation (Exact name of registrant as specified in its charter) Delaware 1-3473 95-0862768 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 300 Concord Plaza Drive 78216-6999 San Antonio, Texas (Zip Code) (Address of principal executive offices) (210) 828-8484 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| 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. Tesoro Corporation (the "Company") on August 3, 2006 issued a press release (the "Press Release") announcing financial results for its second quarter ended June 30, 2006. The Press Release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The information above is being furnished, not filed, pursuant to Item 2.02 of Form 8-K. Accordingly, the information in Item 2.02 of this Current Report, including the Press Release, will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. 99.1 Press Release issued on August 3, 2006 by Tesoro Corporation. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: August 3, 2006 TESORO CORPORATION By: /s/ GREGORY A. WRIGHT -------------------------------------------------- Gregory A. Wright Executive Vice President and Chief Financial Officer 3 Index to Exhibits Exhibit Number Description 99.1 Press Release issued on August 3, 2006 by Tesoro Corporation. 4 EX-99.1 2 a5201393ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Solid Operational Performance and Optimization of Assets Drives Tesoro Corporation's Record Earnings SAN ANTONIO--(BUSINESS WIRE)--Aug. 3, 2006--Tesoro Corporation (NYSE:TSO) today reported net earnings of $326 million, or $4.66 per share, for the second quarter of 2006 compared to net earnings of $184 million, or $2.62 per share, for the second quarter of 2005. "The second quarter demonstrates the tangible contributions driven by an effective organizational structure and talented people. Our operations are managed by employees who are focused on safety, crude flexibility, reliability and cost control and delivering positive results to our shareholders," said Bruce A. Smith, Chairman, President and CEO of Tesoro. "The optimal mix of crude sources, product markets, production and logistics management led to our record results. Refining margins in the western United States were robust this quarter, highlighting the market fundamentals of tight gasoline supplies and greater national demand for high octane gasoline blending components. We expect these fundamentals to continue to drive a strong margin environment, especially on the West Coast," said Smith. For the first half of 2006, the company reported net earnings of $369 million, or $5.25 per share, compared to $212 million, or $3.02 per share, for the first six months of 2005. Refining operating income for the second quarter was over 50% higher or $212 million more than 2005 with significant gains from the Northwest and California regions driven by record second quarter throughput and high clean product yields. Benchmark crack spreads in both regions were nearly $10 per barrel ahead of the same period last year. Capital spending for the quarter was $114 million including $20 million for turnarounds. For the year, the Company expects capital spending of approximately $630 million, including turnarounds. In accordance with our third quarter announcement of the cancellation of the Anacortes refinery coker project, the company expects to record in the third quarter a pre-tax charge between $15 and $25 million for the termination of that project. "The margin environment in the second quarter was very, very strong and we expect the fundamentals to continue to be good for the remainder of the year. The key to our performance will be to continue to have each and every employee focus on safety and operational excellence. That will enable us to run our refineries at the optimal level and capture these strong margins," said Smith. 