-----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, F7WUQonr3eiSLjOQzj8Lx+hq7tzlL1g4Q4pVR/WazM2bfe5CJAokc1LyyURw4Fye pTO49x9x+wWla27aShoP6w== 0001157523-07-007926.txt : 20070807 0001157523-07-007926.hdr.sgml : 20070807 20070807080023 ACCESSION NUMBER: 0001157523-07-007926 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070807 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070807 DATE AS OF CHANGE: 20070807 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: 071029932 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 a5465742.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 7, 2007 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 on August 7, 2007 issued a press release announcing financial results for its second quarter ended June 30, 2007. 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 announcing second quarter financial results issued on August 7, 2007 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 7, 2007 TESORO CORPORATION By: /s/ OTTO C. SCHWETHELM ------------------------------------ Otto C. Schwethelm Vice President and Chief Financial Officer 3 Index to Exhibits Exhibit Number Description 99.1 Press release announcing second quarter financial results issued on August 7, 2007 by Tesoro Corporation. 4 EX-99.1 2 a5465742ex991.txt EXHIBIT 99.1 Exhibit 99.1 Tesoro Corporation Announces Second Quarter Results; Achieves Year-End Debt Target Early SAN ANTONIO--(BUSINESS WIRE)--Aug. 7, 2007--Tesoro Corporation (NYSE:TSO) today reported record second quarter net income of $443 million, or $3.17 per share, compared to $326 million, or $2.33 per share in the second quarter of 2006. Year-to-date net income totaled $559 million, or $4.02 per share, which is $190 million or 51% ahead of 2006. Year-to-date refinery operating income has surpassed one billion dollars compared to $718 million in the same period last year. The improvement is primarily attributable to increases in throughput and clean product margins. The Company achieved 91% utilization rates for the second quarter, excluding results from the Los Angeles refinery. "While the addition of the Los Angeles refinery positively impacts our year over year comparisons, approximately 90% of our second quarter earnings growth was from our existing system," said Bruce Smith, Tesoro's Chairman, President and CEO. "It was a busy quarter for the company. We successfully integrated the new Shell and USA retail assets, integrated the Los Angeles refinery and completed two turnarounds at the facility. Now that Los Angeles has finished its scheduled maintenance for the year, we expect the refinery to run at higher throughput rates and to capture a greater percentage of the available margin than we recorded in the second quarter," said Smith. Capital expenditures for the year are expected to remain at $900 million. In 2007, the Company has completed the Amorco wharf crude oil blending project at Golden Eagle, installed the new diesel desulphurization unit in Alaska, and upgraded the catalytic cracker unit at Salt Lake City. In the third quarter the Company expects to increase the sulfur handling capabilities of the Anacortes refinery, thereby increasing the amount of sour crude the refinery can process. The Golden Eagle coker modification project is on budget and on track to be completed in the first quarter of 2008. At the end of June, the Company's debt to capitalization was 37%. By August 3rd the Company repaid all outstanding borrowings on our revolving line of credit. Including the debt repayments subsequent to the quarter, our pro-forma debt to capitalization ratio would have been 33% at June 30, 2007. "One of our main goals this year was to reduce our debt-to-capitalization ratio to below 40% by year end, which we achieved almost six months early. The Company does not have additional debt that can be repaid, so cash flow will now be directed towards organic capital projects. We believe these programs offer the opportunity to continue to substantially increase shareholder value," said Smith. Los Angeles Refinery Update Operating income from the Los Angeles refinery was $23 million for the 51 days in the second quarter the Company held operational control and includes $30 million negative impact associated with building inventory to required levels. Throughput and yield averages over the 51 days of operation were 89 thousand barrels-per-day (bpd) and 103 thousand bpd, respectively. "We are enthused by the results we've seen in our first few months of operations, even with the extensive maintenance we have completed," said Smith. "While we understand there