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 September 15, 2006 to shareholders of record as of September 1, 2006. Public Invited to Listen to Analyst Conference Call via Internet At 3:00 p.m., CDT, Thursday, August 3, 2006, Tesoro will broadcast, live, its conference call with analysts regarding second 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 approximately 465 branded retail stations, of which over 200 are company owned and operated under the Tesoro(R) and Mirastar(R) brands. This earnings release contains certain statements that are "forward-looking" statements concerning the market environment, capital expenditures and accounting adjustments within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof." TESORO CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2006 2005 2006 2005 --------- ------- ------- ------- Revenues $ 4,929 $ 4,033 $ 8,806 $ 7,204 Costs and Expenses: Costs of sales and operating expenses 4,276 3,601 7,965 6,598 Selling, general and administrative expenses (a) 45 48 85 102 Depreciation and amortization 60 43 120 84 Loss on asset disposals and impairments 5 4 12 5 --------- ------- ------- ------- Operating Income 543 337 624 415 Interest and Financing Costs (b) (21) (32) (41) (64) Interest Income and Other 7 - 17 1 --------- ------- ------- ------- Earnings Before Income Taxes 529 305 600 352 Income Tax Provision 203 121 231 140 --------- ------- ------- ------- Net Earnings $ 326 $ 184 $ 369 $ 212 ========= ======= ======= ======= Net Earnings Per Share: Basic $ 4.79 $ 2.69 $ 5.40 $ 3.13 Diluted $ 4.66 $ 2.62 $ 5.25 $ 3.02 Weighted Average Common Shares: Basic 68.0 68.3 68.3 67.5 Diluted 69.9 70.1 70.3 70.1 (a) During the six months ended June 30, 2005, the Company recorded stock-based and other compensation charges totaling $11 million related to the termination and retirement of certain executive officers. (b) In April 2005, the Company voluntarily prepaid the remaining $96 million outstanding principal balance of the senior secured term loans at a prepayment premium of 1%, which resulted in a pretax charge of $3 million consisting of the write-off of unamortized debt issuance costs and the 1% prepayment premium. NET EARNINGS ADJUSTED FOR SPECIAL ITEMS (Unaudited) (In millions except per share amounts) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2006 2005 2006 2005 --------- ------- ------- ------- Net Earnings - U.S. GAAP $ 326 $ 184 $ 369 $ 212 Special Items, After-tax: Termination and retirement costs (a) - - - 6 Debt prepayment and financing costs (b) - 2 - 2 --------- ------- ------- ------- Net Earnings Adjusted for Special Items $ 326 $ 186 $ 369 $ 220 ========= ======= ======= ======= Net Earnings Per Share - U.S. GAAP $ 4.66 $ 2.62 $ 5.25 $ 3.02 Special Items Per Share, After- tax: Termination and retirement costs (a) - - - 0.09 Debt prepayment and financing costs (b) - 0.03 - 0.03 --------- ------- ------- ------- Net Earnings Per Share Adjusted for Special Items $ 4.66 $ 2.65 $ 5.25 $ 3.14 ========= ======= ======= ======= 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 Six Months Ended June 30, June 30, ------------------ ---------------- 2006 2005 2006 2005 --------- ------- ------- ------- Operating Income (Loss) Refining $ 593 $ 381 $ 718 $ 513 Retail (12) (9) (24) (20) --------- ------- ------- ------- Total Segment Operating Income 581 372 694 493 Corporate and Unallocated Costs (38) (35) (70) (78) --------- ------- ------- ------- Operating Income 543 337 624 415 Interest and Financing Costs (b) (21) (32) (41) (64) Interest Income and Other 7 - 17 1 --------- ------- ------- ------- Earnings Before Income Taxes$ 529 $ 305 $ 600 $ 352 ========= ======= ======= ======= Depreciation and Amortization Refining $ 54 $ 37 $ 108 $ 72 Retail 4 4 8 8 Corporate 2 2 4 4 --------- ------- ------- ------- Depreciation and Amortization $ 60 $ 43 $ 120 $ 84 ========= ======= ======= ======= - Capital Expenditures Refining $ 88 $ 48 $ 143 $ 85 Retail - 1 1 1 Corporate 6 3 8 30 --------- ------- ------- ------- Capital Expenditures $ 94 $ 52 $ 152 $ 116 ========= ======= ======= ======= BALANCE SHEET DATA (Unaudited) (Dollars in millions) June 30, December 31, 2006 2005 ----------- ------------ Cash and Cash Equivalents $ 620 $ 440 Total Assets $ 5,600 $ 5,097 Total Debt $ 1,042 $ 1,047 Total Stockholders' Equity $ 2,197 $ 1,887 Total Debt to Capitalization Ratio 32% 36% TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2006 2005 2006 2005 -------- -------- -------- ------- REFINING SEGMENT Total Refining Segment Throughput (thousand barrels per day) Heavy crude 288 271 266 267 Light crude 236 251 236 220 Other feedstocks 20 19 18 22 -------- -------- -------- ------- Total Throughput 544 541 520 509 ======== ======== ======== ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 257 258 246 241 Jet fuel 66 66 67 66 Diesel fuel 129 126 114 108 Heavy oils, residual products, internally produced fuel and other 113 111 114 113 -------- -------- -------- ------- Total Yield 565 561 541 528 ======== ======== ======== ======= Refining Margin ($/throughput bbl) (c) Gross $ 17.88 $ 13.28 $ 13.44 $ 11.00 Manufacturing cost before depreciation and amortization (c) $ 3.36 $ 3.36 $ 3.55 $ 3.45 Segment Operating Income ($ millions) Gross refining margin (after inventory changes) (d) $ 858 $ 640 $ 1,253 $ 1,007 Expenses Manufacturing costs 166 165 335 318 Other operating expenses 38 48 77 87 Selling, general and administrative 5 7 10 14 Depreciation and amortization (e) 54 37 108 72 Loss on asset disposals and impairments 2 2 5 3 -------- -------- -------- ------- Segment Operating Income $ 593 $ 381 $ 718 $ 513 ======== ======== ======== ======= Product Sales (thousand barrels per day) (f) Gasoline and gasoline blendstocks 279 307 275 287 Jet fuel 90 102 90 99 Diesel fuel 133 142 129 133 Heavy oils, residual products and other 82 76 82 72 -------- -------- -------- ------- Total Product Sales 584 627 576 591 ======== ======== ======== ======= Product Sales Margin ($/barrel) (f) Average sales price $ 90.45 $ 67.06 $ 82.06 $ 63.34 Average costs of sales 74.24 56.14 70.09 53.91 -------- -------- -------- ------- Product Sales Margin $ 16.21 $ 10.92 $ 11.97 $ 9.43 ======== ======== ======== ======= (c) 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. (d) 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. (e) Includes manufacturing depreciation and amortization per throughput barrel of approximately $1.01 and $0.66 for the three months ended June 30, 2006 and 2005, respectively, and $1.06 and $0.70 for the six months ended June 30, 2006 and 2005, respectively. (f) Sources of total product sales include products manufactured at the refineries, products drawn from inventory balances and products purchased from third parties. Total product sales margin includes margins on sales of manufactured and purchased products and the effects of inventory changes. Total product sales were reduced by approximately 23 Mbpd and 21 Mbpd in the three months and six months ended June 30, 2006, respectively, as a result of recording certain purchases and sales transactions with the same counterparty on a net basis beginning in the 2006 first quarter upon adoption of EITF Issue No. 04-13, "Accounting for Purchases and Sales of Inventory with the Same Counterparty." TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ---------------- 2006 2005 2006 2005 ---------- ------- ------- ------- Refining By Region California (g) Throughput (thousand barrels per day) Heavy crude 161 156 150 150 Light crude - 7 2 3 Other feedstocks 8 8 8 7 ---------- ------- ------- ------- Total Throughput 169 171 160 160 ========== ======= ======= ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 100 100 95 91 Diesel fuel 50 51 43 46 Heavy oils, residual products, internally produced fuel and other 29 29 32 31 ---------- ------- ------- ------- Total Yield 179 180 170 168 ========== ======= ======= ======= Refining Margin ($/throughput bbl) Gross $ 26.28 $ 19.23 $ 20.16 $ 18.00 Manufacturing cost before depreciation and amortization $ 5.56 $ 5.31 $ 5.80 $ 5.42 Pacific Northwest (Alaska & Washington) (g) Throughput (thousand barrels per day) Heavy crude 97 96 91 89 Light crude 73 80 69 61 Other feedstocks 7 6 6 11 ---------- ------- ------- ------- Total Throughput 177 182 166 161 ========== ======= ======= ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 75 78 70 71 Jet fuel 29 34 29 31 Diesel fuel 32 30 26 20 Heavy oils, residual products, internally produced fuel and other 47 46 46 45 ---------- ------- ------- ------- Total Yield 183 188 171 167 ========== ======= ======= ======= Refining Margin ($/throughput bbl) Gross $ 15.80 $ 12.08 $ 11.82 $ 8.83 Manufacturing cost before depreciation and amortization $ 2.41 $ 2.42 $ 2.76 $ 2.76 Mid-Pacific (Hawaii) (g) Throughput (thousand barrels per day) Heavy crude 30 19 25 28 Light crude 56 51 61 49 ---------- ------- ------- ------- Total Throughput 86 70 86 77 ========== ======= ======= ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 21 16 22 18 Jet fuel 27 21 28 24 Diesel fuel 13 11 13 11 Heavy oils, residual products, internally produced fuel and other 26 23 25 25 ---------- ------- ------- ------- Total Yield 87 71 88 78 ========== ======= ======= ======= Refining Margin ($/throughput bbl) Gross $ 7.32 $ 6.71 $ 5.28 $ 5.26 Manufacturing cost before depreciation and amortization $ 1.77 $ 2.52 $ 1.66 $ 2.06 (g) The Company experienced reduced throughput due to scheduled maintenance turnarounds at the Alaska refinery during the 2006 second quarter and the California refinery during the 2006 first quarter and unscheduled downtime at the North Dakota refinery during the 2006 second quarter. During the 2005 second quarter, the Company experienced reduced throughput at the Hawaii refinery due to a scheduled maintenance turnaround. In the 2005 first quarter the Company experienced reduced throughput at the California and Washington refineries, primarily as a result of scheduled major maintenance turnarounds and unscheduled downtime. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2006 2005 2006 2005 --------- ------- ------- ------- Mid-Continent (North Dakota & Utah) (g) Throughput (thousand barrels per day) Light crude 107 113 104 107 Other feedstocks 5 5 4 4 --------- ------- ------- ------- Total Throughput 112 118 108 111 ========= ======= ======= ======= Yield (thousand barrels per day) Gasoline and gasoline blendstocks 61 64 59 61 Jet fuel 10 11 10 11 Diesel fuel 34 34 32 31 Heavy oils, residual products, internally produced fuel and other 11 13 11 12 --------- ------- ------- ------- Total Yield 116 122 112 115 ========= ======= ======= ======= Refining Margin ($/throughput bbl) Gross $ 17.32 $ 10.19 $ 12.93 $ 7.82 Manufacturing cost before depreciation and amortization $ 2.75 $ 2.48 $ 2.95 $ 2.58 TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ---------------- 2006 2005 2006 2005 ---------- -------- -------- ------- RETAIL SEGMENT Number of Stations (end of period) Company-operated 210 213 210 213 Branded jobber/dealer 257 283 257 283 ---------- -------- -------- ------- Total Stations 467 496 467 496 ========== ======== ======== ======= Average Stations (during period) Company-operated 210 214 210 214 Branded jobber/dealer 256 286 259 289 ---------- -------- -------- ------- Total Average Retail Stations 466 500 469 503 ========== ======== ======== ======= Fuel Sales (millions of gallons) Company-operated 64 67 123 132 Branded jobber/dealer 47 50 87 96 ---------- -------- -------- ------- Total Fuel Sales 111 117 210 228 ========== ======== ======== ======= - Fuel Margin ($/gallon) (h) $ 0.10 $ 0.15 $ 0.12 $ 0.13 Merchandise Sales ($ millions) $ 38 $ 35 $ 70 $ 65 Merchandise Margin ($ millions) $ 10 $ 9 $ 18 $ 17 Merchandise Margin % 26% 26% 26% 26% Segment Operating Income (Loss)($ millions) Gross Margins Fuel (i) $ 11 $ 17 $ 26 $ 30 Merchandise and other non- fuel margin 11 10 20 18 ---------- -------- -------- ------- Total Gross Margins 22 27 46 48 Expenses Operating expenses 23 22 45 44 Selling, general and administrative 6 8 12 14 Depreciation and amortization 4 4 8 8 Loss on asset disposals and impairments 1 2 5 2 ---------- -------- -------- ------- Segment Operating Income (Loss) $ (12)$ (9) $ (24)$ (20) ========== ======== ======== ======= (h) 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. (i) Includes the effect of intersegment purchases from the refining segment at prices which approximate market. CONTACT: Tesoro Corporation, San Antonio Investor Relations: Scott Phipps, 210-283-2882 or Public Relations: Natalie Silva, 210-283-2729 -----END PRIVACY-ENHANCED MESSAGE-----