is work to be done, we are confident in the team we have assembled to execute our capital program." As previously disclosed, the Company plans to spend a billion dollars in capital at the refinery over the next four to five years to improve operations, increase throughput and fulfill environmental regulations. "Synergistic benefits from the acquisition, which we expect to be $100 million in the first twelve months of operations, are being achieved as planned. In terms of feedstocks, we are seeing benefits in both the grades of crude oil and shipping costs. Additionally, the trading and supply team is finding greater flexibility in optimizing intermediate products such as naphtha and reformate around our west coast assets. I expect our team to continue uncovering opportunities that unlock the earnings power of the system we have put together," said Smith. Board Declares Quarterly Dividend Tesoro announced today that its Board of Directors has approved a regular quarterly cash dividend of $0.10 per share. The dividend is payable September 17th, 2007 to shareholders of record as of September 3rd, 2007. Public Invited to Listen to Analyst Conference Call via Internet At 9:30 a.m., CDT, Tuesday, August 7th, 2007, Tesoro will broadcast, live, its conference call with analysts regarding second quarter 2007 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 150 Company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of approximately 660,000 barrels per day. Tesoro's retail-marketing system includes over 890 branded retail stations, of which over 450 are company operated under the Tesoro(R), Shell(R), Mirastar(R) and USA(R) brands. This earnings release contains certain statements that are "forward-looking" statements concerning the market environment, and our expectations on capital expenditures 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 Six Months Ended Ended June 30, June 30, -------------- -------------- 2007 2006 2007 2006 ------ ------ ------ ------ Revenues $ 5,604 $ 4,929 $ 9,480 $ 8,806 Costs and Expenses: Costs of sales and operating expenses 4,710 4,276 8,258 7,965 Selling, general and administrative expenses 73 45 142 85 Depreciation and amortization 89 60 158 120 Loss on asset disposals and impairments 3 5 5 12 ------ ------ ------ ------ Operating Income 729 543 917 624 Interest and Financing Costs (30) (21) (47) (41) Interest Income and Other 11 7 25 17 ------ ------ ------ ------ Earnings Before Income Taxes 710 529 895 600 Income Tax Provision 267 203 336 231 ------ ------ ------ ------ Net Earnings $ 443 $ 326 $ 559 $ 369 ====== ====== ====== ====== Net Earnings Per Share: Basic $ 3.26 $ 2.40 $ 4.13 $ 2.70 Diluted $ 3.17 $ 2.33 $ 4.02 $ 2.63 Weighted Average Common Shares: Basic 135.7 136.0 135.4 136.5 Diluted 139.6 139.8 139.2 140.5 - --------------------------------------- Note: Amounts include the results of operations of our Shell and USA Petroleum acquisitions since their acquisition dates in May 2007. Share and per share data for both periods presented reflect the effect of a two-for-one stock split effected in the form of a stock dividend which was distributed on May 29, 2007. TESORO CORPORATION SELECTED OPERATING SEGMENT DATA (Unaudited) (In millions) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- Operating Income (Loss) Refining $ 791 $ 593 $ 1,047 $ 718 Retail - (12) (11) (24) -------- -------- -------- -------- Total Segment Operating Income 791 581 1,036 694 Corporate and Unallocated Costs (62) (38) (119) (70) -------- -------- -------- -------- Operating Income 729 543 917 624 Interest and Financing Costs (30) (21) (47) (41) Interest Income and Other 11 7 25 17 -------- -------- -------- -------- Earnings Before Income Taxes $ 710 $ 529 $ 895 $ 600 ======== ======== ======== ======== Depreciation and Amortization Refining $ 79 $ 54 $ 141 $ 108 Retail 7 4 11 8 Corporate 3 2 6 4 -------- -------- -------- -------- Depreciation and Amortization $ 89 $ 60 $ 158 $ 120 ======== ======== ======== ======== - Capital Expenditures Refining $ 176 $ 88 $ 307 $ 143 Retail 1 - 2 1 Corporate 12 6 20 8 -------- -------- -------- -------- Capital Expenditures $ 189 $ 94 $ 329 $ 152 ======== ======== ======== ======== BALANCE SHEET DATA (Unaudited) (Dollars in millions) June 30, December 31, 2007 (a) 2006 ------------ ------------ Cash and Cash Equivalents $ 169 $ 986 Total Assets $ 8,224 $ 5,904 Total Debt $ 1,787 $ 1,046 Total Stockholders' Equity $ 3,077 $ 2,502 Total Debt to Capitalization Ratio (b) 37% 29% - --------------------------------------------- (a) The purchase price of the Shell and USA assets, both acquired in May 2007, have been preliminarily allocated to the assets and liabilities acquired based upon their fair market values at the date of acquisition. The allocations remain subject to change. (b) Assuming the repayments on the revolving credit facility in July and August 2007 totaling $250 million had occurred during the 2007 second quarter, the Company's debt and debt to capitalization ratio on a pro forma basis would have been $1,537 million and 33% as of June 30, 2007, respectively. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2007 2006 2007 2006 -------- -------- -------- -------- REFINING SEGMENT Total Refining Segment Throughput (thousand barrels per day) Heavy crude 306 288 268 266 Light crude 275 236 246 236 Other feedstocks 31 20 25 18 -------- -------- -------- -------- Total Throughput 612 544 539 520 ======== ======== ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 299 257 246 246 Jet fuel 75 66 69 67 Diesel fuel 140 129 122 114 Heavy oils, residual products, internally produced fuel and other 128 113 123 114 -------- -------- -------- -------- Total Yield 642 565 560 541 ======== ======== ======== ======== Refining Margin ($/throughput bbl) (c) Gross $ 21.76 $ 17.88 $ 17.92 $ 13.44 Manufacturing cost before depreciation and amortization $ 4.11 $ 3.36 $ 4.26 $ 3.55 Segment Operating Income ($ millions) Gross refining margin (after inventory changes) (d) $ 1,168 $ 858 $ 1,733 $ 1,253 Expenses Manufacturing costs 229 166 416 335 Other operating expenses 58 38 108 77 Selling, general and administrative 8 5 16 10 Depreciation and amortization (e) 79 54 141 108 Loss on asset disposals and impairments 3 2 5 5 --------- -------- -------- -------- Segment Operating Income $ 791 $ 593 $ 1,047 $ 718 ======== ======== ======== ======== Refined Product Sales (thousand barrels per day) (f) Gasoline and gasoline blendstocks 326 279 289 275 Jet fuel 91 90 90 90 Diesel fuel 138 133 126 129 Heavy oils, residual products and other 99 82 93 82 -------- -------- -------- -------- Total Refined Product Sales 654 584 598 576 ======== ======== ======== ======== Refined Product Sales Margin ($/barrel) (f) Average sales price $ 90.92 $ 90.45 $ 84.12 $ 82.06 Average costs of sales 72.05 74.24 68.49 70.09 -------- -------- -------- -------- Refined Product Sales Margin $ 18.87 $ 16.21 $ 15.63 $ 11.97 ======== ======== ======== ======== - --------------------------------- (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 is calculated by dividing manufacturing costs by total refining throughput and 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 calculated as revenues less costs of feedstocks, purchased refined 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. The adjustment for changes in refined product inventory resulted in a decrease in gross refining margin of $43 million and $27 million for the three months ended June 30, 2007 and 2006, respectively, and $14 million and $13 million for the six months ended June 30, 2007 and 2006, respectively. Gross refining margin 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 $1.34 and $1.01 for the three months ended June 30, 2007 and 2006, respectively, and $1.36 and $1.06 for the six months ended June 30, 2007 and 2006, respectively. (f) Sources of total refined product sales include products manufactured at the refineries and products purchased from third parties. Total refined product sales margin includes margins on sales of manufactured and purchased refined products and the effects of inventory changes. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2007 2006 2007 2006 -------- -------- -------- -------- Refining By Region California (Golden Eagle and Los Angeles) (g)(h) Throughput (thousand barrels per day) Heavy crude 191 161 150 150 Light crude 10 - 5 2 Other feedstocks 17 8 10 8 -------- -------- -------- -------- Total Throughput 218 169 165 160 ======== ======== ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 128 100 85 95 Jet fuel 8 - 4 - Diesel fuel 56 50 43 43 Heavy oils, residual products, internally produced fuel and other 43 29 43 32 -------- -------- -------- -------- Total Yield 235 179 175 170 ======== ======== ======== ======== Refining Margin ($/throughput bbl) Gross $ 27.87 $ 26.28 $ 24.65 $ 20.16 Manufacturing cost before depreciation and amortization $ 6.93 $ 5.56 $ 7.83 $ 5.80 Pacific Northwest (Alaska & Washington) (g) Throughput (thousand barrels per day) Heavy crude 81 97 89 91 Light crude 104 73 83 69 Other feedstocks 9 7 11 6 -------- -------- -------- -------- Total Throughput 194 177 183 166 ======== ======== ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 85 75 80 70 Jet fuel 33 29 30 29 Diesel fuel 37 32 34 26 Heavy oils, residual products, internally produced fuel and other 47 47 45 46 -------- -------- -------- -------- Total Yield 202 183 189 171 ======== ======== ======== ======== Refining Margin ($/throughput bbl) Gross $ 19.03 $ 15.80 $ 16.30 $ 11.82 Manufacturing cost before depreciation and amortization $ 2.68 $ 2.41 $ 2.80 $ 2.76 Mid-Pacific (Hawaii) Throughput (thousand barrels per day) Heavy crude 34 30 29 25 Light crude 53 56 56 61 -------- -------- -------- -------- Total Throughput 87 86 85 86 ======== ======== ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 21 21 21 22 Jet fuel 24 27 25 28 Diesel fuel 16 13 15 13 Heavy oils, residual products, internally produced fuel and other 27 26 25 25 -------- -------- -------- -------- Total Yield 88 87 86 88 ======== ======== ======== ======== Refining Margin ($/throughput bbl) Gross $ 6.74 $ 7.32 $ 5.42 $ 5.28 Manufacturing cost before depreciation and amortization $ 1.90 $ 1.77 $ 1.97 $ 1.66 - - --------------------------------- (g) The Company experienced reduced throughput and yield levels during scheduled maintenance turnarounds for the Los Angeles refinery during the 2007 second quarter, the Golden Eagle refinery during the 2007 and 2006 first quarters, the Utah refinery during the 2007 first quarter, and the Alaska refinery during the 2006 second quarter. (h) Volumes and margins for 2007 include amounts for the Los Angeles refinery since acquisition on May 10, 2007, averaged over the periods presented. Throughput and yield averaged over the 51 days of operation were 89,000 bpd and 103,000 bpd, respectively. TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2007 2006 2007 2006 -------- --------- -------- -------- Mid-Continent (North Dakota & Utah) (g) Throughput (thousand barrels per day) Light crude 108 107 102 104 Other feedstocks 5 5 4 4 -------- --------- -------- -------- Total Throughput 113 112 106 108 ======== ========= ======== ======== Yield (thousand barrels per day) Gasoline and gasoline blendstocks 65 61 60 59 Jet fuel 10 10 10 10 Diesel fuel 31 34 30 32 Heavy oils, residual products, internally produced fuel and other 11 11 10 11 -------- --------- -------- -------- Total Yield 117 116 110 112 ======== ========= ======== ======== Refining Margin ($/throughput bbl) Gross $ 27.49 $ 17.32 $ 20.88 $ 12.93 Manufacturing cost before depreciation and amortization $ 2.84 $ 2.75 $ 3.08 $ 2.95 TESORO CORPORATION OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2007 2006 2007 2006 -------- -------- -------- -------- RETAIL SEGMENT Number of Stations (end of period) Company-operated 453 210 453 210 Branded jobber/dealer 438 257 438 257 -------- -------- -------- -------- Total Stations 891 467 891 467 ======== ======== ======== ======== Average Stations (during period) Company-operated 353 210 273 210 Branded jobber/dealer 361 256 315 259 -------- -------- -------- -------- Total Average Retail Stations 714 466 588 469 ======== ======== ======== ======== Fuel Sales (millions of gallons) Company-operated 187 64 244 123 Branded jobber/dealer 57 47 104 87 -------- -------- -------- -------- Total Fuel Sales 244 111 348 210 ======== ======== ======== ======== Fuel Margin ($/gallon) (i) $ 0.15 $ 0.10 $ 0.14 $ 0.12 Merchandise Sales ($ millions) $ 53 $ 38 $ 84 $ 70 Merchandise Margin ($ millions) $ 13 $ 10 $ 21 $ 18 Merchandise Margin % 25% 26% 25% 26% Segment Operating Income (Loss) ($ millions) Gross Margins Fuel (j) $ 37 $ 11 $ 49 $ 26 Merchandise and other non-fuel margin 17 11 25 20 -------- -------- -------- -------- Total Gross Margins 54 22 74 46 Expenses Operating expenses 41 23 61 45 Selling, general and administrative 6 6 13 12 Depreciation and amortization 7 4 11 8 Loss on asset disposals and impairments - 1 - 5 -------- -------- -------- -------- Segment Operating Income (Loss) $ - $ (12) $ (11) $ (24) ======== ======== ======== ======== - --------------------------------- (i) Management uses fuel margin per gallon to compare profitability to other companies in the industry. Fuel margin per gallon is calculated by dividing fuel gross margin by fuel sales volume and may not be calculated similarly by other companies. 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 as an alternative to segment operating income and revenues or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. (j) 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 Manager, Investor Relations or Media: Sarah Simpson, 210-283-2374 Vice President, Corporate Communications -----END PRIVACY-ENHANCED MESSAGE-----